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National versus supranational bank regulation: Gains and losses of joining a banking union

Maria Näther and Uwe Vollmer

Economic Systems, 2019, vol. 43, issue 1, 1-18

Abstract: We ask how the structure of international banking affects the decision of a national regulator to join a banking union and to transfer regulatory powers to the supranational level. The focus is on bank supervision and bank resolution. A national regulator ignores possible gains or losses, which accrue to other jurisdictions if banks are internationally active. A supranational regulator takes these regulatory external effects into account. While supranational regulation improves total welfare, this is not necessarily the case for welfare in single countries. By analyzing the size and determinants of spillover effects we show how they constrain a country’s willingness to participate in a banking union. Our results may explain why some member states of the European Union currently hesitate to join the European Banking Union.

Keywords: Multinational banking; Banking union; Bank resolution; Single supervisory mechanism; Opt-in (search for similar items in EconPapers)
JEL-codes: G21 G28 D62 F21 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:ecosys:v:43:y:2019:i:1:p:1-18