Regulation of Multinational banks: A Theoretical Inquiry

Lóránth, Gyöngyi and Giacomo Calzolari ()

No 4232, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This Paper studies prudential regulation of a multinational bank (MNB here-after). We analyse how two frequently chosen representation forms for MNBs - branch and subsidiary representation - affect the behaviour of national regulators. We find that the different liability structure and insurance arrangements for non-local depositors under the two representations have a crucial impact on regulators? behaviour. We show that branch representation leads to a more lenient regulation for the home unit (the unit of incorporation) than subsidiary representation. Regulation of the foreign unit can be softer or tougher in branch MNBs depending on the prospect of the home unit. We examine how intervention of a regulator in charge of a given bank's unit changes with the information received about the foreign units. We discuss the effect of lobbying activity and international resources transfers on its regulation.

Keywords: Multinational banks; Prudential regulation; Representation form; Subsidiary; Branch (search for similar items in EconPapers)
JEL-codes: F23 G21 G28 L51 (search for similar items in EconPapers)
Date: 2004-02
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Regulation of multinational banks: A theoretical inquiry (2011)
Working Paper: Regulation of multinational banks: a theoretical inquiry (2005)
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