Bankers Without Borders? Implications of Ring-Fencing for European Cross-Border Banks

Yuliya Makarova, Anna Ilyina, Christian Schmieder and Eugenio Cerutti

No 2010/247, IMF Working Papers from International Monetary Fund

Abstract: This paper presents a stylized analysis of the effects of ring-fencing (i.e., different restrictions on cross-border transfers of excess profits and/or capital between a parent bank and its subsidiaries located in different jurisdictions) on cross-border banks. Using a sample of 25 large European banking groups with subsidiaries in Central, Eastern and Southern Europe (CESE), we analyze the impact of a CESE credit shock on the capital buffers needed by the sample banking groups under different forms of ring-fencing. Our simulations show that under stricter forms of ring-fencing, sample banking groups have substantially larger needs for capital buffers at the parent and/or subsidiary level than under less strict (or in the absence of any) ring-fencing.

Keywords: WP; capital; banking group; group; bank (search for similar items in EconPapers)
Pages: 35
Date: 2010-11-01
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Citations: View citations in EconPapers (36)

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