Cooperation in International Banking Supervision

Cornelia Holthausen () and Thomas Rønde
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Thomas Rønde: Institute of Economics, University of Copenhagen

No 2004-02, CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics

Abstract: This paper analyzes cooperation between sovereign national authorities in the supervision and regulation of a multinational bank. We take a political economy approach to regulation and assume that supervisors maximize the welfare of their own country. The communication between the supervisors is modeled as a cheap talk game. We show that: (1) unless the interests of the countries are perfectly aligned, first best closure regulation cannot be implemented; (2) the more aligned the interests are, the higher is welfare; (3) the bank can allocate its investments strategically across countries to escape closure.

Keywords: multinational banks; supervision; closure; cheap talk (search for similar items in EconPapers)
JEL-codes: F36 G21 G28 L51 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2003-12
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Cooperation in International Banking Supervision (2005)
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