Regulatory and Bailout Decisions in a Banking Union

Andreas Haufler

No 290, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: We model a banking union of two countries whose banking sectors differ in their average probability of failure and externalities between the two countries arise from cross-border bank ownership. The two countries face (i) a regulatory (supervisory) decision of which banks are to be shut down before they can go bankrupt, and (ii) a bailout decision of who pays for banks that have failed despite regulatory oversight. Each of these choices can either be taken in a centralized or in a decentralized way. In our benchmark model the two countries always agree on a centralized regulation policy. In contrast, bailout policies are centralized only when international spillovers from cross-border bank ownership are strong, and banking sectors are highly profitable.

Keywords: banking union; bank regulation; bailout policies (search for similar items in EconPapers)
JEL-codes: F33 G28 H87 (search for similar items in EconPapers)
Date: 2021-05-27
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://rationality-and-competition.de/wp-content/uploads/2021/11/290.pdf (application/pdf)

Related works:
Journal Article: Regulatory and bailout decisions in a banking union (2021)
Working Paper: Regulatory and Bailout Decisions in a Banking Union (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:290

Access Statistics for this paper

More papers in Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition
Bibliographic data for series maintained by Viviana Lalli ().