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Financing and Resolving Banking Groups

Author

Listed:
  • Lóránth, Gyöngyi
  • Banal-Estanol, Albert
  • Kolm, Julian

Abstract

We study how bank resolution regimes affect investment. Banking groups create financing synergies by transferring excess financing capacity across units and lowering bankers' agency rents. Single-point-of-entry (SPOE) resolution mutualizes losses, which permits ex-post efficient continuation of weaker units following negative shocks, but can prevent optimal investment ex-ante. Multiple-point-of-entry (MPOE) resolution does not mutualize losses, which forces weaker units to shut down following negative shocks, but can foster ex-ante investment. MPOE resolution is more efficient when stronger units' financial excess capacity is small, weak units' financing deficits are large, and units' synergies are low or units face different risks.

Suggested Citation

  • Lóránth, Gyöngyi & Banal-Estanol, Albert & Kolm, Julian, 2021. "Financing and Resolving Banking Groups," CEPR Discussion Papers 16192, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16192
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    More about this item

    Keywords

    Complex banking groups; Resolution regimes; Restructuring;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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