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Cooperation in International Banking Supervision

Author

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  • Rønde, Thomas
  • Holthausen, Cornelia

Abstract

This paper analyses cooperation among national supervisors in the decision to close a multinational bank. The supervisors are asymmetrically informed and exchange information through ?cheap talk?. It is assumed that they consider domestic welfare only. We show that: (1) the supervisors will commit mistakes both of ?type I? and ?type II? in the closure decision; (2) the more aligned national interests are, the higher is welfare resulting from the closure decision; (3) the bank can allocate its investments strategically to escape closure; (4) allocating the decision right to an uninformed supranational supervisor can improve closure regulation, especially when interests are very disaligned.

Suggested Citation

  • Rønde, Thomas & Holthausen, Cornelia, 2005. "Cooperation in International Banking Supervision," CEPR Discussion Papers 4990, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4990
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    More about this item

    Keywords

    Multinational banks; supervision; Closure; Cheap talk;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • 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
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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