IDEAS home Printed from https://ideas.repec.org/p/oxf/wpaper/2003-fe-11.html
   My bibliography  Save this paper

Multinational Bank Capital Regulation with Deposit Insurance and Diversification Effects

Author

Listed:
  • Alan Morrison
  • Gyongyi Loranth

Abstract

We analyse a model in which bank deposits are insured and there is an exogenous cost of bank capital. The former effect results in bank overinvestment and the latter in underinvestment. Regulatory capital requirements introduce investment distortions which are a constrained optimal response to these market imperfections. We show that capital requirements which are constrained optimal for national banks result in underinvestment by multinational banks. The extent of underinvestment depends upon the home bank`s riskiness, the extent of international diversification, and the liability structure (branch or subsidiary) of the multinational. Capital requirements for international banks should therefore reflect these effects. We relate our findings to observed features of multinational banks and we discuss the possible existence of a multinational bank channel for financial contagion.

Suggested Citation

  • Alan Morrison & Gyongyi Loranth, 2003. "Multinational Bank Capital Regulation with Deposit Insurance and Diversification Effects," Economics Series Working Papers 2003-FE-11, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:2003-fe-11
    as

    Download full text from publisher

    File URL: https://ora.ox.ac.uk/objects/uuid:6a2f3922-2fca-473f-a69e-ad41a82cbc4d
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:zbw:bofrdp:2007_012 is not listed on IDEAS
    2. Freixas, Xavier & Loranth, Gyongyi & Morrison, Alan D., 2007. "Regulating financial conglomerates," Journal of Financial Intermediation, Elsevier, vol. 16(4), pages 479-514, October.
    3. Holopainen, Helena, 2007. "Integration of financial supervision," Bank of Finland Research Discussion Papers 12/2007, Bank of Finland.
    4. Michael Brei & Carlos Winograd, 2012. "Foreign banks, corporate strategy and financial stability: lessons from the river plate," Working Papers halshs-00703738, HAL.
    5. Michael Brei & Carlos Winograd, 2012. "Foreign banks, corporate strategy and financial stability: lessons from the river plate," PSE Working Papers halshs-00703738, HAL.
    6. Holopainen, Helena, 2007. "Integration of financial supervision," Research Discussion Papers 12/2007, Bank of Finland.
    7. Calzolari, Giacomo & Loranth, Gyongyi, 2011. "Regulation of multinational banks: A theoretical inquiry," Journal of Financial Intermediation, Elsevier, vol. 20(2), pages 178-198, April.

    More about this item

    Keywords

    Capital adequacy requirements; deposit insurance; multinati;
    All these keywords.

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:2003-fe-11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anne Pouliquen (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.