The Case for a European Banking Charter

Čihák, Martin; Decressin, Jörg

doi:10.5089/9781451867374.001

Cited by 27 publications

(19 citation statements)

References 23 publications

(12 reference statements)

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“…Hand in hand with an increase in cross-border banking went an increase in bank concentration. As reported by Cihak and Decressin (2007), before the crisis 16 large cross-border financial institutions accounted for about one-third of EU banking assets. The trend towards crossborder banking can also be illustrated for individual banks in Europe.…”

Section: Cross-border Banking In Europe: Trends and Regulationsmentioning

confidence: 93%

Supervising cross-border banks: theory, evidence and policy

2013

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This paper analyses the distortions that banks' cross-border activities, such as foreign assets, deposits and equity, can introduce into regulatory interventions. We find that while each individual dimension of cross-border activities distorts the incentives of a domestic regulator, a balanced amount of cross-border activities does not necessarily cause inefficiencies, as the various distortions can offset each other. Empirical analysis using bank-level data from the recent crisis provides support to our theoretical findings. Specifically, banks with a higher share of foreign deposits and assets and a lower foreign equity share were intervened at a more fragile state, reflecting the distorted incentives of national regulators. We discuss several implications for the supervision of cross-border banks in Europe.

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Section: Cross-border Banking In Europe: Trends and Regulationsmentioning

confidence: 93%

Supervising cross-border banks: theory, evidence and policy

2013

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“…Next to the intervention threshold we also calculate the implied CDS spread at the time of intervention. 10 We can see that under the chosen parameters the critical intervention threshold for a domestic bank is 0:946. This translates into a CDS spread of 536bps (by means of comparison, the average spread of 55 intervened banks considered in the empirical analysis of Section 4 is 417bps).…”

Section: Numerical Analysismentioning

confidence: 99%

Supervising Cross-Border Banks: Theory, Evidence and Policy

2012

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent AbstractThis paper analyzes the distortions that banks' cross-border activities, such as foreign assets, deposits and equity, can introduce into regulatory interventions. We find that while each individual dimension of cross-border activities distorts the incentives of a domestic regulator, a balanced amount of cross-border activities does not necessarily cause inefficiencies, as the various distortions can offset each other. Empirical analysis using bank-level data from the recent crisis provides support to our theoretical findings. Specifically, banks with a higher share of foreign deposits and assets and a lower foreign equity share were intervened at a more fragile state, reflecting the distorted incentives of national regulators. We discuss several implications for the supervision of cross-border banks in Europe.

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“…A variety of (not always exclusionary) options are available, including further development of the discretionary approach building on the bilateral Memoranda of Understanding on a case by case basis; the lead supervisor model advocated by the European Financial Services Roundtable; a movement to a European System of Financial Supervisors (Schoenmaker and Oosterloo (2006)) and the introduction of a "European Banking Charter" as a voluntary n+1st regime (Čihák and Decressin (2007)). 6 In general, changes falling short of a single EU supervisor are likely to favor a greater role of the home supervisor coupled with mechanisms designed to incorporate the externalities created in other member states (Schoenmaker and Oosterloo (2006)).…”

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confidence: 98%

Rethinking banking supervision in the EU

Wolf

2008

IEEP

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As the long-standing attempt to create an integrated European banking market is showing signs of success, 1 the costs and benefits of the traditional reliance on national banking supervision-and the (de)merits of alternative arrangements-are receiving attention in a lively literature involving both practitioners and academics. While it is too early to draw conclusions, the current episode of financial distress will shed light on some of the issues involved.The fundamental question is straightforward. Should the growing importance of banks that are multinational not only in terms of their asset base but also in their outlook and business models lead to a fundamental restructuring of supervisory arrangements? Or does the current system, combining reliance on national (mainly home) supervisors with minimum standards, mutual recognition and increasing coordination and information exchange across member-states remain preferable for the time being? If not, what are the alternatives, and the criteria on which decisions should be made?A growing theoretical literature explores the implications of alternative regulatory and supervisory arrangements taking account of the interaction between institutional features, informational issues and incentives structures, inter alia. 2 This literature, exploring implications for both financial stability and efficiency, has yielded valuable insights into the tradeoffs involved in choosing between alternative

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The Case for a European Banking Charter

Cited by 27 publications

References 23 publications

Supervising cross-border banks: theory, evidence and policy

Supervising cross-border banks: theory, evidence and policy

Supervising Cross-Border Banks: Theory, Evidence and Policy

Rethinking banking supervision in the EU

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