Regulatory and Bailout Decisions in a Banking Union

Arbeitspapier

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 decision of which banks are to be shut down before they can go bankrupt, and (ii) a loss allocation – or 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8964

Classification and Topics

• Classification: Wirtschaft ; Financial Institutions and Services: Government Policy and Regulation ; International Monetary Arrangements and Institutions ; International Fiscal Issues; International Public Goods
• Subject: banking union ; bank regulation ; bailout policies

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haufler, Andreas
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/235334
• Last update: 10.03.2025, 11:42 AM CET