Banking Supervision in Integrated Financial Markets: Implications for the EU

Arbeitspapier

I analyze the optimal design of banking supervision in the presence of cross-border lending. Cross-border lending could imply that an individual bank failure in one country could trigger negative spillover effects in another country. Such cross-border contagion effects could turn out to be important in the EU because national banking problems could easily spread via the highly integrated interbank market. I show that if benevolent supervisors are accountable only to their own jurisdiction, they will not take cross-border contagion effects into account. Supervisors with such a national mandate fail to implement the optimum from a supranational perspective. In consequence, the probability of a bank failure will be inefficiently high. Against the background of this result, I argue in favor of institutionalizing an EU ”Supervisory Coordination Authority” to which national supervisors are accountable.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 812

Classification and Topics

• Classification: Wirtschaft
• Subject: banking supervision ; systemic risk ; cross-border contagion

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Stolz, Stéphanie
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/76440
• Last update: 10.03.2025, 11:41 AM CET