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Bank resolution and the structure of global banks

Bolton, Patrick and Oehmke, Martin (2018) Bank resolution and the structure of global banks. Review of Financial Studies. ISSN 0893-9454

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Abstract

We study the resolution of global banks by national regulators. Single-point-of-entry (SPOE) resolution, where loss-absorbing capital is shared across jurisdictions, is efficient but faces implementation constraints. First, when expected transfers across jurisdictions are too asymmetric, national regulators fail to set up SPOE resolution ex ante. Second, when required ex-post transfers are too large, national regulators ring-fence assets instead of cooperating in SPOE resolution. In this case, a multiple-point-of- entry (MPOE) resolution, where loss-absorbing capital is pre-assigned, is more robust. Our analysis highlights a fundamental link between efficient bank resolution, the operational structures, risks, and incentives of global banks.

Item Type: Article
Official URL: https://academic.oup.com/rfs
Additional Information: © 2018 Society for Financial Studies
Divisions: Finance
Subjects: H Social Sciences > HG Finance
Sets: Departments > Finance
Date Deposited: 21 Aug 2018 09:38
Last Modified: 20 Nov 2019 05:44
Projects: 714567
Funders: European Research Council, Paul Woolley Centre
URI: http://eprints.lse.ac.uk/id/eprint/90056

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