Multinational banks and supranational supervision
Title: Multinational banks and supranational supervision
Citation: The review of financial studies, 2018, OnlineFirst
Supervision of multinational banks (MNBs) by national supervisors suffers from coordination failures. We show that supranational supervision solves this problem and decreases the public costs of an MNB’s failure, taking its organizational structure as given. However, the MNB strategically adjusts its structure to supranational supervision. It converts its subsidiary into a branch (or vice versa) to reduce supervisory monitoring. We identify the cases in which this endogenous reaction leads to unintended consequences, such as higher public costs and lower welfare. Current reforms should consider that MNBs adapt their organizational structures to changes in supervision.
Published: 27 November 2018; A supplementary data is present as an Internet Appendix to “Multinational Banks and Supranational Supervision”
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