Resolution of International Banks: Can Smaller Countries Cope?

International Finance, 2018, 39-54

22 Pages Posted: 1 Nov 2016 Last revised: 29 Apr 2018

See all articles by Dirk Schoenmaker

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: October 19, 2017

Abstract

The stability of a banking system ultimately depends on the strength and credibility of the fiscal backstop. While large countries can still afford to resolve large global banks on their own, small and medium-sized countries face a policy choice. This paper investigates the impact of resolution on banking structure. The financial trilemma model suggests that smaller countries can either conduct joint supervision and resolution of their global banks (based on single point of entry resolution) or reduce the size of their global banks and move to separate resolution of these banks’ national subsidiaries (based on multiple point of entry resolution). Euro-area countries are heading for joint resolution based on burden sharing, while the UK and Switzerland have implemented policies to downsize their banks.

Keywords: Global Financial Architecture, International Banks, Burden Sharing, Resolution Planning, Single Point of Entry, Multiple Point of Entry

JEL Classification: F30, G21, G28

Suggested Citation

Schoenmaker, Dirk, Resolution of International Banks: Can Smaller Countries Cope? (October 19, 2017). International Finance, 2018, 39-54, Available at SSRN: https://ssrn.com/abstract=2862082 or http://dx.doi.org/10.2139/ssrn.2862082

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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