Working Paper: NBER ID: w24737
Authors: Patrick Bolton; Martin Oehmke
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 may not be implementable. 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 preassigned, is more robust. Our analysis highlights a fundamental link between efficient bank resolution and the operational structures and risks of global banks.
Keywords: No keywords provided
JEL Codes: G01; G18; G21; G33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| SPOE resolution is efficient in principle (H21) | efficiency of SPOE is contingent upon the symmetry of expected transfers (D61) |
| asymmetric expected transfers (F16) | national regulators prefer MPOE resolution (L59) |
| size of transfers too large (H87) | regulators may ringfence assets (G18) |
| operational complementarities across jurisdictions (H73) | prevent effective SPOE resolution (F55) |
| efficiency gains from SPOE resolution are significant compared to MPOE (D61) | efficiency of bank resolution mechanisms (G28) |