TY - JOUR
T1 - Supervising cross-border banks
T2 - Theory, evidence and policy
AU - Beck, T.H.L.
AU - Todorov, R.I.
AU - Wagner, W.B.
PY - 2013
Y1 - 2013
N2 - This paper analyses the distortions that banks' cross‐border activities, such as foreign assets, deposits and equity, can introduce into regulatory interventions. We find that while each individual dimension of cross‐border activities distorts the incentives of a domestic regulator, a balanced amount of cross‐border activities does not necessarily cause inefficiencies, as the various distortions can offset each other. Empirical analysis using bank‐level data from the recent crisis provides support to our theoretical findings. Specifically, banks with a higher share of foreign deposits and assets and a lower foreign equity share were intervened at a more fragile state, reflecting the distorted incentives of national regulators. We discuss several implications for the supervision of cross‐border banks in Europe.
AB - This paper analyses the distortions that banks' cross‐border activities, such as foreign assets, deposits and equity, can introduce into regulatory interventions. We find that while each individual dimension of cross‐border activities distorts the incentives of a domestic regulator, a balanced amount of cross‐border activities does not necessarily cause inefficiencies, as the various distortions can offset each other. Empirical analysis using bank‐level data from the recent crisis provides support to our theoretical findings. Specifically, banks with a higher share of foreign deposits and assets and a lower foreign equity share were intervened at a more fragile state, reflecting the distorted incentives of national regulators. We discuss several implications for the supervision of cross‐border banks in Europe.
M3 - Article
VL - 28
SP - 5
EP - 44
JO - Economic policy: A European forum
JF - Economic policy: A European forum
SN - 0266-4658
IS - 73
ER -