This paper studies the impact of didifferent resolution policies on the choice of banks to expand abroad. The regulator can choose to resolve banks through bail-in or bail-out or a combination of the two. The choice of the regulator affects the cost of funding of banks, endogenous in the model. We study the relative profitability of alternative bank corporate structures, either multinational (large and diversied) or domestic (small and non diversied) for different levels of public support. Our model allows us to identify the potential impact of the resolution policy on the structure of the banking system. Lower levels of public support increase the cost of funding for all banks, in line with recent empirical evidence. We show that a reduction in the level of public support (from bail-out to bail-in) induces banks to expand abroad in search for alternatives to save on their funding costs. Finally, we are able to identify the optimal resolution mix by taking into account the reaction of banks to the policy.

Cerasi, V., Montoli, S. (2020). Bank Resolution and Multinational Banks [Working paper del dipartimento] [10.2139/ssrn.3650813].

Bank Resolution and Multinational Banks

Cerasi, V
;
Montoli, S
2020

Abstract

This paper studies the impact of didifferent resolution policies on the choice of banks to expand abroad. The regulator can choose to resolve banks through bail-in or bail-out or a combination of the two. The choice of the regulator affects the cost of funding of banks, endogenous in the model. We study the relative profitability of alternative bank corporate structures, either multinational (large and diversied) or domestic (small and non diversied) for different levels of public support. Our model allows us to identify the potential impact of the resolution policy on the structure of the banking system. Lower levels of public support increase the cost of funding for all banks, in line with recent empirical evidence. We show that a reduction in the level of public support (from bail-out to bail-in) induces banks to expand abroad in search for alternatives to save on their funding costs. Finally, we are able to identify the optimal resolution mix by taking into account the reaction of banks to the policy.
Working paper del dipartimento
Bank regulation; bail-in; multinational banks; bank funding cost
English
2020
https://ssrn.com/abstract=3650813
http://dx.doi.org/10.2139/ssrn.3650813
University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 447
Cerasi, V., Montoli, S. (2020). Bank Resolution and Multinational Banks [Working paper del dipartimento] [10.2139/ssrn.3650813].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/284622
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