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Title: Bank Resolution and the Structure of Global Banks

Author(s): Patrick Bolton and Martin Oehmke

Publication Date: July 2018

Keyword(s): bank resolution and single point of entry

Programme Area(s): Financial Economics and International Macroeconomics and Finance

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, isefficient 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 pre-assigned, is more robust. Our analysis highlights a fundamental link between efficient bank resolution and the operational structures and risks of global banks.

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Bibliographic Reference

Bolton, P and Oehmke, M. 2018. 'Bank Resolution and the Structure of Global Banks'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13032