DP11326 Multinational Banks and Supranational Supervision

Author(s): Giacomo Calzolari, Jean-Edouard Colliard, Gyöngyi Lóránth
Publication Date: June 2016
Keyword(s): Banking Union, Cross-border banks, Monitoring, Multinational banks, regulation, Supervision
JEL(s): F23, G21, G28, L51
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11326

We study the supervision of multinational banks (MNBs), allowing for either national or supranational supervision. National supervision leads to insu?cient monitoring of MNBs due to a coordination problem between supervisors. Supranational supervision can solve this problem and increase monitoring. However, this change has the unintended consequence of a?ecting the MNB?s choice of foreign representation. MNBs may expand abroad using branches rather than subsidiaries, or abandon foreign expansion altogether. These changes completely neutralize the more intense monitoring that would otherwise occur with supranational supervision. Our paper provides insight into how the national boundaries of bank supervision interact with multinational banks.