DP13032 Bank Resolution and the Structure of Global Banks

• Patrick Bolton Martin Oehmke
3 Jul 2018

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