CESifo Working Paper No. 812
Banking Supervision in Integrated Financial
Markets: Implications for the EU
Abstract
I analyze the optimal design of banking supervision in the presence of cross-border lending.
Cross-border lending could imply that an individual bank failure in one country could trigger
negative spillover effects in another country. Such cross-border contagion effects could turn
out to be important in the EU because national banking problems could easily spread via the
highly integrated interbank market. I show that if benevolent supervisors are accountable only
to their own jurisdiction, they will not take cross-border contagion effects into account.
Supervisors with such a national mandate fail to implement the optimum from a supranational
perspective. In consequence, the probability of a bank failure will be inefficiently high.
Against the background of this result, I argue in favor of institutionalizing an EU
”Supervisory Coordination Authority” to which national supervisors are accountable.
Keywords: banking supervision, systemic risk, cross-border contagion.
JEL Classification: G21, G28.
Stéphanie Stolz
Kiel Institute for World Economics
Düsternbrooker Weg 120
24105 Kiel
Germany
More intriguing information
1. TOWARDS THE ZERO ACCIDENT GOAL: ASSISTING THE FIRST OFFICER MONITOR AND CHALLENGE CAPTAIN ERRORS2. Consciousness, cognition, and the hierarchy of context: extending the global neuronal workspace model
3. Tax systems and tax reforms in Europe: Rationale and open issue for more radical reforms
4. The name is absent
5. The name is absent
6. The purpose of this paper is to report on the 2008 inaugural Equal Opportunities Conference held at the University of East Anglia, Norwich
7. The name is absent
8. Restricted Export Flexibility and Risk Management with Options and Futures
9. The Environmental Kuznets Curve Under a New framework: Role of Social Capital in Water Pollution
10. Stable Distributions