Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/193590
Authors: 
Segura, Anatoli
Vicente, Sergio
Year of Publication: 
2018
Series/Report no.: 
ESRB Working Paper Series 83
Abstract: 
This paper characterizes the optimal banking union with endogenous participation in a two-country economy in which domestic bank failures may be contemporaneous to sovereign crises, giving rise to risk-sharing motives to mutualize the funding of bail-outs. Raising public funds to conduct a bail-out entails the deadweight loss of distortionary taxation. Bank bail-ins create disruption costs in the economy. When country asymmetry is large, resolution policies exhibit reduced contributions to the public backstop and forbearance in early bank intervention in the fiscally stronger country, facilitating bail-outs in this country.
Subjects: 
banking union
bail-in
bailout
public backstop
mechanism design
JEL: 
G01
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-95210-00-4
Document Type: 
Working Paper
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