Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/256757 
Year of Publication: 
2022
Series/Report no.: 
Discussion Paper No. 290
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
We model a banking union of two countries whose banking sectors differ in their average probability of failure and externalities between the two countries arise from cross-border bank ownership. The two countries face (i) a regulatory (super- visory) decision of which banks are to be shut down before they can go bankrupt, and (ii) a bailout decision of who pays for banks that have failed despite regu- latory oversight. Each of these choices can either be taken in a centralized or in a decentralized way. In our benchmark model the two countries always agree on a centralized regulation policy. In contrast, bailout policies are centralized only when international spillovers from cross-border bank ownership are strong, and banking sectors are highly profitable.
Subjects: 
banking union
bank regulation
bailout policies
JEL: 
G28
F33
H87
Document Type: 
Working Paper

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