Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70604
Authors: 
Eisenbeis, Robert A.
Kaufman, George G.
Year of Publication: 
2007
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2006-15a
Abstract: 
This paper examines the implications that alternative regulatory structures may have for resolving failed banking institutions. We place our emphasis on the European Union (EU), which is both economically and financially large and has several features relating to cross-border banking in the form of direct investment that may heighten the problems we consider. We propose four principles to ensure the efficient resolution of bank failures, should they occur, with minimum, if any, credit and liquidity losses. These principles include prompt legal closure of institutions before they become economically insolvent, prompt identification of claims and assignment of losses, prompt reopening of failed institutions, and prompt recapitalizing and reprivatization of failed institutions. Finally, we propose a mechanism to put such a scheme into place quickly in the case where a cross-border banking organization seeks to take advantage of the liberal cross-border branching provisions in the single banking license available to banks in the EU. In return for the privilege of such a license, the bank agrees to be subject to a legal closure rule as a positive capital ratio established by the EU or the home country.
Subjects: 
cross-border banking
financial crises
bank regulatory structure
branching
banking subsidiaries
supervision and regulation
JEL: 
G28
G33
G38
D74
D83
G21
Document Type: 
Working Paper

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