NATIONAL BUREAU OF ECONOMIC RESEARCH
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Bank Resolution and the Structure of Global Banks

Patrick Bolton, Martin Oehmke

NBER Working Paper No. 24737
Issued in June 2018
NBER Program(s):Corporate Finance

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

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Document Object Identifier (DOI): 10.3386/w24737

 
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