Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5088798 | Journal of Banking & Finance | 2014 | 16 Pages |
Abstract
Cross-border banking needs cross-border recapitalisation mechanisms. Each mechanism, however, suffers from the financial trilemma, which is that cross-border banking, national financial autonomy and financial stability are incompatible. In this paper, we study the efficiency of different burden-sharing agreements for the recapitalisation of the 30 largest banks in Europe. We consider bank bailouts for these banks in a simulation framework with stochastic country-specific bailout benefits. Among the burden sharing rules, we find that the majority and qualified-majority voting rules come close to the efficiency of a bailout mechanism with a supranational authority. Even a unanimous voting rule works better than home-country bailouts, which are very inefficient. If we assume additional systemic risk benefits, the efficiency of burden sharing rules comes close to the supranational solution.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Dirk Schoenmaker, Arjen Siegmann,