Cross-border banking on the two sides of the Atlantic: does it have an impact on bank crisis management?
Series: Working Papers. 1738.
Author: María J. Nieto and Larry D. Wall.
Published in: Journal of Banking Regulation, January 2018, Volume 19, Issue 1, pp 4–17
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Abstract
In the US and the EU political incentives to oppose cross-border banking have been strong in spite of the measurable benefits to the real economy from breaking down geographic barriers. Even a federal level supervisor and safety net is not by itself sufficient to incentivizing crossborder
banking although differences in the institutional set up are reflected in the way the two areas responded to the crisis. The US response was a coordinated response and the cost of resolving banks was borne at the national level. Moreover, the FDIC could market failed banks to other banks irrespective of state boundaries reducing the cost of the crisis to the US economy and the sovereign finances. In the EU, the crisis resulted in financial market fragmentation and unbearable costs to some sovereigns.