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Optimal Supervisory Architecture and Financial Integration in a Banking Union

Abstract : Both in the United States and in the Euro Area, bank supervision is the joint responsibility of local and central supervisors. I study a model in which local supervisors do not internalize as many externalities as a central supervisor. Local supervisors are more lenient, but banks also have weaker incentives to hide information from them. These two forces can make a joint supervisory architecture optimal, with more weight put on centralized supervision when cross-border externalities are larger. Conversely, more centralized supervision endogenously encourages banks to integrate more cross-border. Due to this complementarity, the economy can be trapped in an equilibrium with both too little central supervision and too little financial integration, when a superior equilibrium would be achievable.
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Preprints, Working Papers, ...
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https://hal-hec.archives-ouvertes.fr/hal-01941516
Contributor : Antoine Haldemann Connect in order to contact the contributor
Submitted on : Saturday, December 1, 2018 - 1:40:13 PM
Last modification on : Friday, April 29, 2022 - 10:13:04 AM

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  • HAL Id : hal-01941516, version 1

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Jean-Edouard Colliard. Optimal Supervisory Architecture and Financial Integration in a Banking Union. 2017. ⟨hal-01941516⟩

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