Financing and Resolving Banking Groups
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Series
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Speaker(s)Gyöngyi Loranth (University of Vienna, Austria)
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FieldFinance, Accounting and Finance
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LocationTinbergen Institute Amsterdam, room 1.01
Amsterdam -
Date and time
April 24, 2024
12:45 - 14:00
Abstract
We study how bank resolution regimes affect banking groups’ investments in loan-making units with different financial strength. Single-point-of-entry (SPOE) resolution preserves groups’ structure, which permits efficient rein- vestment in weaker units hit by negative shocks, but can prevent optimal investment ex ante. Multiple-point-of-entry (MPOE) resolution separately resolves weaker units following negative shocks and prevents reinvestment, but can foster ex ante investment. The relative efficiency of SPOE and MPOE resolution depends on banking groups’ risk profiles and overall prof- itabilities. The coexistence of both resolution regimes increases economy wide efficiency relative to the adoption of a uniform resolution regime for all banks. Joint with Albert Banal-Estañol and Julian Kolm.