Multinational banks: Supranational resolution regimes and the importance of capital regulation

The lack of coordination in the resolution of multinational banks
has led to demands for the increased centralization of resolution
regimes. However, as this paper argues, the anticipation of
resolution procedures affects the incentives of host countries to
impose capital standards on their resident banks. Critically, it is
shown that overall welfare can even be decreased by introducing a
centralized resolution regime without fully centralizing capital
requirements. As, in the aftermath of the financial crisis, only
countries that are not part of a supranational resolution regime
unilaterally and significantly increased the capital requirements
for their largest resident banks, this paper can help to understand
and study the heterogeneity of the observed regulatory approaches.