Blanket guarantee and restructuring decisions for multinational banks in a bargaining model

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Title: Blanket guarantee and restructuring decisions for multinational banks in a bargaining model
ISBN: 978-952-462-516-6
978-952-462-517-3
Author: Niinimäki, Juha-Pekka ; Mälkönen, Ville
Organization: Suomen Pankki
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2009
Series number: 16/2009
Year of publication: 2009
Publication date: 1.6.2009
Published in: Published in Journal of Financial Stability, Volume 8, Issue 2, April 2012: 84-95
DOI: 10.1016/j.jfs.2011.02.005
Pages: 35 s.
Keywords: pankkikriisit; talletussuoja; mallit; kansainvälinen; pankkitoiminta; valtiot; kustannukset; konkurssit; neuvottelumallit; uudelleenjärjestelyt
Abstract: This paper examines blanket guarantee and restructuring decisions in respect of a multinational bank (MNB) using Nash bargaining, when the threat of a panic motivates countries to take decisions quickly. The failure of the bank would cause unevenly distributed externalities between the countries concerned, which influences restructuring incentives. In equilibrium, the bank is either liquidated or one or both of the countries recapitalizes it. The partition of the recapitalisation costs is sensitive to the country-specific benefits and costs from recapitalisation, panics and liquidation. The home regulator benefits from the privilege of being the only entity that can legally liquidate the MNB. Rational expectations regarding the bargaining result affect the incentives to declare a blanket guarantee.
Rights: https://helda.helsinki.fi/bof/copyright


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