Bankers Without Borders? Implications of Ring-Fencing for European Cross-Border Banks

By Yuliya Makarova, Anna Ilyina, Christian Schmieder, Eugenio M Cerutti

November 1, 2010

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Yuliya Makarova, Anna Ilyina, Christian Schmieder, and Eugenio M Cerutti. Bankers Without Borders? Implications of Ring-Fencing for European Cross-Border Banks, (USA: International Monetary Fund, 2010) accessed November 8, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper presents a stylized analysis of the effects of ring-fencing (i.e., different restrictions on cross-border transfers of excess profits and/or capital between a parent bank and its subsidiaries located in different jurisdictions) on cross-border banks. Using a sample of 25 large European banking groups with subsidiaries in Central, Eastern and Southern Europe (CESE), we analyze the impact of a CESE credit shock on the capital buffers needed by the sample banking groups under different forms of ring-fencing. Our simulations show that under stricter forms of ring-fencing, sample banking groups have substantially larger needs for capital buffers at the parent and/or subsidiary level than under less strict (or in the absence of any) ring-fencing.

Subject: Banking, Credit, Cross-border banking, Cross-border effects, Nonperforming loans

Keywords: Bank, Banking group, Capital, Group, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/247
Stock No:

WPIEA2010247
ISBN:

9781455209477
ISSN:

1018-5941

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