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Bank Resolution and the Structure of Global Banks

In this paper we analyze the key trade-offs that arise in cross-border resolution of global banks, taking into account the political constraints faced by national regulators. We show that, although conducting a single, global resolution for an entire multinational bank (a “single-point-of-entry” resolution) is efficient in principle, it is not always compatible with the interests of national regulatory authorities, who may prefer to ring-fence their national banking industries. In that situation, conducting (and planning for) separate resolutions in different jurisdictions (a “multiple-point-of-entry” resolution) is more efficient. Overall, our model highlights that credible G-SIB resolution is not “one size fits all.” Rather, resolution should take into account a bank’s risk structure and operational complementarities across different jurisdictions.