Wall, Larry D.; Nieto, María J.; Mayes, David G. --- "Creating an EU-Level Supervisor for Cross-border Banking Groups: Issues Raised by the US Experience with Dual Banking" [2011] ELECD 503; in LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder (eds), "Managing Risk in the Financial System" (Edward Elgar Publishing, 2011)

Book Title: Managing Risk in the Financial System

Editor(s): LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9780857933812

Section: Chapter 18

Section Title: Creating an EU-Level Supervisor for Cross-border Banking Groups: Issues Raised by the US Experience with Dual Banking

Author(s): Wall, Larry D.; Nieto, María J.; Mayes, David G.

Number of pages: 16

Extract:

18. Creating an EU-level supervisor
for cross-border banking groups:
issues raised by the US experience
with dual banking*
Larry D. Wall, María J. Nieto and
David G. Mayes

18.1. INTRODUCTION AND MOTIVATION

The European Union (EU) has been facilitating the growth of cross-border
banking groups with considerable success, but bank supervision remains
the responsibility of national supervisors. The difficulties this poses have
been vividly highlighted by the problems encountered in the present crisis
that have increased moral hazard. The conundrum has long been recog-
nized and various proposals have been offered to address this weakness,
ranging from full centralization of prudential supervision,1 to strength-
ened cooperation via colleges of supervisors and resolution authorities.2
An alternative that would retain the most important advantages of full
centralization is that of centralization of chartering and supervision only
for those cross-border groups that are systemically important to the EU.
All other banks would retain national chartering and supervision. In many
respects this would be similar to the arrangements in the US where there
are federal and state charters.
Decressin and Cihák,3 also consider a system with both an EU charter
and a national charter. However, they leave open the question of the
structure of the prudential supervisor including the possibility that EU
chartered banks would be supervised by national authorities. A key
part of their proposed framework would be freedom of choice for banks
between national and European charters. In the authors' view, this
...