Governance of International Banking

In the aftermath of the financial crisis, the business model of international banks is under pressure. Regulators across the world are retrenching to national lines by applying restrictions on cross-border banking. Applying game theory, this book develops a model of the financial trilemma to understand the co-ordination failure among regulators. It also provides governance solutions to overcome this co-ordination failure. The goal is to offer a long-term perspective on international banking for regulators and academics. The book combines academic insights and policy issues.
"Well before the euro crisis, Dirk Schoenmaker was warning us that globalization might undermine financial stability. In this new book he analyzes the complex landscape of modern international banking in terms of a simple unifying concept: the 'trilemma' that financial stability, international financial integration, and autonomous national control over banking policy cannot all coexist. Schoenmaker provides a clear and accessible introduction to the issues that will prove indispensable for students at all levels, for their teachers, for finance professionals, and for policymakers."--Maurice Obstfeld, Professor of Economics, University of California, Berkeley

"One of the greatest problems in the exercise to make banking safer is how to organise the resolution of a failing cross-border bank. This is a subject on which Dirk Schoenmaker is one of the world's leading experts. In this book he explores both the problems of, and suggests potential answers to, this thorny problem. Anyone concerned with the future of the global financial system will greatly benefit from reading this book."--Charles Goodhart, Emeritus Professor of Banking and Finance, London School of Economics

PREFACE ; ACKNOWLEDGMENTS ; LIST OF FIGURES ; LIST OF TABLES ; ABBREVIATIONS ; INTRODUCTION ; 1 GOVERNANCE CHALLENGES FOR GLOBAL FINANCE ; 1.1 GOVERNANCE CHALLENGES ; 1.2 INTERNATIONAL POLICY PROPOSALS ; 1.3 CONCLUSION ; 2 THE FINANCIAL TRILEMMA: THEORY ; 2.1 POLICY COORDINATION ; 2.2 MODELLING THE FINANCIAL TRILEMMA ; 2.3 CONCLUSION ; 3 THE RISE OF INTERNATIONAL BANKING ; 3.1 STRATEGY AND BUSINESS MODELS ; 3.2 EMPIRICAL EVIDENCE ON INTERNATIONAL BANKING ; 3.3 FINANCIAL SAFETY NET ; 3.4 CONCLUSION ; 4 FAILING THE FINANCIAL TRILEMMA ; 4.1 POTENTIAL FOR CONFLICTS OF INTERESTS ; 4.2 CASE STUDIES OF INTERNATIONAL BANK FAILURES ; 4.3 CONCLUSION ; 5 SOLVING THE FINANCIAL TRILEMMA ; 5.1 INTERNATIONAL COORDINATION ; 5.2 COMPARING COORDINATION MECHANISMS ; 5.3 CONTAINING MORAL HAZARD ; 5.4 NO COORDINATION ; 5.5 CONCLUSION ; 6 POLITICAL ECONOMY ; 6.1 KEY ROLE OF POLITICIANS ; 6.2 POSITION OF SUPERVISORS AND BANKS ; 6.3 COUNTRIES TAKE DIFFERENT APPROACHES ; 6.4 CONCLUSION ; 7 GLOBAL GOVERNANCE ; 7.1 FRAMEWORK FOR GOVERNANCE ; 7.2 EUROPEAN GOVERNANCE ; 7.3 GLOBAL GOVERNANCE ; 7.4 CONCLUSION ; CONCLUSIONS ; BIBLIOGRAPHY ; INDEX