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Cambridge Finance Workshop - Gyöngyi Lóránth

Cambridge Finance Workshop Series are usually held on Thursdays during term time. The workshops are an opportunity for those working in finance to present their latest results or papers.
When Mar 05, 2020
from 12:30 PM to 01:30 PM
Where KH107, Keynes House, Cambridge Judge Business School
Contact Name
Contact Phone 01223768129
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Gyöngyi Lóránth (University of Vienna)

 

Financing and Resolving Banking Groups (joint with Albert Banal-Estanol and Julian Kolm)

Abstract
We study the formation and resolution of multi-unit banking groups.
Banking groups create financing synergies by transferring financing capacity
across subsidiaries. Single-point-of-entry (SPOE) resolution imposes a
single balance sheet on the banking group. This allows the regulator to shift
resources across banking units upon resolution, thus permitting the ex-post
efficient continuation of units that are hit by negative liquidity shocks.
However, SPOE resolution can also prevent the ex-ante efficient formation
of banking groups because outside investors take the ex-post transfers into
account. Multiple-point-of-entry (MPOE) resolution separates banking
units and maintains limited liability within the group. Separate resolution
can commit the regulator to shut down units, which reduces the ex-post
required financing capacity and may ease the ex-ante financing constraints.
In addition, SPOE resolution may not allow the group to exploit all
financing synergies because it may prevent the choice of capital structure
that minimizes the costs of incentive provision. Making the choice between
SPOE and MPOE resolution bank specific increases efficiency relative
to the adoption of a uniform resolution regime for all banks. Resolution
improves outcomes relative to friction-less private financial restructuring.

 

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