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

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

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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.Parent Bank Home country Subsidiary Host country 1 RZB Austria RAIFFEISEN BANKA DD Slovenia 2 Bank Austria Austria ... AKCIOVA SPOLECNOST 9 Volksbank Austria VOLKSBANK CZ 10 Bank Austria Austria UNICREDIT BANK CZECH REPUBLIC 11 KBC ... Dexia Belgium DENIZBANK A.S. 32 BNP Paribas France TURK EKONOMI BANKASI A.S. 33 Credit Agricole France Calyon YatAprApm BankasApanbsp;...


Title:Bankers without Borders? Implications of Ring-Fencing for European Cross-Border Banks
Author: Ms. Yulia Makarova, Anna Ilyina, Mr. Christian Schmieder, Eugenio Cerutti
Publisher:International Monetary Fund - 2010-11-01
ISBN-13:

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