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Abstract

Cross-border resolution regimes are at the frontier of the international financial architecture reform. Bail-in resolution for global groups is now designed under two distinct regimes, SPE (Single Point of Entry) and MPE (Multiple Points of Entry). No model rationalized their welfare consequences. We examine cooperation versus non-cooperation in a model with strategically optimizing authorities and banks. Welfare losses in each regime depend on the degree of banks' liabilities home bias. SPE cooperative generally minimizes losses since authorities internalize cross-country spillovers, unless groups are highly decentralized. SPE may have unintended consequences: under cooperation it increases financial re-trenchment in previously segmented markets (by the same token it stimulates integration in well integrated markets). Under noncooperation subsidiarization emerges as an endogenous outcome. High capital requirements by acting as discipline devise reduce losses and blur the difference between regimes.

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