A key observation of the paper is that neither the branch nor the subsidiary structure is obviously preferable in all cases from the financial stability perspective. The key to ensuring financial stability lies instead in the design of effective mechanisms to oversee and resolve cross-border banking groups. These include effective home/host supervision and information-sharing arrangements and satisfactory cross-border resolution regimes and burden- sharing agreements. Such mechanisms, combined with adequate risk management and strong capital and liquidity frameworks, would encourage banking groups and policymakers to fully internalize the costs associated with the groups’ failure. This, in turn, could make home and host.
