Contents -- Acknowledgements -- Preface -- I. Special Addresses -- Cross-Border Banking Regulation - A Way Forward: The European Case Stefan Ingves -- 1. Introduction -- 2. Banking Developments in the European Union -- 3. Regulatory Challenges -- 4. Potential Solutions -- 5. Another Approach -- Remarks before the Conference on International Financial Instability Sheila C. Bair -- 1. Basel II and the Importance of an International Capital Standard -- 2. The Importance of Establishing a Deposit Insurance System -- 3. Coordination and Cooperation among Deposit Insurers -- 4. Cross-Border Risks and Resolution Issues -- 5. Concluding Remarks -- Benign Financial Conditions, Asset Management, and Political Risks: Trying to Make Sense of Our Times Raghuram G. Rajan -- 1. The Productivity Revolution -- 2. The Savings Investment Imbalance -- 3. Performance Management -- 4. Illiquidity Seeking -- 5. Tail Risk and Herding -- 6. Risk Seeking -- 7. Consequences -- International Financial Instability: Cross-Border Banking and National Regulation Chicago - Dinner Remarks Jean Pierre Sabourin -- II. Landscape of International Banking and Financial Crises -- Current State of Cross-Border Banking Dirk Schoenmaker and Christiaan van Laecke -- 1. Introduction -- 2. Measuring Cross-Border Banking -- 2.1 Literature -- 2.2 Transnationality Index -- 2.3 Classifying banks -- 3. Data on Cross-Border Banking -- 4. Comparing Cross-Border Banking across the Continents -- 4.1 Individual regions -- 4.2 Overall picture of cross-border banking -- 5. Public Policy Issues -- 5.1 Financial supervision -- 5.2 Financial stability -- 6. Conclusions -- References -- Actual and Near-Miss Cross-Border Crises Carl-Johan Lindgren -- 1. Introduction and Conclusions -- 2. Five Cross-Border Crisis Cases -- 2.1 Mexico-Argentina, 1994-95.

2.2 Meridien BIAO Bank and several African countries, 1995 -- 2.3 Thailand and the Asian region, 1997-2000 -- 2.4 Russia and several other countries, 1998-99 -- 2.5 Argentina and Uruguay, 2001-02 -- 3. Near-Miss Cross-Border Crises -- 3.1 LDC debt crisis -- 3.2 Japan -- 3.3 Long Term Capital Management -- 3.4 Ecuador -- 3.5 Brazil -- 3.6 Turkey -- 4. What Causes Cross-Border Crises? -- 4.1 Crisis originating in individual banks -- 4.2 Crisis originating in systemic banking crisis -- 4.3 Crisis due to unsustainable macroeconomic policies -- 4.4 Market transmission of crisis -- 4.5 The effects of depositor and creditor protection schemes -- A Review of Financial Stability Reports Sander Oosterloo, Jakob de Haan, and Richard Jong-A-Pin -- 1. Introduction -- 2. Central Banks That Publish a FSR -- 3. Which Factors Influence Publication of a FSR? -- 4. The Content of the FSRs: A Comparison -- 5. Relationship between Transparency and Financial Soundness -- 6. Concluding Comments -- References -- Discussion of Landscape of International Banking and Financial Crises Luc Laeven -- References -- III. Causes and Conditions for Cross-Border Instability Transmission and Threats to Stability -- Cross-Border Contagion Links and Banking Problems in the Nordic Countries Bent Vale -- 1. Introduction -- 2. Why Cross-Border Banking? -- 3. The Nordic Banking Structure -- 4. The Nordic Banking Crises in the Early 1990s5 -- 5. Potential Contagion Links under Nordic Cross-Border Banking -- 6. Country Specific Bank Problems in a Subsidiary but Not Failure -- 6.1 The case with only independent nationwide banks -- 6.2 The case with a cross-border banking group -- 6.3 Some experience so far regarding the Nordea group -- 7. Severe Problems, but Not Failure in the Parent Bank -- 8. Diversification: Branches versus Subsidiaries.

9. Country Specific Problems That Cause Failure of a Cross-Border Bank -- 9.1 Failure of the banking group due to the parent bank -- 9.2 Failure of a subsidiary -- 9.3 A common shock: Failure of all banks in the group -- 10. Concluding Remarks -- References -- Currency Crises, (Hidden) Linkages, and Volume Max Bruche, Jon Danielsson, and Gabriele Galati -- 1. Introduction -- 2. Background -- 3. Identifying Crises -- 4. Models -- 5. Data -- 6. Summary of Results -- 7. Conclusion -- References -- What Do We Know about the Performance and Risk of Hedge Funds? Triphon Phumiwasana, Tong Li, James R. Barth, and Glenn Yago -- 1. Introduction -- 2. An Overview of the Hedge Fund Industry -- 2.1 Growth and size -- 2.2 Differences in size, domicile, asset location, and age of funds -- 2.3 Hedge fund strategies -- 2.3 Management fees -- 2.4 Lock-up periods -- 3. Performance and Risk of Hedge Funds -- 4. Some Statistical Analyses -- 5. Conclusions -- References -- Remarks on Causes and Conditions of Financial Instability Panel Garry Schinasi -- 1. Introduction -- 2. Context and Background -- 3. The Papers: Cross-Border Banking Groups -- 4. FX and Other Global Markets -- 5. Hedge Funds -- IV. Prudential Supervision -- Home Country versus Cross-Border Negative Externalities in Large Banking Organization Failures and How to Avoid Them Robert A. Eisenbeis -- 1. Introduction -- 2. Sources and Nature of Systemic Risks -- 3. Negative Externalities and Banking Failures10 -- 4. Conflicts of Interest, Agency Costs, and Bankruptcy Laws: Their Role in Affecting the Negative Externalities of Banking Failures -- 5. Summary and Conclusions -- References -- Conflicts between Home and Host Country Prudential Supervisors Richard J. Herring -- 1. Home/Host Cooperation in Historical Perspective: The Concordat -- 2. Harmonization Attempts: The Core Principles and Basel II.

3. Conflicts That May Arise with Regard to Weak or Insolvent Banks -- 4. Asymmetries between Home and Host Supervisory Authorities -- 5. Concluding Comment -- References -- Cross-Border Nonbank Risks and Regulatory Cooperation Paul Wright -- 1. Introduction -- 2. What Types of Prudential Cross-Border Risks Do Nonbanks Pose? -- 2.1 Broker dealers -- 2.2 Reinsurance -- 2.3 Hedge funds -- 3. What are the Implications of the Fact That Regulation is Nationally Based? -- 4. Is It Possible to Identify "Optimal" Patterns of Cross-Border Regulatory Cooperation? -- 5. Concluding Comments: What Are the Constraints And Realities Governing What Cross-Border Collaboration Can Achieve? -- Challenges in Cross-Border Supervision and Regulation Eric Rosengren -- 1. Trends in Global Banking -- 2. Progress on Home-Host Issues -- 3. Conclusion -- V. Government Safety Net -- Bagehot and Coase Meet the Single European Market Vítor Gaspar -- 1. Introduction -- 2. The Classical Lender of Last Resort Doctrine: Thornton and Bagehot -- 3. The Classical Lender of Last Resort Doctrine and Monetary Policy Implementation Today -- 4. Integration and Stability in the Single European Financial Market -- 5. Conclusion -- References -- Banking in a Changing World: Issues and Questions in the Resolution of Cross-Border Banks Michael Krimminger -- 1. Background - Insolvency Principles -- 2. International Complications -- 3. The Division of Labor between Home and Host Countries -- 4. Pre-Failure Crisis Management -- 4.1 Primary supervisory responsibility -- 4.2 Availability of information -- 4.3 Regulatory and supervisory infrastructure -- 4.4 Systemically significant banks -- 4.5 Crisis management by the bank -- 4.6 Corporate structures -- 5. Crisis Resolution -- 5.1 The law governing initiation of proceedings -- 5.2 Grounds for intervention -- 5.3 Deposit insurance.

5.4 Legal powers of controlling authorities -- 6. Future Directions? -- International Banks, Cross-Border Guarantees, and Regulation Andrew Powell and Giovanni Majnoni -- 1. Introduction -- 2. Bank Structure and Capital Allocation with Lead Supervision and Local Deposit Insurance -- 2.1 The capital allocation decision with structure given -- 2.2 The structure decision assuming capital is given -- 2.3 The capital allocation and structure decision combined -- 3. Concerns for Host Regulators and the Role of Host Capital Supervision -- 4. Tensions between Home and Host Regulator Suggested by the Model -- 5. Conclusions: Implications for Cross-Border Supervision -- References -- Deposit Insurance, Bank Resolution, and Lender of Last Resort - Putting the Pieces Together Thorsten Beck -- 1. Introduction -- 2. Moral Hazard versus Bank Runs - Different Components of the Financial Safety Net -- 3. Putting the Pieces Together - From Components to the Safety Net -- 4. Complications in Cross-Border Banking -- 5. Conclusions -- References -- VI. Insolvency Resolution -- Cross-Border Resolution of Banking Crises Rosa María Lastra -- 1. Introduction -- 2. The Case for Lex Specialis -- 3. International Law Principles Governing Insolvency -- 4. Cross-Border Bank Insolvency -- 5. International Rules -- 5.1 International rules on insolvency -- 5.2 International rules concerning the regulation of branches and subsidiaries -- 6. Regional Rules -- 6.1 The Montevideo Treaties of 1889 and 1940 and the Bustamante Code of 1928 -- 6.2 The EU insolvency regime -- 7. Bilateral Rules -- 7.1 The need for a European Standing Committee for Crisis Management -- 8. Concluding Observations -- References -- Bridge Banks and Too Big to Fail: Systemic Risk Exemption David G. Mayes -- 1. The Issue -- 2. Too Big to Fail -- 3. The Nature of the Intervention -- 4. Who Should be Responsible?.

5. The Power to Act.