Some grim reading for bankers
A paper published by the European Central Bank has found the interdependence of lending decisions by national subsidiaries of global banks can lead to contagion.
The paper, "Cross-border contagion in multinational banks", takes as its model a bank that delegates local lending decisions to a national manager, and has a liquidity threshold which induces a depositor run and regulatory action. The research finds that this set-up can lead to contagion, which the paper describes as "parallel reactions
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