Subsidiaries are independent legal entities, while branches are not legally independent from their parent bank. However, host country authorities have little influence over foreign banks’ crisis management. One of the key issues is whether the home country authorities, in a crisis situation, should be obliged to take into account the effects of the crisis in other countries where a bank has branches with extensive activities. 5  Borchgrevink, Henrik and Thorvald Grung Moe (2004). ”Management of financial crises in cross-border banks” Norges Bank, Economic Bulletin, no. 3/04, pp. 157-164  BIS Review 34/2005  3  There are arguments to suggest that home-country authorities should have more responsibility for host banks also in a subsidiary bank structure. This would reduce the number of authorities that banks have to relate to. It is also in line with developments in banking where an increasing number of cross-border banks are organised as global firms with subsidiary structures under central management. The question of coordination is far from being solved. One possible way forward is to transfer some responsibility to supranational institutions. As transfers of responsibilities imply transfer of control, this solution is not a simple one in political terms. In the EU, the idea of a European supervisory authority has so far met resistance. A fundamental problem – especially in the case of a financial crisis – is the lack of a corresponding supranational fiscal institution. Today, any financial support must be granted by national authorities.

This is reflected in the increasing number of financial stability reports published world wide. How do authorities cooperate in order to support financial stability? Closely connected to the question of analytical focus, is the question of division of responsibility for maintaining financial stability, both on a domestic level as well as between authorities in different countries. The task of ensuring financial stability within a country is in most cases divided between the ministry of finance, the central bank and a financial supervisory authority, with the ministry of finance having the overall responsibility. To promote efficient cooperation, the regular exchange of information between these authorities is crucial and some formal framework for cooperation should be established. The evolution towards larger cross-border banks makes the issue of responsibilities more complicated. In the event of a crisis, central banks, supervisory authorities, political authorities as well as deposit guarantee funds in several countries will be involved. In contrast to the national banking crises in Norway, Finland and Sweden in the early 1990s, a similar crisis today would most likely involve authorities from all four Nordic countries. Therefore, it is important to establish guidelines in advance to ensure effective crisis management. A special challenge will be to establish leadership. With four ministries of finance involved, the choice of leadership will not be straightforward. The traditional view is that the host-country authorities are responsible for subsidiary banks, while home-country authorities are responsible for branches.5 This view is closely linked to the legal difference between subsidiaries and branches.