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Euro Area (cross-border?) banking

Author

Listed:
  • Pierluigi Bologna

    (Bank of Italy)

  • Marianna Caccavaio

    (Bank of Italy)

Abstract

This paper presents stylized facts of the segmentation of the Euro Area (EA) banking system and investigates cross-border banking dynamics. Results show that the determinants of cross-border banking change substantially over-time: (i) in the pre-crisis period of financial integration the physical distance and the financial distance between countries were the main drivers; (ii) during the global financial crisis banks reduced the concentration in their foreign claims portfolio and retrenched from the more externally vulnerable countries but kept on investing in the still profitable countries with a sound fiscal position; and (iii) during the EA sovereign tensions, while portfolio diversification and the pull-back from externally vulnerable countries continued, foreign claims were also driven by the deteriorating sovereign conditions, the bank-sovereign link, and opportunities for flight-to-quality. During the crisis the structure of banks� international organization also mattered as banks retrench more when they do not operate through foreign branches and subsidiaries.

Suggested Citation

  • Pierluigi Bologna & Marianna Caccavaio, 2014. "Euro Area (cross-border?) banking," Questioni di Economia e Finanza (Occasional Papers) 228, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_228_14
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2014-0228/QEF-228.pdf
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    Citations

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    Cited by:

    1. Stijn Claessens, 2017. "Global Banking: Recent Developments and Insights from Research," Review of Finance, European Finance Association, vol. 21(4), pages 1513-1555.
    2. Bouvatier, Vincent & Delatte, Anne-Laure, 2015. "Waves of international banking integration: A tale of regional differences," European Economic Review, Elsevier, vol. 80(C), pages 354-373.
    3. repec:hal:spmain:info:hdl:2441/27s0rlpcib9hhphbgsgctgbcj5 is not listed on IDEAS
    4. Piergiorgio Alessandri & Fabio Panetta, 2015. "Prudential policy at times of stagnation: a view from the trenches," Questioni di Economia e Finanza (Occasional Papers) 300, Bank of Italy, Economic Research and International Relations Area.
    5. Jörg Bibow, 2015. "The euro's savior? Assessing the ECB's crisis management performance and potential for crisis resolution," IMK Studies 42-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    6. Tedeschi, Gabriele & Recchioni, Maria Cristina & Berardi, Simone, 2019. "An approach to identifying micro behavior: How banks’ strategies influence financial cycles," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 329-346.
    7. Vidal-Tomás, David & Tedeschi, Gabriele & Ripollés, Jordi, 2020. "The desertion of rich countries and the mutual support of the poor ones: Preferential lending agreements among the PIGS," Finance Research Letters, Elsevier, vol. 34(C).

    More about this item

    Keywords

    Euro Area; Cross-border banking; Foreign claims; Financial stability;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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