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What are borders made of? An analysis of barriers to European banking integration

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  • Massimiliano Affinito

    () (Banca d'Italia)

  • Matteo Piazza

    () (Banca d'Italia)

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    Abstract

    Linguistic and cultural differences, different legal and supervisory frameworks, relationship lending have been repeatedly mentioned as barriers to European retail banking integration. We investigate whether these barriers have affected integration within national boundaries, using an index of localism of regional banking systems as a measure of market integration. If local banks are established and flourish because asymmetric information makes entry difficult for non-incumbents (DellÂ’Ariccia, 2001) or regulatory and governance rules prevent entry from outside (Berger et al., 1995), we should find a significant relationship between indicators of these barriers and measures of the localism of banking systems. Our results show that this is indeed the case for asymmetric information, while findings are more blurred for supervisory practices.

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    Bibliographic Info

    Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 666.

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    Date of creation: Apr 2008
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    Handle: RePEc:bdi:wptemi:td_666_08

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    Web page: http://www.bancaditalia.it
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    Keywords: banking integration; barriers; asymmetric information;

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