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Financial Supervision in an Integrating Europe: Measuring Cross-Border Externalities

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  • Sander Osterloo
  • Dirk Schoenmaker

Abstract

Against the backdrop of an integrating Europe, the debate on the need for European arrangements for financial supervision and stability is intensifying in the literature as well as in the policy arena. While there is a consensus that the need for European arrangements ultimately depends on the intensity of cross-border spill-over effects or externalities within the EU, there has been no attempt to measure these cross-border externalities. The aim of this paper is to fill this gap.� A new data-set on cross-border penetration (as a proxy for cross-border externalities) of large banking groups is collected. It is found that cross-border penetration within the EU is currently limited: only seven banks out of the sample of 30 large EU banking groups are considered to be ‘European’ banks that have the potential to pose significant cross-border externalities. However, aggregate data show a gradual, though statistically significant, increase of cross-border penetration in the EU. Policy-makers may thus in the (near) future face the challenge of designing European structures for financial supervision and stability.

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File URL: http://www.lse.ac.uk/fmg/documents/specialPapers/2004/sp156.pdf
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Bibliographic Info

Paper provided by Financial Markets Group in its series FMG Special Papers with number sp156.

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Date of creation: Apr 2004
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Handle: RePEc:fmg:fmgsps:sp156

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Web page: http://www.lse.ac.uk/fmg/

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Cited by:
  1. Berger, Helge & Hefeker, Carsten, 2006. "Does financial integration make banks act more prudential? Regulation, foreign owned banks, and the lender-of-last resort," Discussion Papers 2006/2, Free University Berlin, School of Business & Economics.
  2. Robert A. Eisenbeis & George G. Kaufman, 2007. "Cross-border banking: challenges for deposit insurance and financial stability in the European Union," Working Paper 2006-15, Federal Reserve Bank of Atlanta.
  3. Mayes , David G., 2004. "An approach to bank insolvency in transition and emerging economies," Research Discussion Papers 4/2004, Bank of Finland.
  4. Claudia M. Buch & Katja Neugebauer, 2009. "Diversification of Banks' International Portfolios: Evidence and Policy Lessons," Working Paper / FINESS 2.4, DIW Berlin, German Institute for Economic Research.
  5. Robert A. Eisenbeis, 2006. "Home country versus cross-border negative externalities in large banking organization failures and how to avoid them," Working Paper 2006-18, Federal Reserve Bank of Atlanta.
  6. Beck, T.H.L. & Todorov, R.I. & Wagner, W.B., 2011. "Bank Supervision Going Global? A Cost-Benefit Analysis (Replaced by CentER DP 2012-059)," Discussion Paper 2011-127, Tilburg University, Center for Economic Research.
  7. Robert A. Eisenbeis, 2004. "Agency problems and goal conflicts," Working Paper 2004-24, Federal Reserve Bank of Atlanta.
  8. Laurence Scialom, 2007. "Pour une politique d'actions correctives précoces dans l'Union européenne : les carences institutionnelles et légales," Revue d'Économie Financière, Programme National Persée, vol. 89(3), pages 111-121.
  9. Pedro Gustavo Teixeira & Garry J. Schinasi, 2006. "The Lender of Last Resort in the European Single Financial Market," IMF Working Papers 06/127, International Monetary Fund.
  10. Beck, T.H.L. & Todorov, R.I. & Wagner, W.B., 2012. "Supervising Cross-Border Banks: Theory, Evidence and Policy (Revised version of CentER Discussion Paper 2011-127)," Discussion Paper 2012-059, Tilburg University, Center for Economic Research.
  11. repec:diw:diwfin:diwfin02040 is not listed on IDEAS
  12. Edward J. Kane, 2006. "Inadequacy of Nation-Based and VaR-Based Safety Nets in the European Union," NBER Working Papers 12170, National Bureau of Economic Research, Inc.
  13. D'Hulster, Katia, 2011. "Cross border banking supervision : incentive conflicts in supervisory information sharing between home and host supervisors," Policy Research Working Paper Series 5871, The World Bank.
  14. Vítor Gaspar & Garry Schinasi, 2010. "Financial Stability and Policy Cooperation," Working Papers o201001, Banco de Portugal, Economics and Research Department.
  15. Eisenbeis, Robert A. & Kaufman, George G., 2008. "Cross-border banking and financial stability in the EU," Journal of Financial Stability, Elsevier, vol. 4(3), pages 168-204, September.
  16. Dirk Schoenmaker & Wolf Wagner, 2011. "The Impact of Cross-Border Banking on Financial Stability," Tinbergen Institute Discussion Papers 11-054/2/DSF18, Tinbergen Institute.
  17. Tröger, Tobias, 2013. "The Single Supervisory Mechanism - Panacea or Quack Banking Regulation? Preliminary assessment of the evolving regime for the prudential supervision of banks with ECB involvement," IMFS Working Paper Series 73, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt.
  18. Charles Goodhart & Dirk Schoenmaker, 2009. "Fiscal Burden Sharing in Cross-Border Banking Crises," International Journal of Central Banking, International Journal of Central Banking, vol. 5(1), pages 141-165, March.

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