EU financial safety nets are social contracts that assign uncertain benefits and burdens to taxpayers in different member countries. To help national officials to assess their taxpayers' exposures to loss from partner countries, this paper develops a way to estimate how well markets and regulators in 14 of the EU-15 countries have controlled deposit-institution risk-shifting in recent years. Our method traverses two steps. The first step estimates leverage, return volatility, and safety-net benefits for individual EU financial institutions. For stockholder-owned banks, input data feature 1993-2004 data on stock-market capitalization. Parallel accounting values are used to calculate enterprise value (albeit less precisely) for mutual savings institutions. The second step uses the output from the first step as input into regression models of safety-net benefits and interprets the results. Parameters of the second-step models express differences in the magnitude of safety-net subsidies and in the ability of financial markets and regulators in member countries to restrain the flow of safety-net subsidies to commercial banks and savings institutions. We conclude by showing that banks from high-subsidy and low-restraint countries have initiated and received the lion's share of cross-border M&A activity. The efficiency, stabilization, and distributional effects of allowing banks to and from differently subsidized environments to expand their operations in partner countries pose policy issues that the EU ought to address.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
13782.
Length: Date of creation: Feb 2008 Date of revision: Handle: RePEc:nbr:nberwo:13782
Note: IFM Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: ().
Find related papers by JEL classification: F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)