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Cross-Border Banking in the Euro Area since the Crisis: What is Driving the Great Retrenchment?

Author

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  • Schmitz, Martin
  • Tirpák, Marcel

Abstract

This special feature examines the potential drivers of the post-crisis retrenchment in cross-border banking in the euro area, which stands out in international comparison. Examining a wide range of possible determinants of this phenomenon, it establishes a significant link between deteriorating asset quality and the retrenchment in cross-border banking. Conversely, tighter prudential policies and the introduction of bank levies do not contribute to explaining the reduction in cross-border banking activity. Therefore, tackling the persistent asset quality problems, along with the completion of the banking union, would seem to be pivotal to reaping the potential benefits of cross-border banking within the euro area in terms of risk diversification and risk-sharing. JEL Classification: G00

Suggested Citation

  • Schmitz, Martin & Tirpák, Marcel, 2017. "Cross-Border Banking in the Euro Area since the Crisis: What is Driving the Great Retrenchment?," Financial Stability Review, European Central Bank, vol. 2.
    • Handle: RePEc:ecb:fsrart:2017:0002:2
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    File URL: https://www.ecb.europa.eu//pub/pdf/fsr/art/ecb.fsrart201711_02.en.pdf
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    Citations

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    Cited by:

    1. María J. Nieto & Dalvinder Singh, 2021. "Incentive compatible relationship between the ERM II and close cooperation in the Banking Union: the cases of Bulgaria and Croatia," Occasional Papers 2117, Banco de España.

    More about this item

    Keywords

    cross-border banking; financial stability; retrenchment;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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