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Financial connectivity in cross-border lending and crises: Role of financial and legislative integration

Author

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  • Demir, Müge
  • Önder, Zeynep

Abstract

This study investigates whether financial and legislative integration affects the relationship between financial stability and connectivity in the bank-to-bank and bank-to-non-bank cross-border lending markets of 25 European countries by using network analysis and the locational banking statistics of the Bank for International Settlements. We test whether connecting through a single market or a single currency affects the interplay between financial stability and connectivity across the members of the European Union. The results suggest that as the level of financial connectivity increases, using the single currency, the euro, helps to improve the resilience of the European Union in response to the crisis in both bank-to-bank and bank-to-non-bank lending markets but legislative-regulatory integration does not have any significant effect. The positive effect of the euro on financial stability is observed not only for systemic crises but also for residual events.

Suggested Citation

  • Demir, Müge & Önder, Zeynep, 2025. "Financial connectivity in cross-border lending and crises: Role of financial and legislative integration," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:intfin:v:101:y:2025:i:c:s1042443125000277
    DOI: 10.1016/j.intfin.2025.102137
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    More about this item

    Keywords

    Cross-border banking; Financial stability; Network analysis; Financial connectivity; EU; Eurozone;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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