IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Integration and consolidation in EU banking - an unfinished business

  • Christoph Walkner
  • Jean-Pierre Raes
Registered author(s):

    The objective of this paper is to review the obstacles to cross-border integration and consolidation, which confront banks operating within the EU. Theoretical and empirical evidence supports the view that integration and consolidation in the banking sector can enhance overall economic performance via macroeconomic stabilisation, higher levels of efficiency and consumer welfare. While in recent years only slow progress has been recorded in EU cross-border banking integration, a substantial consolidation in the Member State's national banking sectors has occurred leading to rising domestic concentration ratios implying greater efficiency but potentially limiting welfare gains. The lack of progress in cross-border integration can be attributed to various factors, including national differences in market practices, regulation and taxation. A fairly comprehensive list of existing obstacles is provided and their impact on the main avenues for cross-border banking integration is examined, namely on (i) organic growth in the form of foreign branches and subsidiaries, (ii) cross-border mergers and acquisitions and (iii) cross-border provision of banking services. In addition, the role of institutional factors relating to the framework for prudential supervision is considered, notably in the context of the relationship of home and host country supervisors with each other and with market participants. While the highlighted issues are of general relevance in the context of EU financial integration, they might be of special significance in the context of the recently acceded Member States and their largely foreign owned banking system.

    If you experience problems downloading a file, check if you have the proper application to view it first. 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.

    File URL: http://ec.europa.eu/economy_finance/publications/publication662_en.pdf
    Download Restriction: no

    Paper provided by Directorate General Economic and Financial Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 226.

    as
    in new window

    Length: 30 pages
    Date of creation: Apr 2005
    Date of revision:
    Handle: RePEc:euf:ecopap:0226
    Contact details of provider: Postal: Coomunivcations Unit, B-1049 Bruxelles / Brussels
    Fax: +32 2 298.08.23
    Web page: http://ec.europa.eu/economy_finance/index_en.htm
    Email:


    More information through EDIRC

    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.:

    as in new window
    1. Inês Cabral & Frank Dierick & Jukka Vesala, 2002. "Banking integration in the euro area," Occasional Paper Series 06, European Central Bank.
    2. Schüler, Martin, 2003. "Incentive Problems in Banking Supervision: The European Case," ZEW Discussion Papers 03-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. William Lang & Choon-Geol Moon & Loretta Mester & Joseph Hughes & Michael Pagano, 2001. "Do Bankers Sacrifice Value to Build Empires? Managerial Incentives, Industry Consolidation, and Financial Performance," Departmental Working Papers 200117, Rutgers University, Department of Economics.
    4. Joe Peek & Eric S. Rosengren, 2000. "Implications of the globalization of the banking sector: the Latin American experience," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 45-62.
    5. Jason Karceski & Steven Ongena & David C. Smith, 2000. "The impact of bank consolidation on commercial borrower welfare," International Finance Discussion Papers 679, Board of Governors of the Federal Reserve System (U.S.).
    6. Joe Peek & Eric S. Rosengren, 1997. "Bank consolidation and small business lending: it's not just bank size that matters," Working Papers 97-1, Federal Reserve Bank of Boston.
    7. Claudia M. Buch & Gayle L. DeLong, 2001. "Cross-Border Bank Mergers: What Lures the Rare Animal?," Kiel Working Papers 1070, Kiel Institute for the World Economy.
    8. Luigi Zingales & Raghuram G. Rajan, 2003. "Banks and Markets: The Changing Character of European Finance," NBER Working Papers 9595, National Bureau of Economic Research, Inc.
    9. Allen Berger & Robert DeYoung, 2001. "The Effects of Geographic Expansion on Bank Efficiency," Journal of Financial Services Research, Springer, vol. 19(2), pages 163-184, April.
    10. Kaas, Leo, 2004. "Financial market integration and loan competition: when is entry deregulation socially beneficial?," Working Paper Series 0403, European Central Bank.
    11. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, 1997. "The effects of megamergers on efficiency and prices: evidence from a bank profit function," Finance and Economics Discussion Series 1997-9, Board of Governors of the Federal Reserve System (U.S.).
    12. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
    13. repec:dgr:kubcen:200087 is not listed on IDEAS
    14. Joe Peek & Eric S. Rosengren, 1996. "The international transmission of financial shocks: the case of Japan," Working Papers 96-1, Federal Reserve Bank of Boston.
    15. Donald Morgan & Bertrand Rime & Philip Strahan, 2003. "Bank Integration and State Business Cycles," NBER Working Papers 9704, National Bureau of Economic Research, Inc.
    16. Rajan, Raghuram G & Zingales, Luigi, 2001. "The Great Reversals: The Politics of Financial Development in the 20th Century," CEPR Discussion Papers 2783, C.E.P.R. Discussion Papers.
    17. Dean Amel & Colleen Barnes & Fabio Panetta & Carmelo Salleo, 2002. "Consolidation and efficiency in the financial sector: a review of the international evidence," Temi di discussione (Economic working papers) 464, Bank of Italy, Economic Research and International Relations Area.
    18. Paola Sapienza, 2002. "The Effects of Banking Mergers on Loan Contracts," Journal of Finance, American Finance Association, vol. 57(1), pages 329-367, 02.
    19. Linda S. Goldberg, 2001. "When is U.S. bank lending to emerging markets volatile?," Staff Reports 119, Federal Reserve Bank of New York.
    20. Manna, Michele, 2004. "Developing statistical indicators of the integration of the euro area banking system," Working Paper Series 0300, European Central Bank.
    21. Michael Thiel, 2001. "Finance and economic growth - a review of theory and the available evidence," European Economy - Economic Papers 158, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    22. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 433-52, December.
    23. repec:ner:tilbur:urn:nbn:nl:ui:12-3125519 is not listed on IDEAS
    24. Berger, Allen N, 2003. " The Economic Effects of Technological Progress: Evidence from the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 141-76, April.
    25. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile 56, Central Bank of Chile.
    26. Beck, Thorsten & Levine, Ross, 2004. "Stock markets, banks, and growth: Panel evidence," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 423-442, March.
    27. Allen N. Berger & Robert De Young & Gregory F. Udell, 2001. "Efficiency Barriers to the Consolidation of the European Financial Services Industry," European Financial Management, European Financial Management Association, vol. 7(1), pages 117-130.
    28. Michael Leahy & Sebastian Schich & Gert Wehinger & Florian Pelgrin & Thorsteinn Thorgeirsson, 2001. "Contributions of Financial Systems to Growth in OECD Countries," OECD Economics Department Working Papers 280, OECD Publishing.
    29. Lieven Baele & Annalisa Ferrando & Peter Hördahl & Elizaveta Krylova & Cyril Monnet, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank.
    30. repec:dgr:uvatin:20010088 is not listed on IDEAS
    31. Dario Focarelli & Fabio Panetta, 2002. "Are Mergers Beneficial to Consumers? Evidence from the Market for Bank Deposits," Temi di discussione (Economic working papers) 448, Bank of Italy, Economic Research and International Relations Area.
    32. Javier Andrés & Ignacio Hernando & J. David López-Salido, 1999. "The Role of the Financial System in the Growth-Inflation Link: the OECD Experience," Banco de Espa�a Working Papers 9920, Banco de Espa�a.
    33. repec:ner:tilbur:urn:nbn:nl:ui:12-3125506 is not listed on IDEAS
    34. Boot, Arnoud W. A., 1999. "European lessons on consolidation in banking," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 609-613, February.
    35. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Bank concentration and crises," Policy Research Working Paper Series 3041, The World Bank.
    36. Lensink, Robert & Hermes, Niels, 2004. "The short-term effects of foreign bank entry on domestic bank behaviour: Does economic development matter?," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 553-568, March.
    37. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
    38. Stiroh, Kevin J & Strahan, Philip E, 2003. " Competitive Dynamics of Deregulation: Evidence from U.S. Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 801-28, October.
    39. Clarke, George & Cull, Robert & Martinez Peria, Maria Soledad & Sanchez, Susana M., 2001. "Foreign bank entry - experience, implications for developing countries, and agenda for further research," Policy Research Working Paper Series 2698, The World Bank.
    40. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
    41. Emilia Bonaccorsi Di Patti & Giorgio Gobbi, 2007. "Winners or Losers? The Effects of Banking Consolidation on Corporate Borrowers," Journal of Finance, American Finance Association, vol. 62(2), pages 669-695, 04.
    42. Haynes, Michelle & Thompson, Steve, 1999. "The productivity effects of bank mergers: Evidence from the UK building societies," Journal of Banking & Finance, Elsevier, vol. 23(5), pages 825-846, May.
    43. Montgomery, Heather, 2003. "The role of foreign banks in post-crisis Asia: the importance of method of entry," MPRA Paper 33031, University Library of Munich, Germany.
    44. repec:ner:tilbur:urn:nbn:nl:ui:12-3125520 is not listed on IDEAS
    45. Robert Marquez, 2002. "Competition, Adverse Selection, and Information Dispersion in the Banking Industry," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 901-926.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:euf:ecopap:0226. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ECFIN INFO)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.