Euro Area (cross-border?) banking

Pierluigi Bologna and Marianna Caccavaio ()
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Marianna Caccavaio: Bank of Italy

No 228, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper presents stylized facts of the segmentation of the Euro Area (EA) banking system and investigates cross-border banking dynamics. Results show that the determinants of cross-border banking change substantially over-time: (i) in the pre-crisis period of financial integration the physical distance and the financial distance between countries were the main drivers; (ii) during the global financial crisis banks reduced the concentration in their foreign claims portfolio and retrenched from the more externally vulnerable countries but kept on investing in the still profitable countries with a sound fiscal position; and (iii) during the EA sovereign tensions, while portfolio diversification and the pull-back from externally vulnerable countries continued, foreign claims were also driven by the deteriorating sovereign conditions, the bank-sovereign link, and opportunities for flight-to-quality. During the crisis the structure of banks� international organization also mattered as banks retrench more when they do not operate through foreign branches and subsidiaries.

Keywords: Euro Area; Cross-border banking; Foreign claims; Financial stability (search for similar items in EconPapers)
JEL-codes: F36 G01 G21 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-ban and nep-eec
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_228_14

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