What are borders made of? An analysis of barriers to European banking integration

Massimiliano Affinito () and Matteo Piazza ()
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Massimiliano Affinito: Banca d'Italia
Matteo Piazza: Banca d'Italia

No 666, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research Department

Abstract: Linguistic and cultural differences, different legal and supervisory frameworks, relationship lending have been repeatedly mentioned as barriers to European retail banking integration. We investigate whether these barriers have affected integration within national boundaries, using an index of localism of regional banking systems as a measure of market integration. If local banks are established and flourish because asymmetric information makes entry difficult for non-incumbents (DellÂ’Ariccia, 2001) or regulatory and governance rules prevent entry from outside (Berger et al., 1995), we should find a significant relationship between indicators of these barriers and measures of the localism of banking systems. Our results show that this is indeed the case for asymmetric information, while findings are more blurred for supervisory practices.

Keywords: banking integration; barriers; asymmetric information (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-eec, nep-fmk and nep-reg
Date: 2008-04
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