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Regional Bank Efficiency and its Effect on Regional Growth in “Normal” and “Bad” Times

Ansgar Belke (), Ulrich Haskamp () and Ralph Setzer ()

No 201507, ROME Working Papers from ROME Network

Abstract: The financial crisis affected regions in Europe in a different magnitude. This is why we examine whether regions which incorporate banks with a higher intermediation quality grow faster in “normal” times and are more resilient in “bad” ones. For this purpose, we measure the intermediation quality of a bank by estimating its profit and cost efficiency while taking the changing banking environment after the financial crisis into account. Next, we aggregate the efficiencies of all banks within a NUTS 2 region to obtain a regional proxy for financial quality in twelve European countries. Our results show that relatively more profit efficient banks foster growth in their region. The link between financial quality and growth is valid in “normal” and in “bad” times. These results provide evidence to the importance of swiftly restoring bank pro_tability in euro area crisis countries through addressing high nonperforming loans ratios and decisive actions on bank recapitalization.

Keywords: bank efficiency; financial development; regional growth; Europe (search for similar items in EconPapers)
JEL-codes: G21 E16 O47 O52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eec and nep-eff
Date: 2015-07
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http://www.rome-net.org/RePEc/rmn/wpaper/rome-wp-2015-07.pdf First version, 2015 (application/pdf)

Related works:
Journal Article: Regional bank efficiency and its effect on regional growth in “normal” and “bad” times (2016) Downloads
Working Paper: Regional bank efficiency and its effect on regional growth in 'normal' and 'bad' times (2015) Downloads
Working Paper: Regional Bank Efficiency and its Effect on Regional Growth in Normal and Bad Times (2015) Downloads
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