What are Borders Made of? An Analysis of Barriers to European Banking Integration

37 Pages Posted: 26 Jun 2008 Last revised: 17 Nov 2011

Date Written: April 30, 2008

Abstract

Linguistic and cultural differences, different legal and supervisory frameworks, and 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 (Dell'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: european banking integration, barriers, asymmetric information

JEL Classification: G21, G28

Suggested Citation

Affinito, Massimiliano and Piazza, GianMatteo, What are Borders Made of? An Analysis of Barriers to European Banking Integration (April 30, 2008). Bank of Italy Temi di Discussione (Working Paper) No. 666, Available at SSRN: https://ssrn.com/abstract=1151682 or http://dx.doi.org/10.2139/ssrn.1151682

Massimiliano Affinito

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

GianMatteo Piazza (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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