Between Lisbon and London: Financial Sector Consolidation in the Context of the Lisbon Agenda

Posted: 24 Nov 2009  

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute

Maria Fabiana Penas

affiliation not provided to SSRN

Date Written: 2005

Abstract

A review of the intermediate effects of the Lisbon Agenda is conducted. The Lisbon Agenda focused on innovation, productivity and growth, with a goal to make Europe the most competitive and dynamic economy inthe world by 2010 through financial sector integration and consolidation. Integration was expected to lead to increased efficiency and growth, and to support small, innovative companies. However, the short-term effects on thefinancing of innovationhave been found to be ambiguous. Concern spurs from the perceived reliance of small- and medium-sized enterprises (SMEs) on local financial institutions and on relationship lending. Consolidation increases competition pressure on such small banks and could jeopardize the SMEs' source of finance, since large institutions are often unable or unwilling to handle loan applications by SMEs. However, ifalternative finance sources, such as de novo banks and venture capital markets,are allowed to develop unhindered, negative effects are likely to disappear inthe long-term. Implications for policy-makers include ensuring that markets stay open andflexible to encourage new forms of financing. Also, antitrust authorities mustpreserve competitive bank markets and facilitate cross-border bank mergers. Finally, the EU governments should take measures, such as creating exit optionsfor venture capitalists and eliminating rigid labor markets, to encourage innovation. (LKB)

Keywords: Lisbon Agenda (European Union), Public policies, Venture capital, Access to capital, Acquisitions & mergers, Antitrust laws, Loans, Financial markets, Market competition, Market consolidation, Productivity growth, Development policies, Innovation policies, Agglomeration economies, Firm size, Banking industry, Finance, Financial institutions

Suggested Citation

Degryse, Hans and Ongena, Steven and Penas, Maria Fabiana, Between Lisbon and London: Financial Sector Consolidation in the Context of the Lisbon Agenda (2005). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship. Available at SSRN: https://ssrn.com/abstract=1509965

Hans Degryse (Contact Author)

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Steven R. G. Ongena

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute ( email )

Quartier UNIL-Dorigny, Bâtiment Extranef, # 211
40, Bd du Pont-d'Arve
CH-1015 Lausanne, CH-6900
Switzerland

Maria Fabiana Penas

affiliation not provided to SSRN

No Address Available

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