Corporate Governance and Intra-Group Transactions in European Bank Holding Companies During the Crisis

Wharton Financial Institutions Center Working Paper No. 11-35

74 Pages Posted: 3 Apr 2011 Last revised: 4 Dec 2011

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Xian Gu

Central University of Finance and Economics (CUFE)

Oskar Kowalewski

IESEG School of Management; LEM - CNRS 9221

Date Written: March 30, 2011

Abstract

In this paper we study the intra-group transactions between the parent bank and its foreign subsidiaries in European Union countries during the crisis. We use hand-collected data from annual statements on related party transaction and find that they may create a serious problem for the stability of the foreign banks’ subsidiaries. Moreover, as some of those subsidiary banks were large by assets in some of the member states the related party transactions with the parent bank created a serious threat to host countries financial system stability. We attribute this transaction to weak governance in foreign subsidiaries. We suggest improvements in governance as well greater disclosure of related party transactions in bank holding companies in Europe.

Keywords: multinational banks, corporate governance, internal bank markets, crisis

JEL Classification: G21, G28, G38

Suggested Citation

Allen, Franklin and Gu, Xian and Kowalewski, Oskar, Corporate Governance and Intra-Group Transactions in European Bank Holding Companies During the Crisis (March 30, 2011). Wharton Financial Institutions Center Working Paper No. 11-35. Available at SSRN: https://ssrn.com/abstract=1799552 or http://dx.doi.org/10.2139/ssrn.1799552

Franklin Allen (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Xian Gu

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Oskar Kowalewski

IESEG School of Management ( email )

1 Parvis de La Défense
Socle de la Grande Arche
Paris La Défense cedex, 92044
France

HOME PAGE: http://www.ieseg.fr/en/faculty-and-research/professor/?id=1740

LEM - CNRS 9221 ( email )

Lille
France

HOME PAGE: http://lem.cnrs.fr/

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