European Banks Straddling Borders: Risky or Rewarding?

Forthcoming in Financial Research Letters

18 Pages Posted: 18 Jul 2017 Last revised: 4 Jun 2020

See all articles by Patty Duijm

Patty Duijm

De Nederlandsche Bank

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: May 20, 2020

Abstract

The establishment of the European Banking Union in 2014 created a large banking market in Europe, making it easier for banks to straddle borders and expand their business to other European countries. We use a unique hand-collected dataset with cross-border loans for the 61 largest European banks to study the impact cross-border banking has on the risk-return profile of an individual bank. Our results show that cross-border banking decreases banks’ risk, by lowering the insolvency risk and generating a more stable income profile.

Keywords: International Banking; Bank Regulation; Financial Stability; Risk; Geographical diversification

JEL Classification: E44, G21, G28

Suggested Citation

Duijm, Patty and Schoenmaker, Dirk, European Banks Straddling Borders: Risky or Rewarding? (May 20, 2020). Forthcoming in Financial Research Letters, Available at SSRN: https://ssrn.com/abstract=3000821 or http://dx.doi.org/10.2139/ssrn.3000821

Patty Duijm

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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