Obstacles to a Global Banking System: 'Old Europe' Versus 'New Europe'

26 Pages Posted: 19 Aug 2006

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Date Written: June 2006

Abstract

"Old Europe" - the developed nations of continental Europe - averages only about 15% foreign bank ownership, whereas "New Europe" - the transition nations of Eastern Europe - averages about 70%. Similar findings hold elsewhere in the world - developed nations tend to have much lower foreign bank ownership shares than developing nations. We examine the causes of the differences within Europe with an eye toward more general conclusions. Our findings suggest that the low foreign bank shares in "Old Europe" - and perhaps developed nations more generally - may primarily result from net comparative disadvantages for foreign banks and relatively high implicit government entry barriers. The high foreign penetration in "New Europe" - and perhaps developing nations more generally - may be due to net comparative advantages for foreign banks and low government entry barriers, particularly in nations that reduced their state bank ownership.

Keywords: Banks, Europe, Globalization, Cross-border

JEL Classification: G21, G28, F23, L10

Suggested Citation

Berger, Allen N., Obstacles to a Global Banking System: 'Old Europe' Versus 'New Europe' (June 2006). Available at SSRN: https://ssrn.com/abstract=925264 or http://dx.doi.org/10.2139/ssrn.925264

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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