Cross-Border Banking in Europe: Implications for Financial Stability and Macroeconomic Policies
Citation:
Franklin Allen, Thorsten Beck, Elena Carletti, Philip R. Lane, Dirk Schoenmaker and Wolf Wagner, Cross-Border Banking in Europe: Implications for Financial Stability and Macroeconomic Policies, London, UK, Centre for Economic Policy Research, 2011, 1-119Download Item:
Cross-Border Banking in Europe- Implications for Financial Stability and Macroeconomic Policies.pdf (Published (publisher's copy) - Peer Reviewed) 4.250Mb
Abstract:
Understanding the role of banks in cross-border finance has become an urgent
priority. Cross-border banks have played a central role in the dynamics of the
global crisis of 2007-2009. First, European banks had a surprisingly large exposure
to the US securitised asset markets, which arose to a significant extent through
global banks acting either on the buying or selling side in these markets. Second,
the breakdown in credit and asset markets was an international phenomenon,
with cross-border linkages suffering disproportionately due to greater information
problems vis-a-vis cross-border counterparties and the differences in regulatory
regimes. Third, currency mismatches in funding became evident, with European
banks suffering a dollar shortage that ultimately required resolution through
a major currency swap initiative among the main central banks. Fourth, the
provision of fiscal support for distressed banks was especially problematic in
relation to cross-border activities. The rescue of multi-country banks, such as
Dexia and Fortis, required the governments involved to devise ad hoc, ex-post
burden-sharing agreements. In relation to emerging Europe, there were also fears
that the policies of home-country governments might encourage parent banks to
fail to support the operations of affiliates.
This report analyses key aspects of cross-border banking, takes a European focus
and derives policy recommendations based on them.
Sponsor
Grant Number
European Commission
217559
Author's Homepage:
http://people.tcd.ie/planeDescription:
PUBLISHEDLondon, UK
Author: LANE, PHILIP RICHARD
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