Research on Cross-Border Banking

The financial crisis has revealed the urgent need to better understand the determinants and consequences of cross-border banking. Banks' decision to internationalize can be determined by entry barriers, geographical distance or growth prospects. The entry of foreign banks into domestic markets can bring along benefits and costs for the host country. While efficiency of the host country's banking market can be improved through the entry of foreign banks, cross-border activities can transmit shocks. This reveals the necessity of supranational regulation and supervision. For an appropriate design of (inter)national regulation and supervision, it is important to understand how banks are connected within and across borders. Along these lines, we provide information on relevant literature, main research questions and findings for each of the following topics.

Macroprudential Policy and Regulation

The macroprudential approach focuses on risks arising in foreign financial markets and the impact of financial distress on important financial institutions. The key aspects of current regulatory reforms include... [more]

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Determinants of cross-border banking

International capital flows in banking have increased over recent decades. The internationalization of banking has thereby been driven by the globalization of economic activity as well as by the deregulation of financial markets... [more]

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Foreign banks and domestic markets

In recent decades, the banking sector has become more international. This internationalization of banks has occurred, amongst others, through the set up of foreign affiliates. The entry of a foreign bank into a new market can bring along benefits as well as costs for the host country... [more]

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Transmission of shocks via international banks

Cross-border linkages of banks can transmit liquidity shocks from one country to another. This has become obvious during the recent financial crisis, where internationally active banks played an important role in the transmission of shocks. A liquidity shock can be transferred from one country abroad to the domestic country due to various channels... [more]

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Cross-border bank regulation and supervision

Internationally active banks can be a source of systemic risk as a default of one bank can easily spill over to banks in other countries. This implies that financial market stability in one country influences stability in another country. For this reason, different countries should have an incentive to cooperate... [more]

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International banking networks

Financial systems of different countries have become more interconnected in recent years. This process of financial integration allows for a better diversification of risks. However, internationally connected banking systems entail a higher risk of spreading local shocks to a supranational or even worldwide level... [more]

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