Arbeitspapier
Financial integration, specialization and systemic risk
This paper studies the implications of cross-border financial integration for financial stability when banks' loan portfolios adjust endogenously. Banks can be subject to sectoral and aggregate domestic shocks. After integration they can share these risks in a complete interbank market. When banks have a comparative advantage in providing credit to certain industries, financial integration may induce banks to specialize in lending. An enhanced concentration in lending does not necessarily increase risk, because a well-functioning interbank market allows to achieve the necessary diversification. This greater need for risk sharing, though, increases the risk of cross-border contagion and the likelihood of widespread banking crises. However, even though integration increases the risk of contagion it improves welfare if it permits banks to realize specialization benefits.
- Sprache
-
Englisch
- Erschienen in
-
Series: ECB Working Paper ; No. 1425
Allocative Efficiency; Cost-Benefit Analysis
Financial Markets and the Macroeconomy
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
financial integration
Interbank Market
specialization
Grüner, Hans Peter
Hartmann, Philipp
- Handle
- Letzte Aktualisierung
-
20.09.2024, 08:22 MESZ
Objekttyp
- Arbeitspapier
Beteiligte
- Fecht, Falko
- Grüner, Hans Peter
- Hartmann, Philipp
- European Central Bank (ECB)
Entstanden
- 2012
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