Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. AbstractThis paper examines the drivers of the retrenchment in cross-border banking in the European Union (EU) since the global financial crisis, which stands out in international comparison as banks located in the euro area and in the rest of the EU reduced their cross-border claims by around 25%. Particularly striking is the sharp and sustained reduction in intra-EU claims, especially in the form of deleveraging from cross-border interbank loans. Examining a wide range of possible determinants, we identify high non-performing loans as an important impediment to cross-border lending after the crisis, highlighting the spillovers from national banking sector conditions across the EU. We also find evidence that prudential policies can entail spillovers via cross-border banking in the EU, albeit with heterogeneity across instruments in terms of direction, magnitude and significance. Our results do not point to a major role of newly introduced bank levies in explaining cross-border banking developments.The EU's banking sector is not only the largest in the world, but also accounts for the bulk of the "financial de-globalisation" observed in cross-border banking since the global financial crisis. In this paper we provide an anatomy of the great cross-border banking retrenchment in the EU and investigate a wide range of possible drivers of this phenomenon, including indicators of banking sector performance and stability, prudential policies and bank levies. Using a granular breakdown of cross-border bank lending by instrument and counterparty sector, we are able to identify the most affected components of cross-border lending and shed light on the underlying causes.Banks located in the euro area and in the rest of the EU reduced their cross-border bank claims by around 25% since the global financial crisis, driven by a sharp and sustained reduction in intra-EU claims, which make up 60% of total EU cross-border claims. Within the EU, banks have cut their cross-border loans by around 40% which particularly affected cross-border interbank lending. Our empirical analysis shows a significant link between deteriorating asset quality and the great retrenchment in cross-border banking, highlighting the spillovers from national banking sector conditions across the EU. We also find evidence that prudential policies can entail spillovers via cross-border banking in the EU, albeit with heterogeneity across instruments in terms of direction, magnitude and significance. In p...

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