Banks, Regions and Development After the Crisis and Under the New Regulatory System

Abstract

One of the most evident consequences of the Great Financial Crisis has been a rapid expansion of banking regulation. We argue that the burden of the new regulatory system is asymmetric, driving small banks to the "too-small-to-survive" zone, while reinforcing the "too-big-to-fail" protection for big banks. The asymmetric effect on banking structure produces related asymmetries on firms and regional economies, in light of the fact that small firms and peripheral regions are highly dependent on bank credit and need strategic proximity of banking structures. Finally, our review of the literature on different countries and on different periods of time, including the financial crisis years, suggests the importance of a differentiated banking model when firms and regions are heterogeneous. There is no obvious optimal size of bank.

The COVID‐19 Pandemic and Relationship Banking in Germany: Will Regional Banks Cushion an Economic Decline or is A Banking Crisis Looming?

“…Tough competition, the ongoing low interest rate environment and tightened banking regulation (to prevent a new financial crisis) challenge all banks. However, extensive reporting requirements generate fixed costs that burden small regional banks disproportionally (Alessandrini et al 2016;Schiele et al 2017). Against this background, some authors see regional banks and, more generally, banking diversity as being at risk in Germany and Europe (Ferri & Neuberger 2018;Schmidt 2018), also because of rising new competition from fintech companies (Schackmann-Fallis & Weiss 2018;Flögel & Beckamp 2020).…”

“…However, extensive reporting requirements generate fixed costs that burden small regional banks disproportionally (Alessandrini et al . 2016; Schiele et al . 2017).…”

Will FinTech make regional banks superfluous for small firm finance? Observations from soft information‐based lending in Germany

“…Beside the general challenges the banking business faces in the current low interest rate environment, tightened bank regulation (e.g., CRD 4 recommendation), especially the extensive reporting requirements, are seen as an explanation for the M&A of regional banks in Germany (Dombret, ; Flögel & Gärtner, ; Schiele et al, ). Increased reporting generates fixed costs that burden small regional banks disproportionally compared with large banks (Alessandrini et al, ). Competition with the digital provision of bank services is one key explanation for branch closures, as clients visit their branch less often (Conrad et al, ), so it becomes more difficult to run (smaller) branches economically.…”

Optimal regulation of banking system’s advanced credit risk management by unified computational representation of business processes across the entire banking system

“…As a result, regulators were conned and the data were published as real information, deceiving the public users. In fact, regulatory systems in most countries all over the world were not sufficiently controlled to act equivalently in a heterogeneous banking environment and handle their supervision policies (Alessandrini, Fratianni, Papi, & Zazzaro, 2016;FSB, 2017;Resti, 2016b). Inadequacies in the international regulatory framework and the lack of standardisations led to the rapid propagation and development of a cross-border crisis (Ayadi, Ferri, & Pesic, 2016).…”