Is full banking integration desirable?

Arribas, Iván; Peiró‐Palomino, Jesús; Tortosa‐Ausina, Emili

doi:10.1016/j.jbankfin.2017.08.002

Cited by 11 publications

(7 citation statements)

References 113 publications

(107 reference statements)

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“…In existing banking literature, cross-border bank claims have been widely used as a proxy for bank integration. Arribas et al (2017) find that integration among banks stimulates economic growth, especially for the poorest economies. Milcheva and Zhu (2016) use bilateral bank foreign exposure to measure bank integration and find that bank sector integration significantly contributes to the co-movements of housing.…”

Section: Integration In Banking Areamentioning

confidence: 98%

“…A recent paper by Karolyi et al (2018) finds that cross-border bank inflows can stimulate local competition and therefore lower systemic risk in the bank system. Arribas et al (2017), moreover, state that bank integration contributes to economic growth in terms of GDP per capita. Kalemli-Ozcan et al (2013) claim that a higher banking integration between two countries, due to increased cross-border banking activities, can decrease the synchronicity of business cycles.…”

Section: Benefits and Costs Of Integrationmentioning

confidence: 99%

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Does bank integration contribute to insolvencies and crises?

Sun

2020

JFEP

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Purpose This paper aims to construct a measure of integration among global banks and examine its impact on bank insolvencies and bank crises. Design/methodology/approach The authors apply principal component analysis to measure a bank’s degree of integration to the global banking market. Moreover, they test whether bank integration affects bank insolvency risk, in which they treat the equity of individual banks as a call option. Findings The authors find that the banking industry has become more globally integrated over the past two decades. At the individual bank level, results indicate that banks with higher integration levels have more assets, more nontraditional banking services and more interbank businesses. Overall, they find that a bank’s integration level is negatively associated with insolvency risk, which suggests that greater integration with global markets diversifies a bank’s risk. At the country level, banking systems with less integrated big banks, or more integrated smaller banks, are more stable and hence less likely to suffer a banking crisis. Originality/value The authors construct a novel measure of integration among global banks and examine its impact on bank insolvencies and bank crises.

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Section: Integration In Banking Areamentioning

confidence: 98%

Section: Benefits and Costs Of Integrationmentioning

confidence: 99%

Does bank integration contribute to insolvencies and crises?

Sun

2020

JFEP

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“…Furthermore, Bodenhorn (2016) shows that the financial system was important in the history of the U.S. because of the role it played in mobilizing savings, allocating and controlling capital, and mitigating opportunism. The activity of the financial sector can promote growth also through banking integration (Arribas et al, 2017), deregulation (Jerzmanowski, 2017) and financial development, via the production of new ideas (Madsen and Ang, 2016).…”

Section: Related Literaturementioning

confidence: 99%

Innovation, finance, and economic growth: an agent-based approach

Fagiolo

Giachini

Roventini

2019

J Econ Interact Coord

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This paper extends the endogenous-growth agent-based model in Fagiolo and Dosi (2003) to study the financegrowth nexus. We explore industries where firms produce a homogeneous good using existing technologies, perform R&D activities to introduce new techniques, and imitate the most productive practices. Unlike the original model, we assume that both exploration and imitation require resources provided by banks, which pool agent savings and finance new projects via loans. We find that banking activity has a positive impact on growth. However, excessive financialization can hamper growth. Indeed , we find a significant and robust inverted-U shaped relation between financial depth and growth. Overall, our results stress the fundamental (and still poorly understood) role played by innovation in the finance-growth nexus.

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“…Following Sehgal et al (2016a), we also wanted to utilized deposit and lending rate series across three maturities, namely short term, medium term, and long term to examine the banking linkages for the sample countries but were constrained by the unavailability of organized and homogenous data for comparison. Following Arribas et al (2017), we wanted to use quantity or flow based indicators of banking integration to compile data on total assets held abroad by banks of a given country, and assets of a given country owned by foreign banks (i.e. the information provided contains bilateral bank assets) from the Bank of International Settlement (BIS) database.…”

Section: Datamentioning

confidence: 99%

“…Arribas et al (2017) opined that most papers on banking sector linkages have used not just the price based measures but quantity bases measures of banking integration. However, more recent contributions argue that besides the various measures to examine the degree of banking integration, it is also important to study the connectedness of banking sector.…”

Section: Introductionmentioning

confidence: 99%

Dynamics of banking sector integration in South Asia: an empirical study

Pandey

Sehgal

Ahmad

2019

IGDR

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Purpose Banks in the South Asian region are the fulcrum of economic growth and development as they provide means to development credit and working capital, trade and infrastructure finance and are seen as custodians of the trust in the financial system. This paper aims to study the nature of banking sector linkages for the region. Design/methodology/approach The dependence structure between deposits and lending rates individually for the banks of the South Asian countries are studied using time invariant and time varying family of copula functions. The degree of connectedness is further studied by Diebold and Yilmaz methodology. Findings Results indicate poor levels of banking integration in the region as the dependence parameter for both deposits and lending rates was around 0 for the sample countries, thereby confirming poor banking sector integration in the region. Practical implications Policymakers of the region are interested in the co-movements of the interest rates to understand the cross-sector risk management and any systemic risk pressures for the regional economies. Corporates in these countries are scouting out for competitive borrowing rates to lower their cost of capital. Social implications Rationale for examining the banking sector linkages is that the South Asian countries are at different stages of economic growth and development and this region in particular is the fastest growing region in the world and has largely increased its trade integration with the world albeit having lowest levels of intra-regional trade integration. Originality/value This is a first of a kind of studies to examine the banking sector linkages in South Asia.

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Is full banking integration desirable?

Cited by 11 publications

References 113 publications

Does bank integration contribute to insolvencies and crises?

Does bank integration contribute to insolvencies and crises?

Innovation, finance, and economic growth: an agent-based approach

Dynamics of banking sector integration in South Asia: an empirical study

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