Financial Integration, Specialization and Systemic Risk


Grüner, Hans Peter ; Fecht, Falko ; Hartmann, Philipp


DOI: https://doi.org/10.1016/j.jinteco.2012.01.012
URL: http://www.sciencedirect.com/science/article/pii/S...
Additional URL: https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1425...
Document Type: Article
Year of publication: 2012
The title of a journal, publication series: Journal of International Economics
Volume: 88
Issue number: 1
Page range: 150-161
Place of publication: Amsterdam [u.a.]
Publishing house: Elsevier
ISSN: 0022-1996
Publication language: English
Institution: School of Law and Economics > VWL, Wirtschaftspolitik (Grüner)
Subject: 320 Political science
330 Economics
Classification: JEL: D61, E44, G21,
Keywords (English): Financial integration , Specialization , Interbank market , Financial contagion
Abstract: 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.

Dieser Eintrag ist Teil der Universitätsbibliographie.




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Grüner, Hans Peter ; Fecht, Falko ; Hartmann, Philipp (2012) Financial Integration, Specialization and Systemic Risk. Journal of International Economics Amsterdam [u.a.] 88 1 150-161 [Article]


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