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Title:Capital Market Integration in Euroland - The Role of Banks PDF Logo
Authors:Buch, Claudia M.
Issue Date:1999
Series/Report no.:Kieler Arbeitspapiere 932
Abstract:The introduction of the euro marks a milestone in the process of European financial market integration. This paper analyzes the implications of the euro for cross-border banking activities. A portfolio model is used which captures the role of banks as providers of informational and of risk-diversification services. By eliminating exchange rate risks, the euro enhances the incentives of banks to expand within Euroland. Yet, while the currency bias in bank portfolios will be eliminated, the home bias will remain. It is also argued that positive diversification effects may outweigh possible negative effects on the risk taking of banks.
Subjects:capital mobility
European financial integration
banking
asymmetric information
portfolio choice
JEL:D82
F36
G21
Document Type:Working Paper
Appears in Collections:Kieler Arbeitspapiere, IfW
Publikationen von Forscherinnen und Forschern des IfW

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