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Title:Does Financial Integration Make Banks Act More Prudential? Regulation, Foreign Owned Banks, and the Lender-of-Last Resort PDF Logo
Authors:Berger, Helge
Hefeker, Carsten
Issue Date:2006
Series/Report no.:HWWA Discussion Paper 339
Abstract:We analyze whether financial integration will lead to lower national regulation of domestic banking activities. In our model, banks? efforts and public regulation can lower the probability of bankruptcy. We contrast the national case with an integrated banking market and find that banks will exert greater effort to monitor their foreign activities. Thus, financial integration may increase prudential behavior and regulation. We also discuss incentives for banks to organize their foreign holdings in branches or subsidiaries. We show that the absence of a common lender of last resort can reduce the probability of financial crisis.
Subjects:Bank regulation
lender of last resort
European financial markets
JEL:E61
E58
F36
F33
E42
Document Type:Working Paper
Appears in Collections:HWWA Discussion Paper, Hamburgisches Welt-Wirtschafts-Archiv

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