Obstacles to a global banking system: “Old Europe” versus “New Europe” |
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Authors: | Allen N. Berger |
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Affiliation: | Board of Governors of the Federal Reserve System, 20th and C Streets. NW, Mail Stop 153, Washington, DC 20551, USA; Wharton Financial Institutions Center, Philadelphia, PA 19104, USA |
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Abstract: | “Old Europe” – the developed nations of continental Europe – averages only about 15% foreign bank ownership, whereas “New Europe” – the transition nations of Eastern Europe – averages about 70%. Similar findings hold elsewhere in the world – developed nations tend to have much lower foreign bank ownership shares than developing nations. We examine the causes of the differences within Europe with an eye toward more general conclusions. Our findings suggest that the low foreign bank shares in “Old Europe” – and perhaps developed nations more generally – may primarily result from net comparative disadvantages for foreign banks and relatively high implicit government entry barriers. The high foreign penetration in “New Europe” – and perhaps developing nations more generally – may be due to net comparative advantages for foreign banks and low government entry barriers, particularly in nations that reduced their state bank ownership. |
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Keywords: | G21 G28 F23 L10 |
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