What Are Borders Made of? An Analysis of Barriers to European Banking Integration

  • Massimiliano Affinito
  • Matteo Piazza


Linguistic and cultural differences, different legal and supervisory frameworks, and relationship lending have been repeatedly mentioned as barriers to European retail banking integration. We investigate whether these barriers have affected integration within national boundaries, using an index of localism of regional banking systems as a measure of market integration. If local banks are established and flourish because asymmetric information makes entry difficult for non-incumbents (Dell’Ariccia 2001) or regulatory and governance rules prevent entry from outside (Berger et al. 1995), we should find a significant relationship between indicators of these barriers and measures of the localism of banking systems. Our results show that this is indeed the case for asymmetric information, while findings are more blurred for supervisory practices.


Banking System Euro Area Asymmetric Information Foreign Bank Credit Institution 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



We would like to thank, for help and comments, Riccardo De Bonis, Ron Martin, Marcello Messori, Marcello Pagnini, Miria Rocchelli, Luigi Federico Signorini, and participants at the seminar held at the Research Department of the Bank of Italy (June 2005), at the XIV International “Tor Vergata” Conference on Banking and Finance (Rome, December 2005), and at the conference on “The Changing Geography of Banking” held at the Università Politecnica delle Marche (Ancona, September 2006). The opinions expressed in this contribution do not necessarily reflect those of the Bank of Italy.


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© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Bank of Italy, Economic Research and International Relations AreaItaly
  2. 2.Deputy Head of Monetary and Financial Statistics DivisionEconomic Research and International Relations Area of the BankItaly

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