Abstract
Two items were firmly on the European economic agenda in the 1990s: financial market integration and the creation of a common or single currency. The former was supposed to have been achieved in 1992 (via the Single Market Act, with some derogations), and the latter came into being on January 1, 1999. This study is concerned with a particular connection between the two themes, namely the process of financial intermediation and especially the role of banking.
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Notes
This would be in tune with the underlying ‘Continental’ model of financial intermediation, in which it is suggested that relationship or ‘customer’ rather than market or ‘auction’ relations prevail. The terminology is Okun’s (1981).
Note the separate possibility that, as in Milgrom and Roberts (1982a,b; 1987), strategies involving barriers to entry might themselves be welfare enhancing: e.g., if increased quality or decreased cost-price margins are used as barriers.
Securitisation generally involves assigning to an independently capitalised subsidiary, or corporate unit, a subset of an intermediary’s assets whose diversifiable idiosyncratic risk has been identified and closely matched (in terms of non-diversifiable risk as well as maturity) in the market traded securities which the unit issues as its liabilities. Close matching of maturities and risks allows the subsidiary unit’s capital to be low, thereby releasing the parent institution’s capital into other uses. See Phillips (1996) for an overview of securitisation.
The ED (1997) study pointed out that banks were increasingly under threat from other financial intermediaries in their own ‘bread-and-butter’ consumer based product areas.
In this respect, Dermine (1984) provides a starting point in terms of pricing behaviour by noting the potential simultaneity of deposit and loan rate setting.
Hence, the final chapter doe s not revisit the empirical work in chapter 2, which is a review of research drawn mainly from the EU (1997) study.
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© 2002 Springer Science+Business Media New York
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Spajić, L.D. (2002). Introduction. In: Financial Intermediation in Europe. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-1013-0_1
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DOI: https://doi.org/10.1007/978-1-4615-1013-0_1
Publisher Name: Springer, Boston, MA
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