Bank Bias in Europe: Effects on Systemic Risk and Growth
By Sam Langfield, M. Pagano. Social Science Research Network, 2015
250 citations recorded by the source corpus.
Europe’s financial structure has become strongly bank-based–far more so than in other economies. We document that an increase in the size of the banking system relative to equity and private bond markets is associated with more systemic risk and lower economic growth, particularly during housing market crises. We argue that these two phenomena arise owing to an amplification mechanism, by which banks overextend and misallocate credit when asset prices rise, and ration it when they drop. The paper concludes by discussing policy solutions to Europe’s ‘bank bias’, which include reducing regulatory favouritism towards banks, while simultaneously supporting the development of securities markets.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/eb85ae0bb441b48797a20335f15e10734a8cd2d1
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
In Finance
Citations in the corpus
- Capital Markets Union and the fintech opportunity (2018, background): “Deeper capital markets that diversify the financial system and reduce its reliance on banks are empirically less prone to financial crises, and can also be associated with higher growth (Langfield and Pagano, 2016).”
- Finance and economic growth in OECD and G20 countries (2015, result): “This view is in line with other recent empirical evidence showing that market-based financial systems are more conducive to growth and innovation than bank-based ones (European Systemic Risk Board, 2014; Gambacorta et al., 2014; Hsu et al., 2014; Langfield and Pagano, 2015).”