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Branching is not the only way for foreign banks to enter a national market, and it is impractical when there are informational and cultural barriers and asymmetries among countries. The purpose of this paper is to analyze the determinants of cross-border branching in the Latin American banking sector, a region with regulatory disparity and political and economic instability, offering elements to a grounded strategic decision.

This study uses data from six Latin American countries. To account for the preponderance of zero counts, classes of zero-inflated models are applied (Poisson, negative binomial, and mixed). Model fit indicators obtained from differences between observed and estimated counts are used for comparisons, considering branches in each region established by banks from every other foreign region of the sample.

Branching by foreign banks is positively correlated with the population, GDP per capita, household disposable income, and economic freedom score of the host country. The opposite holds for the unemployment rate and entry regulations of the host country.

Few paper address cross-border banking in emerging economies. This paper analyzes cross-border branching in Latin America in the context of the current financial integration and bank strategy. Econometrically, its pioneering design allows modeling of inflation of zeros, over-dispersion, and the multilevel data structure. This design allowed testing of a novel country-level variable: the host country’s economic freedom score.

This paper aims to examine value gains to acquirers in large commercial bank mega‐mergers (with transaction values over £1 billion) that occurred in the European Union during the period 1997‐2007, distinguishing between domestic and cross‐border transactions.

Based on a sample of 62 bank mega‐mergers, an event study methodology is employed using a market model to determine cumulative standardised abnormal returns (CSAR) to acquiring banks around the announcement date of merger deals. This is followed by cross‐sectional regression to determine specific characteristics driving acquirers' CSAR.

Cross‐border bank mergers have been more frequent in recent years, reflecting a growing trend of banking sector consolidation in the EU. However, such mergers are found to yield significant negative announcement period acquirer returns, while domestic deals have marginally negative but insignificant returns. The operational cost efficiency and capital strength of acquiring banks are found to be significant in influencing excess returns.

Constraints on data availability limited the scope for sensitivity analysis and incorporation of target characteristics in the cross‐sectional regression of drivers affecting acquirers' CSAR. Further research is aimed to address these issues.

Event study and regression results indicate that potential downside risks are judged by market participants to outweigh the benefits from cross‐border M&As in the retail banking market despite evidence of increased financial sector consolidation in the EU.

The study reflects the recent period of increased cross‐border banking consolidation in the EU and reveals findings that differ in some respects from previous studies on EU bank M&As.

The purpose of this study is to investigate the extent of bank industry consolidation across the European Union, the patterns that have emerged from the mergers and acquisitions (M&As) and the regulatory framework that underpins these processes. It aims to identify the key challenges that have to be addressed if M&As are to expand.

The paper reviews the reasons that have led some financial institutions to merge, both domestically and cross‐border, and the developments that have taken place in the economic, legal and political environment. The paper presents an empirical analysis of bank industry M&As within the EU between 1993‐2004 and identifies possible explanations for the patterns of consolidation.

The analysis provides evidence that M&As predominantly take place at the national level and that two main strategies have emerged, namely the consolidation of commercial banking and the creation of universal banking groups.

Ten countries joined the EU in 2004 and are excluded from the analysis, due to data limitations.

More cross‐border mergers should be encouraged if EU countries are to continue to integrate their financial markets. Moreover, if universal banking groups do not succeed in exploiting the economies of scope on which they are founded, divestment of non‐core activities may follow, thus providing acquisition opportunities for others, with the resulting more focused organisations wishing to diversify geographically, via cross‐border M&A.

The study suggests that the limited cross‐border M&A activity observed may be due to the existence of non‐legislative barriers, such as internal control issues raised by geographic diversity and, more specifically, the perceived cultural barriers to pan‐European operation.

The rising interconnectedness between international banks, at one end, allow participants to share risk and diversification which leads to stable local lending and increase in competitiveness, however, at the other end poses potential for volatility spillover and thereby contagion phenomena. Therefore, investigating the presence of co-integration amongst international banks can provide useful information about risk spillover in times of financial turbulence

The authors employ wavelet correlation and wavelet multiple cross-correlation strategies, following an initial decomposition of returns series through maximal overlap discrete wavelet transformation (MODWT).

The results indicate high integration level between Citibank and Deutsche Bank whereas potential of diversification exists between pairs of Citibank–Hong Kong and Shanghai Banking Corporation and Bank of America–Deutsche Bank, with former more evident in short- and medium-term relationship and later in long-run investment horizon. This paper carries implications for investors, fund managers and policymakers in foreseeing the prospects of contagion attributable to high level integration levels.

Implications for cross-border banking integration includes the presence of common lender effect which appears as a dominant factor for cross-border contagion. Therefore, banks based in different countries should focus more on funds diversification rather than borrowing much from any single creditor. Furthermore, foreign operations based on subsidiaries instead of relying on direct cross-border lending can help in reducing volatility of the foreign financial resources. Nevertheless, based on the results and significant strand of existing literature, the presence of contagion is inevitable, and therefore, a careful consideration of cross-border banking supervision and co-operation by the financial authorities can help in mitigating the volatility of global capital flows.

First, this study fills gap in the existing literature regarding the discussion on portfolio diversification opportunities in the banking sector. The banking sector is usually perceived as a main source of fixed income securities or financing; however, on the contrary, investors may also be interested for investments in publicly listed bank's stock. Most of the work regarding portfolio diversification revolves around capital market instruments; however, publicly listed shares of largest bank also present an avenue for diversification. Second, major fundamentals and the associated factor for banks performance are reflected in the its profits, either these profits result from large customer base or proper allocation of bank's assets, etc. Therefore, returns of these banks serve as a barometer for their performance and co-movement between any two banks can highlight the presence and extent of their underlying association. Third, the authors apply the latest extensions in wavelet techniques after decomposing returns series through the MODWT framework. This decomposition followed by wavelet estimations allow us to investigate banks integration level across different time and frequency space thereby carrying implications for both short- and long-run investors. Fourth, by analysing the presence of returns co-movements, the authors can predict the extent of plausible contagion since the recent global financial crisis of 2008–2009 used banks as the main medium of propagation of shocks. Fifth, the work presents many implications for the investment community, major trading partners associated with banks through different instruments and for policymakers so that the effect of contagion can be anticipated or at least mitigated in case of future financial turbulence.

Highlights

1. We investigate portfolio diversification opportunities in the banking sector.

2. Time-frequency returns co-movements is measures by applying wavelet multiple correlation and cross-correlation techniques on decomposed return series.

3. Deutsche Bank and Bank of America act as highest transmitter and recipient of volatility, respectively using the spillover approach of Diebold and Yilmaz (2012).

4. Citibank and Deutsche Bank exhibit high pairwise correlation indicating no diversification benefits.

5. Citibank exhibits high level of integration with other banks in the short- and medium-run whereas Deutsche Bank exercises high integration levels in the long-run investment period.

We investigate portfolio diversification opportunities in the banking sector.

Time-frequency returns co-movements is measures by applying wavelet multiple correlation and cross-correlation techniques on decomposed return series.

Deutsche Bank and Bank of America act as highest transmitter and recipient of volatility, respectively using the spillover approach of Diebold and Yilmaz (2012).

Citibank and Deutsche Bank exhibit high pairwise correlation indicating no diversification benefits.

Citibank exhibits high level of integration with other banks in the short- and medium-run whereas Deutsche Bank exercises high integration levels in the long-run investment period.

In this chapter we study the intra-group transactions between the parent bank and its foreign subsidiaries in European Union (EU) countries during the crisis. We use hand-collected data from annual statements on related party transaction and find that they may create a serious problem for the stability of the foreign banks’ subsidiaries. Moreover, as some of those subsidiary banks were large by assets in some of the member states the related party transactions with the parent bank created a serious threat to the host countries’ financial system stability. We attribute this transaction to the weak governance in foreign subsidiaries. We suggest improvements in governance as well as greater disclosure of related party transactions in bank holding companies in Europe.

This chapter first reviews some of the background concepts on central bank digital currency (CBDC) to provide a broad context, before diving into wholesale CBDC often a starting point for central banks to build CBDC prototypes based on distributed ledger technology (DLT), as it involves less complexity in experimentation. This chapter also examines cross-border CBDC, often an extension of wholesale CBDC prototypes based on DLT. The next chapter will then discuss retail CBDC as well as the prospects of economy-wide roll out of CBDC going forward.

Notes increasing consolidation of the banking industry in the USA, Western Europe and Japan; and presents a study of 1980‐1994 acquisitions of US banks by large interstate banking firms. Considers possible motives for cross‐border expansion, reviews relevant research and compares the performance of target banks with their local competitors and their buyers; and buyers’ performance with their competitors. Finds that most buyers are located in rich, densely populated states and most targets in states which have traditionally restricted bank branching activity; that buyers and targets have very different performance profiles (although some differences gradually reduce after acquisition); and that local market influences have a greater effect than common ownership. Concludes that targets are selected for their location and expected future performance, with possible diversification benefits.

This chapter reviews digital payment infrastructures at the retail, wholesale and cross-border levels, available operating and governance models and trade-offs. Various developments in the field of digital payments, key challenges and the role of the central banks in helping to address those challenges are introduced. This chapter starts by examining issues in retail payments, before moving on the wholesale and large-value payments, real-time gross settlement (RTGS) which is the core settlement of payment systems before examining cross-border payments. This chapter ends with an overview of the role of central banks in promoting digital payment infrastructures.

Cross-border investment has been a large part of merger and acquisition activity in the Latin American banking sector. Spain and the United States have been the largest investors, participating in almost 70% of the total transaction value. After an explanation of the importance of foreign direct investment and implications for cross-border investment, this paper focuses on the largest investor in the region's banking sector and attempts to find an explanation for the increasing participation of Spanish banks. The paper alludes to a potential new reality: Latin America could be the geographical location where major contenders in banking will be engaged in battles for global dominance.

The purpose of this paper is to examine the complexities of reorganizing and/or liquidating troubled banks under the European Union's (EU) current institutional framework as it is defined by its directives and by national supervisory, remedial, and insolvency practices.

The paper compares provisions of different EU directives that impact financial institutions and summarizes national remedial practices.

The paper documents the diversity that currently exists among national supervisory, remedial and failure resolution practices for banks. It also assesses the economic efficiency of the institutional framework for resolving problem banks that is defined by the Reorganization and Winding‐up Directive and identifies components of the directive that can hamper efficient cross‐border resolutions.

There is a deficiency in publicly available information on EU member countries' practices for disciplining and resolving troubled banks.

The paper assesses issues/conditions that can hamper efficient cross‐border resolutions – issues on which policymakers should focus when they reform the current framework. It also explores areas of coordination with other EU directives that deal with financial crisis management that are relevant in the current financial crisis.

The paper makes policy recommendations for reforming the EU's current institutional framework for resolving troubled banks.