Abstract
Integration of banking markets can happen through either cross-border lending or cross-border mergers. In the policy debate in Europe, more emphasize is put on cross-border mergers. We study the impact of crossborder lending on the financing conditions of firms at the German-Austrian border. We use the ifo business climate survey data, that reports the perception of German firms of the banks willingness to lend for the period 2003 – 2006. Our results show that distance also matters in cross-border lending and that SMEs benefit most from cross-border lending. Somewhat paradoxically, difference in banking supervision may have speeded up cross-border lending.
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