Recent Trends in Cross-Border Banking

Abstract

This chapter identifies a number of recent trends in European cross-border banking. The authors first distinguish between two main modes of international banking: cross-border versus multinational banking. Cross-border banking occurs when a bank in country A lends directly to a borrower in country B. Multinational banking, on the other hand, takes place when a bank in country A lends to a borrower in country B via a local bank affiliate (a branch or a subsidiary) in country B. The chapter describes which countries rely more on cross-border banking and which ones on multinational banking and assess how both forms of banking integration fared during the recent crises. The remainder of the chapter then focuses on trends in European banks’ funding structures, the source countries of cross-border and multinational banking, and the recent growth of corporate bond markets in Europe as an alternative to bank credit.