The goal of this paper is to investigate how the European Banking environment has changed dramatically over the past years.
Based on new studies the author will present the Modern Financial Intermediation Theory from Allen and Santomero (2001) and Recent Banking Efficiency
Studies from Van Dijcke (2000) and Ali/ Gstaach (2000), in order to be able to derive new conclusions for the Continental European Universal
Banking System.
The paper presents a possible new structure of the European Banking System, which will show 3 major segments of local, national and
international Banks.
Finally the author will draw conclusions of such changes on the Monetary policy of the European Union.
Table of Contents
1. Introduction
2. Consolidation trend in the European Banking Industry
3. New structure of the European Banking Environment
5. Review of recent Financial Intermediation Theory
6. Implications for the Monetary policy in the European Union
7. Summary
8. Outlook
9. References
Research Objectives and Themes
This paper investigates the dramatic transformation of the European banking environment over the past decade, driven by globalization, capital market growth, and deregulation. It seeks to analyze how traditional universal banking models must adapt to maintain competitiveness, particularly regarding the role of banks as financial intermediaries and their strategic positioning within the European Union's monetary framework.
- Evolution of the Continental European Universal Banking system
- Impact of financial intermediation theory on modern banking practices
- Consolidation trends and efficiency analysis within European banking
- Strategic segmentation of banks into local, national, and international tiers
- Consequences of market-based financial integration on monetary policy
Excerpt from the Book
1. Introduction
There is broad agreement that the environment of financial services in Continental Europe has changed and will change fundamentally.
There are three major reasons for that:
- the traditional characteristic features of Banking in Continental Europe have changed due to deregulation and liberalisation in the European Union,
- further financial integration in Europe and
- technical progress.
There has been a very fundamental change of view in the financial theory:
OLD
- As economic literature in the past has shown, the specific role performed by banks in the economic system is not to intermediate savings, but rather to certify the quality of borrowers, monetizing liabilities which otherwise would fail to find purchasers in the markets (Fama 1985).
- Banks are essential for economic development in that they are a crucial device for the selection of entrepreneurs and the allocation of financial and real resources (Diamond 1984).
NEW
- Allen and Santomero said in 1998 that the traditional theory of financial intermediation was focusing too heavily on the functions of financial institutions that are no longer crucial in mature financial systems.
Summary of Chapters
1. Introduction: Outlines the fundamental changes in the European financial services environment driven by deregulation, integration, and technical progress.
2. Consolidation trend in the European Banking Industry: Examines the pressure on banks to reduce "over-banking" through restructuring, cost containment, and potential M&A activities.
3. New structure of the European Banking Environment: Categorizes European banks into three segments based on their operational focus, performance, and market niche.
5. Review of recent Financial Intermediation Theory: Discusses the shifting theoretical perspectives on the role of banks, moving from traditional intermediation toward risk management.
6. Implications for the Monetary policy in the European Union: Analyzes how the disintermediation of the banking sector impacts monetary policy and the growth of integrated capital markets.
7. Summary: Recaps the core research questions regarding environmental changes, efficiency, and the strategic adaptation of universal banks.
8. Outlook: Discusses the future necessity for banks to differentiate their strategic roles to remain competitive in a globalized market.
9. References: Provides a comprehensive list of academic sources and industry data supporting the analysis.
Keywords
Europe, Banking, Financial Intermediation, Efficiency, Universal Banking, Monetary Policy, Deregulation, Consolidation, Risk Management, Capital Markets, Disintermediation, Strategic Segmentation.
Frequently Asked Questions
What is the fundamental focus of this research?
The work investigates the transformation of the European banking environment and how universal banks must adapt to new market demands and changing theoretical perspectives on financial intermediation.
What are the primary themes discussed in the paper?
Key themes include the consolidation of the European banking industry, the structural shift toward market-based finance, and the ongoing debate regarding the efficiency and strategic utility of traditional universal banking models.
What is the main research objective?
The objective is to analyze the shift in the financial services landscape in Europe and determine whether universal banks possess the necessary flexibility to cope with the transformation process and the policies of the European Union.
Which scientific methods are employed?
The author synthesizes recent banking efficiency studies and utilizes financial intermediation theory, comparing empirical findings from researchers like Allen, Santomero, Berger, and Van Dijcke to derive industry conclusions.
What does the main body cover?
It provides an overview of consolidation trends, a structural classification of top European banks into clusters, a review of recent efficiency literature, and an assessment of the implications for European monetary policy.
Which keywords characterize the work?
The work is defined by terms such as European Banking, Financial Intermediation, Efficiency, Universal Banking, and Capital Market Integration.
How does the author categorize European banks?
The author identifies three tiers: big universal banks (Premium Segment), nation-wide operating banks (Low Segment), and smaller, locally oriented institutions like savings and cooperative banks (Middle Segment).
What conclusion does the author reach regarding the future of banks?
The author suggests that while traditional intermediation roles are diminishing, banks can maintain strategic positions by adopting new, focused strategies, improving risk management, and becoming more flexible in response to market changes.
- Quote paper
- Dr. Johann Sebastian Kann (Author), 2003, The New Way of Continental European Universal Banking, Munich, GRIN Verlag, https://www.grin.com/document/26096
