The Changing Role of Financial Intermediation in Europe
Posted: 20 Apr 1998
After a review of factors such as technology and the related policy toward financial liberalization that has affected financial institutions worldwide, this paper focuses on changes in Continental Europe. We identify and review three driving forces: (a) European integration, (b) the factors that cause a growth of securities markets, and (c) financial innovation. The paper arrives at the conclusion that there will be significant changes in the European financial system in terms of the growth of securities markets but that this growth will center on bank-affiliated institutions who will strengthen their position within national markets. In contrast, there will be relatively little impact via cross-border mergers and acquisitions in the banking sector. Finally, the paper suggests some implications for corporate governance, which will not change unless government policy makes the system of financial intermediation more contestable by outsiders and creates the pre-conditions for an effective corporate control.
JEL Classification: F31, F36
Suggested Citation: Suggested Citation