2013 - Banking and Financial Markets between Integration and Segmentation after the Crisis

The financial, economic and sovereign debt crisis has, among many other things, caused a severe setback for banking and financial market integration in the European Union and the Euro Area. Interbank money markets have become substantially less liquid, cross-border lending came to a virtual halt during acute crisis periods, requiring the Eurosystem to step in as an intermediary. The sovereign debt crisis has been characterised by sharply diverging risk perceptions among Euro Area sovereign borrowers, resulting in soaring yield differentials and sharply increased home bias in sovereign bond markets. Actual or feared bank runs and massive capital flight from some Euro Area countries prompted heavy central bank and government crisis intervention, including in one Euro Area country even the introduction of capital controls. Banks are suffering substantial losses due to crisis and recession-related developments, forcing them to downsize and restructure their national and crossborder operations. In an effort to prevent a repetition of the crisis, a substantial body of new regulation has been designed at the international and EU levels, and is now being implemented by national regulators and gradually fulfilled by banks and other financial intermediaries. Financial innovation is stigmatised and has lost much of its pre-crisis momentum, potentially reducing arbitrage across markets and regions. Recognition of the incompatibility of internationally operating banks with national supervision, bank resolution and deposit insurance has prompted the creation of a European Banking Union, with work on the Single Supervisory Mechanism being most advanced. Increasing fiscal pressures prompt higher taxation of capital, wealth and the financial industry, and have recently invigorated national and international measures to fight tax arbitrage and evasion.
Against this background, papers of high scientific quality are sought, which analyse the driving forces, interrelationships and possible consequences of the above developments with respect to the integration or segmentation of banking and financial markets in Europe. The papers may be both of a theoretical or empirical nature, their research question and conclusions should have clear policy relevance.