Between Lisbon and London: Financial Sector Consolidation in the Context of the Lisbon Agenda

It's "half-time" for the Lisbon Agenda - which has aimed to make Europe the most competitive and dynamic economy in the world by 2010. And it's "half-time" for the EU Financial Services Policy, which aims to increase financial sector integration and should give a helping hand to small and innovative companies that are a corner stone of the Lisbon strategy. But discussion on the ground continues to reveal concern that financial sector integration (and national consolidation) is putting significant pressure on some of Europe's traditional lenders to small companies. Financial sector integration has the potential to increase efficiency, competition and choice in financial intermediation. But the short-term effects of integration can vary. National consolidation leads to larger banks that may be unable or unwilling to handle business with small innovative firms. Other existing or "de novo" banks and financial institutions as well as venture capital firms play an important role in filling any potential "financing gaps". The policy implications are important. Consolidation that is unaccompanied by measures to improve or ensure market openness and contestability may prolong any adverse effects from the integration process, especially for small borrowers. Consolidation has progressed, fostering the emergence of national champions. Ease of market entry now needs to be reinforced across Europe. A stalled process of integrating Europe's financial markets could compromise the Lisbon Agenda and the prospects of some of the small and innovative companies on which its success relies.

Start-up financing : how credit ratings and bank concentration impact credit access

Externe Kreditwürdigkeitsprüfungen durch Rating-Agenturen haben für Banken bei der Kreditvergabe an Unternehmen, aufgrund der verschärften Regulierung durch Basel II, erheblich an Bedeutung gewonnen. Die These, ungünstige oder fehlende Ratings seien der Grund dafür, dass insbesondere innovative, noch nicht etablierte Unternehmen ohne aussagekräftige Kredithistorie oft erhebliche Schwierigkeiten hätten, Bankkredite zu erhalten, bestätigt sich jedoch nicht. Eine Studie des Zentrums für Europäische Wirtschaftsforschung (ZEW) zeigt zwar, dass negative Ratings generell für Unternehmen den Zugang zu Krediten erschweren. Gerade für junge, innovative Unternehmen fällt dieser Effekt allerdings deutlich geringer aus als für andere

How do banks screen innovative firms? Evidence from start-up panel data

Start-up firms often face difficulties in raising external funds. Employing a unique panel dataset covering 9,715 start-up firms over the period 2007-2009, we find that high-tech startups are less likely to use bank finance and face more difficulties in raising bank finance than low-tech start-ups. We find that external credit scores do affect the availability of credit for start-up firms, but that banks rely less on external rating information in their decision making for high-tech start-ups than low-tech start-ups. Start-ups that have their main relation with a small bank use more bank finance and report less difficulties in getting credit. By contrast, a greater expertise of the bank in the firm’s industry is not associated with fewer difficulties to get bank loans. There are no differences between high-tech and low-tech start-ups regarding the impact of bank size

Determinants of Banking System Fragility: A Regional Perspective

Abstract: Banking systems are fragile not only within one country but also within and across regions. We study the role of regional banking system characteristics for regional banking system fragility. We find that regional banking system fragility reduces when banks in the region jointly hold more liquid assets, are better capitalized, and when regional banking systems are more competitive. For Asia and Latin-America, a greater presence of foreign banks also reduces regional banking fragility. We further investigate the possibility of contagion within and across regions. Within region banking contagion is important in all regions but it is substantially lower in the developed regions compared to emerging market regions. For cross-regional contagion, we find that the contagion effects of Europe and the US on Asia and Latin America are significantly higher compared to the effect of Asia and Latin America among themselves. Finally, the impact of cross-regional contagion is attenuated when the host region has a more liquid and more capitalized banking sector.

Start-up financing : how credit ratings and bank concentration impact credit access

Externe Kreditwürdigkeitsprüfungen durch Rating-Agenturen haben für Banken bei der Kreditvergabe an Unternehmen, aufgrund der verschärften Regulierung durch Basel II, erheblich an Bedeutung gewonnen. Die These, ungünstige oder fehlende Ratings seien der Grund dafür, dass insbesondere innovative, noch nicht etablierte Unternehmen ohne aussagekräftige Kredithistorie oft erhebliche Schwierigkeiten hätten, Bankkredite zu erhalten, bestätigt sich jedoch nicht. Eine Studie des Zentrums für Europäische Wirtschaftsforschung (ZEW) zeigt zwar, dass negative Ratings generell für Unternehmen den Zugang zu Krediten erschweren. Gerade für junge, innovative Unternehmen fällt dieser Effekt allerdings deutlich geringer aus als für andere