Assessment of EU banking network regionalization during post-crisis period

Abstract

Research background: Recent financial crisis of 2007–2008 has influenced global banking system and led to reduction of cross-border bank lending in the EU and worldwide. Global banking network has been analysed extensively in prior or post-crisis periods, but the literature on regionalization is scarce, especially with regard to the banking sector in the EU. Moreover, in previous empirical research evaluation of banking sector regionalization using network analysis methodology has not been yet applied.
 Purpose of the article: The aim of the article is to map the EU banking network and to assess its regionalization during post-crisis period.
 Methods: the paper employs comparative literature analysis and synthesis; BIS bilateral interbank cross-border claim yearly flows matrix data and network analysis method (including network mapping, structural and comparative analysis and the data of intraregional and interregional banking network matrices) to assess the changes in regionalization of the EU banking system.
 Findings & Value added: The results of the research show that during post-crisis period both, EU 12 and EU 28, banking networks became more clustered and more decentralized; also the level of regionalization within the EU banking network increased. Such results prove that the EU banking network has undergone structural changes with respect to bilateral interbank cross-border claims. This research adds to the knowledge of regionalization processes within the EU banking network during the post-crisis period and intends to be beneficial for market participants, EU level governmental bodies and financial policy makers.

Evaluation of the post-crisis EU banking network connectedness in the global context

“…The research is performed in 2 stages, as presented in Table 1, and is in line with our previous research on the EU banking network (Gaigaliene et al, 2018).…”

“…Stage 1 is aimed at mapping the global banking network using a network mapping method, as presented in detail in our previous research (Gaigaliene et al, 2018), which is in line with Minoiu and Reyes (2013) and Paltalidis et al (2015). In the network analysis, each country in the dataset is a node within the network, and links between nodes represent crossborder banking claim flows, by constructing matrices W for every time period t where rows represent lender countries, and columns represent borrower countries.…”

“…In Stage 2 the analysis of the structure and connectedness of the global banking network is conducted using the methodology similar to our previous research on the EU banking network's regionalization (Gaigaliene et al, 2018). Firstly, to conduct the global network analysis, the most commonly referred to network indicators: degree, in-degree, out-degree, strength, strength in-degree, strength out-degree, degree centrality, betweenness centrality, closeness centrality and clustering coefficient were calculated as in Gaigaliene et al (2018). Connectedness of global banking network is assessed by using network density indicators.…”

“…Therefore, it is relevant to analyse the EU banking network, its characteristics and trends both from the intra-EU and global perspectives. Our previous research (Gaigaliene et al, 2018) concentrated on the assessment of intra-EU banking network and has shown that during the post-crisis period the level of regionalization within the EU banking network had increased; the network became more clustered and more decentralized. This paper continues our research on structural changes of the EU banking network during post-crisis period by adding a global context and questioning the connectedness of the EU banking network within the global banking system.…”

Banking regulation in ensuring bank's efficiency: Looking through different forms of ownership

“…Kosicova et al (2018) found, that banks' stability strongly depends on the country specific, which confirms banking regulation importance. On the other hand, development of international banking network creates a necessity to take into account structure of bank capital in bank regulation system (Gaigaliene et al, 2018). Characterizing the specificity of differences in banks' performance, it should be noted that commercial banks, which are part of financial conglomerates, reach higher profitability comparing to other banks (Palečková, 2018).…”