The objective of this paper is to identify the bank organizational structures that generate substantial systemic risk and to explain why banks have incentives for creating them. We seek the explanation in a bank’s incentive to exploit financial synergies by choosing an organizational structure that maximizes the benefits the bank can derive from an interest tax shield, reduced default cost and ...

We present a locational model of banking with two types of private banks, honest and opportunistic, and a state bank that is assumed to be less efficient. Opportunistic banks choose whether to honor their contracts with depositors depending on the probability of contract enforcement. We derive three types of equilibria, which depend on institutional quality: a “low” equilibrium in which private...

This paper investigates the effect of European Monetary Union on the integration of the financial services industry within European using data on the announcements of M&A’s within the industry. We find some evidence that EMU has helped financial integration within the euro area. In addition, financial institutions in EMU countries became more active in initiating integration between EMU and non...