Consequences of cross-border banking The increased globalisation of banking has brought both benefits and costs to the economy. For a long time, the benefits have appeared to outweigh the costs, but the recent global financial crisis has put this issue in a new light. I will talk about the economic costs of cross-border banking shortly. But let me first say something about its benefits. A general problem with the banking sector is that it is highly concentrated, which makes it especially prone to anti-competitive behaviour. An interesting question in itself is why the banking sector is so concentrated. One reason is surely that it is heavily regulated. Regulations create entry and exit barriers. From my viewpoint, however, it also seems as if the mechanisms of banking crises are such that you end up with an even more concentrated banking sector after a crisis than before. When some banks run into difficulties, a common solution is to let them be acquired by a more healthy-looking competitor. In Sweden, we went from seven large banks to only four as a consequence of the acquisitions that occurred in connection with the banking crisis in the early 1990s. Four banks now hold around 80 per cent of the total market. That is a highly concentrated market! 13  Williams (2002). 14  See e.g. “Mapping of large European groups with a significant cross-border banking activity for the year 2008” prepared by the Banking Supervision Committee (restricted edition).

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