The new banking economics

T H E

N E W BANKIN G

ECONOMIC S

Edite d b y

Olivie r Pastre , Esthe r Jeffers ,

Han s Blommestei n an d Gae l d e Pontbrian d

With a preface by

T h e Ne w Bankin g

Economic s

Edited by

Olivie r Pastre

Professor, University of Paris VIII, France

Esther Jeffers

Associate Professor, University of Paris VIII, France

Hans Blommestein

Head of the Capital Market Program, OECD, France

Gael de Pontbriand

Partner, PricewaterhouseCoopers, France

DAI HOC THAI NGUYEN

Edwar d Elga r

Cheltenham UK • Northampton, MA, USA

TRUNG TA M HOC LIE U

© Olivier Pastre, Esther Jeffers, Hans Blommestein and Gael de Pontbriand 2007

All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system or transmitted in any form or by any means, electronic,

mechanical or photocopying, recording, or otherwise without the prior

permission of the publisher.

Published by

Edward Elgar Publishing Limited

Glensanda House

Montpellier Parade

Cheltenham

Glos GL50 1UA

UK

Edward Elgar Publishing, Inc.

William Pratt House

9 Dewey Court

Northampton

Massachusetts 01060

USA

A catalogue record for this book

is available from the British Library

Library of Congress Cataloguing in Publication Data

The new banking economics / edited by Olivier Pastrd ... [et al.].

p. cm.

Includes bibliographical references and index.

1. Banks and banking—European Union countries. I. Pastre\ Olivier

HG2974.P37 2007

332.1094—dc22

2007001402

ISBN 978 1 84720 2734

Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall

Content s

List of Figures v " '

List of Tables ix

List of Contributors *

Foreword by Christian Noyer xi

Preface xi v

PART ONE THE BANK NO LONGER EXISTS 1

1. Thoughts on banking activities 3

Jean-Baptiste Bellon and Olivier Pastre

2. Banks - to do what?

1 0

Yves Ullmo

3. Differences in national financial patterns 19

Andreas Hackethal and Reinhard H. Schmidt

4. Fair value accounting and market inefficiency 29

Dominique Garabiol

5. The potential use and abuse of Basel II 36

Veronique McCarroll

PART TWO AN OCEAN OF RISK 45

6. Financial intermediation and transfers of default risks: macro￾and microeconomic efficiency 47

Patrick Artus

7. When banks transfer risks to investors 63

Dominique Plihon

8. Long live risk! 67

Gael de Pontbriand

V

vi The New Banking Economics

9. Banks: to be sliced into oblivion?

Hans-Helmut Kotz

PART THREE NEW TECHNOLOGIES AND NEW ACTIVITIES

10. Technology in the French banking sector and financial industry:

trends and challenges

Herve Sitruk

11. The growing complexity of the links between banks and capital

markets

Hans J. Blommestein

12. What about financing for SMEs?

Jean-Paul Betbeze

13. European financial sector transformation: curse or blessing for

SME finance?

Rien Wagenvoort

PART FOUR MYSTERIOUS WAYS OF COMPETITION

14. Banking consolidation in Europe

Christian de Boissieu

15. Finance and competition: still a long way to go

Philippe Nasse

16. Concentration and competition: the European case

Esther Jeffers

17. Will international bank consolidation really occur?

Valerie Oheix

18. The single market for financial services in Europe: progress

and limitations

Jean-Francois Pons

PART FIVE PERFORMANCES TO BE REDISCOVERED

19. The European cooperative and mutualist banking sector: shared

values and business model diversity

Pascal Blanque and Remy Contamin

Contents vu

20. The need to reconstruct performance indicators

Nathalie Rey

21. Particularities of banking governance

Jean-Paul Pollin

Index

Figure s

1.1 Links between banking activities 4

6.1 Bank loans in the USA, Japan, France and Germany 49

6.2 Bank loans in the UK, Spain and in Italy 51

6.3 Short term interest rates, USA, Japan, Germany and Spain 53

6.4 Banks' stock market index 56

6.5 Stock market index, USA and euro zone 58

6.6 Returns on financial assets 61

11.1 Relative global role of bank deposits and securities 97

11.2 Growth in global hedge funds 98

16.1 Factors favouring cross-border consolidation 138

16.2 Obstacles to cross-border mergers and acquisitions 139

via

Table s

1.1 Characterization of banking activities 8

3.1 Net sources of finance as a percentage of physical investment 22

3.2 Gross flows from internal and external sources as a percentage

of physical investment 25

3.3 Composition of external financing 26

6.1 Nature of buyers of protection on credit derivatives 54

6.2 Nature of sellers of protection 54

6.3 Net position of protection 54

6.4 Duration of instruments 54

6.5 Notional outstandings of credit derivatives 55

6.6 Banks' earnings 56

11.1 Growth of conglomerates of financial institutions 96

14.1 Indicators of banking concentration in Europe 122

Contributor s

P. Artus, Chief Economist and Head of Research, Ixis Corporate &

Investment Bank, France

J.-B. Bellon, Financial Analyst, TRAPEZA Conseil, France

J.-P. Betbeze, Chief Economist, Credit Agricole, France

P. Blanque, Chief Investment Officer, Credit Agricole Asset Management,

France

H. Blommestein, Head of the Capital Market Program, OECD, France

C. de Boissieu, Professor, University of Paris I (Pantheon-Sorbonne), France

R. Contamin, Head of Banking Analysis, Department of Economic

Research, Credit Agricole, France

D. Garabiol, CEO Advisor, Savings and Loan Group, France

A. Hackethal, Professor, European Business School, Germany

E. Jeffers, Associate Professor, University of Paris VIII, France

H.-H. Kotz, Member of the Executive Board, Deutsche Bundesbank,

Germany

V. McCarroll, Director, Mercer Oliver Wyman, France

P. Nasse, Vice President, Conseil de la Concurrence, France

V. Oheix, Associate Professor, University of Paris X-Nanterre, France

O. Pastre, Professor, University of Paris VIII, France

D. Plihon, Professor, University of Paris-Nord, France

J.-P. Pollin, Professor, University of Orleans, France

J.-F. Pons, Director of European and International Affairs, Federation

Bancaire Francaise, France

G. de Pontbriand, Partner, Pricewaterhouse Coopers, France

N. Rey, Associate Professor, University of Paris-Nord, France

R. H. Schmidt, Professor, Johan Wolfgang Goethe-Universitat, Germany

H. Sitruk, General Manager, MANSIT SAS, France

Y. Ullmo, Honorary Senior Councillor, Cour des Comptes, France

R. Wagenvoort, Senior Economist, European Investment Bank, Luxembourg

X