Corporate Governance and Intra-Group Transactions in European Bank Holding Companies During the Crisis
Wharton Financial Institutions Center Working Paper No. 11-35
74 Pages Posted: 3 Apr 2011 Last revised: 4 Dec 2011
Date Written: March 30, 2011
Abstract
In this paper we study the intra-group transactions between the parent bank and its foreign subsidiaries in European Union countries during the crisis. We use hand-collected data from annual statements on related party transaction and find that they may create a serious problem for the stability of the foreign banks’ subsidiaries. Moreover, as some of those subsidiary banks were large by assets in some of the member states the related party transactions with the parent bank created a serious threat to host countries financial system stability. We attribute this transaction to weak governance in foreign subsidiaries. We suggest improvements in governance as well greater disclosure of related party transactions in bank holding companies in Europe.
Keywords: multinational banks, corporate governance, internal bank markets, crisis
JEL Classification: G21, G28, G38
Suggested Citation: Suggested Citation
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