FREEDOM TO PROVIDE CROSS-BORDER BANKING SERVICES IN THE EUROPEAN UNION

Abstract

As a result of ongoing globalisation and European integration banking activities are becoming increasingly international. Cross-border banking is one of the possible ways for a bank to get internationally involved and enables banks to render services to residents of another country without the necessity of direct foreign investment. Primary EU law and EU legislation including the principle of freedom to provide cross-border services applies to banking as well. This means that cross-border banking and other modes of rendition of banking products must be treated equally. Pursuant to EU directives a European bank conducting cross-border expansion on the territory of EU may rely on the single passport regime as the authorization of a home state is recognised by the remaining EU members states. The results of a statistical data analysis make it possible to assess the level of financial integration of the European banking market. Indicators of banking activity reveal that interbank markets are closely integrated across borders. Retail cross-border banking (dealing with households and non-financial corporations) is characterised by far lower levels of financial integration. The retail banking services are generally provided by banks established on local markets.