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Size, Risk, and Governance in European Banking$
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Jens Hagendorff, Kevin Keasey, and Francesco Vallascas

Print publication date: 2013

Print ISBN-13: 9780199694891

Published to Oxford Scholarship Online: January 2014

DOI: 10.1093/acprof:oso/9780199694891.001.0001

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(p.230) (p.231) 9 Conclusions
Size, Risk, and Governance in European Banking

Jens Hagendorff

Oxford University Press

In the aftermath of the financial crisis that erupted in 2007, it is not surprising that issues surrounding the size, risk and regulation of banks have been at the centre of the policy debate across the globe. The aim of this debate has been to identify the necessary interventions to restore confidence in the financial industry and limit the risk posed by future systemic events. This book has analyzed these issues with a focus on Europe. The results discussed in this book offer some support to the critics of the rapid growth in the size of the European banking industry and highlight the importance of coordination in the regulatory landscape across Europe. Nonetheless, they also demonstrate that the negative effects associated with an increase in bank size normally materialize only under some specific circumstances which require special consideration by regulators. Furthermore, our work supports earlier studies which view board monitoring and industry regulation as complements and shows that banks where CEOs receive large bonus payments (both in absolute terms as well as relative to their total cash compensation) display lower levels of default risk. Finally, when assessing the importance of opacity on European bank stability, our results highlight the negative implications that opacity has for the stability of banks and the importance of enhancing transparency at the bank level. The results presented in this book lead to a number of policy implications.

Keywords:   Bank Size, Risk, Governance, Bank Regulation

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