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István P. Székely

is a country director at the European Commission, Directorate General for Economic and Financial Affairs. Prior to joining the European Commission, he worked at the Corvinus University of Budapest, where he is currently an honorary Professor, the University of Bonn, the UN Secretariat, the National Bank of Hungary and the International Monetary Fund. He is an economist by training with a PhD from the University of Cambridge.

For his publications, see ideas.repec.org/e/psz7.html.

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The future of European banking and capital flows to and liquidity in countries outside the banking union

As a result of, and regulatory and market responses to the crisis, the size and nature of capital flows through the banking channels are likely to change significantly, particularly when it comes to Central and East European (non-euro area) EU countries. In the past, given the bank-based nature of financial integration in Europe, a large part of capital flows took place through banks and wholesale banking markets. In fact, a considerable part of the capital flows took place within large banking groups operating Europe wide (in most cases globally), with major implications for the nature of capital allocation and liquidity management. The crisis has however led to major changes in this regard, both on the regulatory side and in the business strategies of these banking groups. This will have important implications for banks in countries outside the banking union, particularly in CEE, regarding liquidity management, product pricing, and asset allocation. Local market conditions are likely to play a much more important role than in the past and volatility is likely to increase.

Last modified: 2018.11.30.