Sovereignty Versus Soundness: Cross-Border/Interstate Banking in the European Union and in the United States: Similarities, Differences and Policy Issues

Abstract

Banks are finally crossing borders within the European Union (EU) and the United States. Some EU member countries and some U.S. states have welcomed entry by banks from elsewhere, while others have resisted it. The article compares the processes of banking deregulation in the two unions and provides some measures of the ensuing progressnot yet completetoward cross-border banking. The analysis focuses on resistance to entry, the reasons for it, and the methods used to put it into effect. Apportioning responsibilities for chartering, prudential supervision and other facets of the financial safety net between the EU and its member countries give rise to active conflicts over sovereignty and compromises over efficiency. Similar conflicts raise questions over the continued viability of the dual banking system in the United States.