In fact, the ability to borrow freely in interbank markets allowed local banks to increase lending towards favoured domestic sectors such as real estate. This is essentially what we saw in Spain and Ireland. In the process, financial integration concentrated rather than diversified risk.11  4  Demyanyk, Y., C. Ostergaard, and Bent E. Sørensen, 2008.
“Risk sharing and portfolio allocation in EMU”, Economic Papers 334, European Commission. 5  Bekaert, G., C. Harvey, and C. Lundblad, 2006. “Growth volatility and financial liberalization.” Journal of International Money and Finance 25, 370–403. 6  Giannetti, M., and S. Ongena, 2009. “Financial Integration and Firm Performance: Evidence from Foreign Bank Entry in Emerging Markets.” Review of Finance 13, 181–223.