Sudden stops would not have materialised in that extreme way if integration had occurred in different market segments that are less sensitive to information and counterparty credit risk.5 In particular, cross-border retail banking was relatively limited before the crisis, both in terms of extending credit lines through bank branches, and in terms of building cross-border bank-client relationships.
Had such retail banking activity been more spread out, banks would have found it more difficult to suddenly withdraw funding from jurisdictions under stress. As a consequence, there would have been less retrenchment to national jurisdictions, a higher degree of risk sharing during times of crisis, and hence a lesser need for the Eurosystem to take an intermediation role. 3.