Crossborder banks may act, via their expansion across jurisdictions, as important drivers in the financial integration process and thus contribute to enhancing the overall efficiency of the banking sector. The supervision of cross-border banks is performed mainly on a national, stand-alone basis, which results in a large number of partially overlapping and also potentially diverging requirements, thereby raising the costs for banks.
These include “hard Brexit” scenarios, protectionist pressures and shifts in the international tax regime that would effectively penalise small economies as a location for multinational production activity. In addition, a sudden shift towards tighter conditions in international financial markets is widely cited as a possible trigger of a contraction in international economic activity.