Financial innovations, such as securitisations and credit risk transfer, have enabled banks to disperse their risks to the capital markets. However, as the financial turmoil has clearly shown, the transfer of risks has in many cases been inadequate. The currently ongoing reintermediation process, which is hampered by a lack of market transparency, is putting strain on banks’ profits, capital and liquidity cushions.
•  Second, banks have increasingly embarked on international operations, primarily through subsidiary companies. As a direct result of a recent surge in cross-border banking mergers and acquisitions, the share of foreign banks in domestic European markets has increased substantially, from 26% of total assets in 2001 to 33% in 2006.