The implications of European retail banking integration on small and medium-sized enterprises financing. An overview

Considering the last few years, the European Union (EU) has became one of the most competitive and integrated economic regions of the world, following a rapid pace of change as a result of an inspired series of initiatives. The harmonization of the banking and other financial services legislation as component of the EU’ Single Market, the creation of the European Economic and Monetary Union (EMU), alongside the ongoing implementation of the Financial Services Action Plan (FSAP) represent the central drivers of financial integration and the set of elements that have helped reducing the barriers to cross-border trade in banking services. The process of deregulation is another element that facilitated the environment in which technology and other bank strategic determinants have become increasingly important. The scope of the present paper is to analyze the implications of a higher degree of banking integration on firms financing options and choices. This paper is composed of two main parts. The first part focuses to the determinants of European banking integration, analyzing this process since the banking system represents the main financial channel for both the small and medium-sized enterprises and households. The second part concentrates on the effects of banking integration on considered entities’ financial constraints. The concluding remarks outline that retail bank integration has an ambiguous implication on SMEs’ access to credit.