Are Local Banks more Suitable for SMEs development? Evidence from a Cross-Country Comparison

The recent financial crisis has generated an impressive debate between practitioners and scholars about the causes and consequences of the crisis, as well as about the effectiveness of supervision and the overall architecture of prudential supervision for providing the stability of international financial system (Borio, 2008; Blundell-Wignall, Atkinson, Lee, 2008; Kirkpatrick, 2009; Acharya, Richardson, 2009). From this perspective, particularly interesting has been considered the experience of those banking systems, where the presence of many local banks helped to mitigate the effects of the financial turbulence (Draghi, 2010). Therefore, after the financial crisis, there has been an increasing attention on the role that local banks may have to sustain economic activity, especially if considering the financing of small and medium enterprises, which are generally more financial constrained than larger firms: from this perspective, a broad economic literature has been focusing attention about the relationship between local bank and SMEs financing (Berger and Udell, 2006; Beck et al., 2009; de la Torre et al., 2010). The objective of this work is to investigate the phenomenon of local banks in the main European countries (we consider 15 European Union countries plus Switzerland and the UK), so as to verify the possible capacity of this category of banks to ensure two fundamental objectives, like the support to local economy and the facilitation of firms’ internationalization. More specifically, in the work we intend to analyze the morphology of the financial and banking systems of the countries surveyed, so as to highlight: the evolution observed over the last few years, the phenomenon of rationalization involving the different banking systems, the level of competition achieved in the different banking systems, the presence of any banks able to meet the criteria for a local bank, the possible effects that the presence of these banks had to support the local economy and the internationalization of businesses. In order to achieve this result, we aim to create a unique and original dataset, where the differences between the various European banking systems are considered, together with the evidence of operational differences highlighted by different categories of banks, leading us to discriminate about their capacity to support the local economy and to facilitate the internationalization process of firms.