The nexus between banking structure and economic development: a regional perspective at a European level

The paper analyses the nexus between the structure of the banking system at a regional level (NUTS 2) and the local economic development with a particular attention on the SMEs in the deprived areas. The project of research examines four countries: France, Germany, United Kingdom and Spain.The paper is divided into two parts. Firstly, the development of the banking systems has been investigated in order to evaluate elements of converge between systems, or elements of differentiation. In the second part, the nexus between economic development and the structure of financial systems at a regional level has been examined. Using a Barro growth regression, the main results suggest that a systemic correlation between structure and economic development cannot be verified at a local level.Between the variables employed, a positive and statistical correlation has been found between local development and financial deepening. The negative and significant relation between initial level of GDP per inhabitant and local development suggests a catching-up’s effect between local areas.This conclusion is also confirmed by a case studies analysis centred on regions that showed, during the period 1995 – 2002, a positive development although in a context of different structure and evolution of local banking systems.