BALKANISATION

A word that is bandied about – recently by Boris Johnson among many others – yet rarely examined closely. I have tried to unravel its connotations in two different contexts, once fairly flippantly, once a little more seriously…

Once used to describe the weakness of tiny, mutually hostile nations with changing borders, this invocation of the troubled Balkan region is now fashionably applied to the banking sector. Balkanisation refers to, in the words of the FT‘s Patrick Jenkins, “the breakdown of cross-border banking as nervous lenders retreat… from the more troubled parts of the Eurozone.”

It is part of the trend towards deglobalisation, financial fragmentation, renationalisation and domestication of debt caused primarily by economic turbulence, prompting banks to introduce more effective safeguards against cyclical changes, aka buffering (another buzzword du jour), but increasingly also due to tighter official regulation. National regulators may now stop banks using deposits in one area to fund debts in another (the ability to shift capital or asset-swap from country to country is known as fungibility), and regulatory intervention can result in the breaking up, or Balkanisation, of the big, diversified financial entities themselves.

 

Here is a more detailed consideration…

http://www.cep.si/dokumenti/Thorne.pdf

 

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