enhances the incentives of banks to expand within Euroland. Yet, while the currency bias in bank portfolios will be eliminated …

and the volatility of the main capital flows ? foreign direct investment (FDI), portfolio investment, and foreign bank …

are regulated, including the need to obtain a charter to operate and explicit and implicit federal guarantees of bank … liabilities to reduce the probability of bank runs. These aspects of banking affect a bankś choice of risk vs. expected return …, which, in turn, affects bank performance. Banks have an incentive to reduce risk to protect the valuable charter from …