Diversification in a country's cross-border operations can reduce the potential costs of spillovers associated with cross-border banking, a Social Science Research Network paper, published on Sunday, says.

Dirk Schoenmaker and Wolf Wagner, the paper's authors, examine the benefits and costs associated with cross-border banking and its effects on financial stability.

Schoenmaker and Wagner argue that many of the costs from cross-border banking may, in fact, be avoided if diversification in a