Market power in banking

Elena Carletti, Agnese Leonello and Robert Marquez

No 2886, Working Paper Series from European Central Bank

Abstract: Bank market power, both in the loan and deposit market, has important implications for credit provision and for financial stability. This article discusses these issues through the lens of a simple theoretical framework. On the asset side, banks choose the quality and quantity of loans. On the liability side, they may be subject to depositor runs whenever they offer demandable contracts. Thisstructure allows us to review the literature on the role of market power for credit provision and stability and also highlight the interactions between the two sides of banks’ balance sheets. Our approach identifies relevant channels that deserve further analysis, especially given the rising importance of bank market power for monetary policy transmission and the rise of the digital economy. JEL Classification: G01, G21, G28

Keywords: balance sheet interactions; bank runs; credit provision; digital economy; monetary policy transmission (search for similar items in EconPapers)
Date: 2024-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-com, nep-fdg, nep-fmk, nep-ind, nep-pay and nep-reg
Note: 2292323
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20242886

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