Bank Concentration and Fragility: Impact and Mechanics

Thorsten Beck (), Asli Demirguc-Kunt and Ross Levine ()

No 11500, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Public policy debates and theoretical disputes motivate this paper%u2019s examination of (i) the relationship between bank concentration and banking system fragility and (ii) the mechanisms underlying this relationship. We find no support for the view that concentration increases the fragility of banks. Rather, banking system concentration is associated with a lower probability that the country suffers a systemic banking crisis. In terms of policies, we find that (i) regulations and institutions that facilitate competition in banking are associated with less
not more -- banking system fragility and (ii) including these policy indicators does not change the results on concentration. This suggests that concentration is a proxy for something else besides the competitive environment. Also, we do not find that official capital regulations, reserve requirements, or official prudential regulations lower crises probabilities. Finally, we present suggestive evidence that concentrated banking systems tend to have larger, better-diversified banks, which may help account for the positive link between concentration and stability.

JEL-codes: G21 G28 L16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-fin and nep-fmk
Date: 2005-08
Note: CF IFM
View list of references View citations in EconPapers

Published relationship to a non-chapter. This should not happen. Please contact NBER.

Downloads: (external link)
http://www.nber.org/papers/w11500.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Chapter: Bank Concentration and Fragility. Impact and Mechanics (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:11500

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w11500
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().