Bank Networks and Systemic Risk: Evidence from the National Banking Acts

Haelim Anderson, Mark Paddrik () and Jessie Wang

American Economic Review, 2019, vol. 109, issue 9, 3125-61

Abstract: The National Banking Acts (NBAs) of 1863–1864 established rules governing the amounts and locations of interbank deposits, thereby reshaping the bank networks. Using unique data on bank balance sheets and detailed interbank deposits in 1862 and 1867 in Pennsylvania, we study how the NBAs changed the network structure and quantify the effect on financial stability in an interbank network model. We find that the NBAs induced a concentration of interbank deposits at both the city and bank levels, creating systemically important banks. Although the concentration facilitated diversification, contagion would have become more likely when financial center banks faced large shocks.

JEL-codes: E44 G01 G21 G28 L14 N21 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aer.20161661
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Citations: View citations in EconPapers (27)

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Working Paper: Bank Networks and Systemic Risk: Evidence from the National Banking Acts (2016)
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