Interbank market structure, bank conduct, and performance: Evidence from the UK

Theophilus Lartey, Gregory A. James, Albert Danso and Agyenim Boateng

Journal of Economic Behavior & Organization, 2023, vol. 210, issue C, 1-25

Abstract: We examine whether a concentrated interbank market stimulates bank collusion or monopolistic pricing towards enhancing performance. We explore this nexus by incorporating the role of bank conduct into the structure–performance paradigm. The results show that the interbank market structure provides a channel for banks to collude and engage in monopolistic pricing in the market for bank and business loans to consequently increase bank performance. Further, while the interbank market structure is both profit and cost efficient for non-conglomerate banks, it is cost efficient for foreign banks. Hence, collusion and other anti-competitive behaviours in the interbank market may exacerbate incentives for foreign and non-conglomerate bank entry. We also explored the theoretical and policy implications of these findings. Our results are robust to alternative measures of market structure, bank conduct and performance, and the use of a wide range of specifications and econometric models.

Keywords: Market structure; Bank conduct; Performance; Ownership; Consolidation (search for similar items in EconPapers)
JEL-codes: G20 G21 G28 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:210:y:2023:i:c:p:1-25

DOI: 10.1016/j.jebo.2023.04.005

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