Risk, Concentration and Market Power in the Banking Industry: Evidence from the Colombian System (1997-2006)

Jorge Tovar, Christian Jaramillo H. () and Carlos Eduardo Hernández

No 4385, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: This paper examines the relationship between risk, concentration and the exercise of market power by banking institutions. We use monthly balance-sheet and interest rate data for the Colombian banking system from 1997 to 2006. The evidence shows that, in the face of high risk, banks transfer a larger share of risk to customers through higher intermediation margins. The result suggests that systemic risk acts as a collusion" device for banks: while high concentration is not enough to have collusion, the true effects of high market concentration on interest rates´ mark-ups emerge when the system is under stress."

Keywords: Banking; market power; risk; concentration; intermediation margins (search for similar items in EconPapers)
JEL-codes: G21 G34 G38 L11 (search for similar items in EconPapers)
Pages: 36
Date: 2007-11-14
New Economics Papers: this item is included in nep-ban, nep-com and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:004385

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