Bank Mergers, Competition and Liquidity

Philipp Hartmann, Giancarlo Spagnolo and Elena Carletti ()

No 4260, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We model the impact of bank mergers on loan competition, reserve holdings and aggregate liquidity. A merger creates an internal money market that affects reserve holdings and induces financial cost advantages, but also withdraws liquidity from the interbank market. We assess changes in liquidity needs for each bank and for the banking system as a whole, and relate them to the degree of loan market competition. Large mergers tend to increase aggregate liquidity needs, and thus the liquidity provision in monetary operations by the central bank. Fiercer loan market competition seems to be beneficial for aggregate liquidity in industrial countries.

Keywords: Credit market competition; Bank reserves; Internal money market; Banking system liquidity (search for similar items in EconPapers)
JEL-codes: D43 G21 G28 L13 (search for similar items in EconPapers)
Date: 2004-02
New Economics Papers: this item is included in nep-cfn and nep-com
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Bank Mergers, Competition, and Liquidity (2007)
Journal Article: Bank Mergers, Competition, and Liquidity (2007)
Working Paper: Bank mergers, competition and liquidity (2006)
Working Paper: Bank Mergers, Competition and Liquidity (2005)
Working Paper: Bank mergers, competition and liquidity (2003)
Working Paper: Bank mergers, competition, and liquidity (2003)
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