Banking Concentration and Financial Crises

Ray Barrell and Dilruba Karim ()

No 516, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: Policy makers need to know if the structure of competition and the degree of banking market concentration change the incidence of financial crises. Previous studies have not always come to clear conclusions. We use a new dataset of 19 countries where we include capital adequacy and house price growth as factors affecting crisis incidence, and we find a positive role for bank concentration in reducing incidence. In addition, we look at New Industrial Economics indicators of market structure and find that increased market power also reduces crisis incidence. We conclude that attempts to increase competition in banking, although welcome for welfare reasons, should be accompanied by increases in capital standards.

Keywords: Financial Stability; Bank Competition; Banking Crises; Macroprudential Policy (search for similar items in EconPapers)
JEL-codes: E44 G01 G18 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-ban, nep-com, nep-fdg and nep-mac
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Citations: View citations in EconPapers (5)

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Journal Article: BANKING CONCENTRATION AND FINANCIAL CRISES (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:516

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