Bank mergers, competition and liquidity

Elena Carletti (), Philipp Hartmann and Giancarlo Spagnolo

No 2006/08, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: We model the impact of bank mergers on loan competition, reserve holdings and aggregate liquidity. A merger changes the distribution of liquidity shocks and creates an internal money market, leading to financial cost efficiencies and more precise estimates of liquidity needs. The merged banks may increase their reserve holdings through an internalization effect or decrease them because of a diversification effect. The merger also affects loan market competition, which in turn modifies the distribution of bank sizes and aggregate liquidity needs. Mergers among large banks tend to increase aggregate liquidity needs and thus the public provision of liquidity through monetary operations of the central bank.

Keywords: Credit Market Competition; Bank Reserves; Internal Money Market; Banking System Liquidity; Monetary Operations (search for similar items in EconPapers)
JEL-codes: D43 G21 G28 L13 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
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 (2005)
Working Paper: Bank Mergers, Competition and Liquidity (2004)
Working Paper: Bank mergers, competition and liquidity (2003)
Working Paper: Bank mergers, competition, and liquidity (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:200608

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