Bank Concentration and Fragility: Impact and Mechanics / Thorsten Beck, Asli Demirguc-Kunt, Ross Levine.

Format:

Book

Author/Creator:

Beck, Thorsten.

Contributor:

National Bureau of Economic Research.

Demirguc-Kunt, Asli.

Levine, Ross.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11500.

NBER working paper series no. w11500

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Bank Concentration and Fragility

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

Public policy debates and theoretical disputes motivate this paper's examination of (i) the relationship between bank concentration and banking system fragility and (ii) the mechanisms underlying this relationship. We find no support for the view that concentration increases the fragility of banks. Rather, banking system concentration is associated with a lower probability that the country suffers a systemic banking crisis. In terms of policies, we find that (i) regulations and institutions that facilitate competition in banking are associated with less--not more--banking system fragility and (ii) including these policy indicators does not change the results on concentration. This suggests that concentration is a proxy for something else besides the competitive environment. Also, we do not find that official capital regulations, reserve requirements, or official prudential regulations lower crises probabilities. Finally, we present suggestive evidence that concentrated banking systems tend to have larger, better-diversified banks, which may help account for the positive link between concentration and stability.

Notes:

Print version record

August 2005.