Global Banking and Local Markets: A National Perspective

Abstract:     
In the early 1990s, a widely shared opinion among scholars and practitioners was that the importance of physical proximity between banks and borrowers would be doomed to decrease drastically over time and, put in extreme terms, the end of banking geography would become a real possibility. However, the empirical evidence shows the continued importance of local credit markets for small borrowers and local economic development. In this paper, we selectively review the literature on the real effects of bank consolidation and produce new evidence on the role of headquarter-to-branch functional distance on relationship lending.

Keywords: global banking, local banking development, functional distance

JEL Classification: G21, G34, R12, R51

Accepted Paper Series