Banking Diversity, Financial Complexity and Resilience to Financial Shocks: Evidence from Italian Provinces

68 Pages Posted: 15 Nov 2021

Date Written: November 9, 2021

Abstract

In this paper we investigate the influence of banking and financial diversity on stability. We compute an index of banking diversity for Italian provinces and, drawing from network theory, we propose a measure of the diversity and development of the overall provincial financial sector. Our results show that diversity in the banking and financial markets promotes greater stability. Such beneficial effects are particularly evident during periods of financial distress. We ascribe our findings to the better diversification achieved by more diverse financial systems, as documented by lower loans concentration and higher loans diversification in terms of economic destination and borrower category.

Keywords: financial diversity, financial stability, non-performing loans, financial complexity, financial crises, banking diversity

JEL Classification: G01, G20, P34

Suggested Citation

Pisicoli, Beniamino, Banking Diversity, Financial Complexity and Resilience to Financial Shocks: Evidence from Italian Provinces (November 9, 2021). CEIS Working Paper No. 526, Available at SSRN: https://ssrn.com/abstract=3959906 or http://dx.doi.org/10.2139/ssrn.3959906

Beniamino Pisicoli (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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