Survival of the Biggest: Large Banks and Crises since 1870
58 Pages Posted: 19 Aug 2022
Date Written: March 12, 2022
This paper studies a newly compiled data set of annual balance sheets of more than 11,000 commercial banks across 17 advanced economies since 1870. The new data expose the central role of large banks for credit cycles and financial instability throughout modern financial history and the reorganization of the banking sector in the aftermath of crises. Large banks account for a large and growing share of asset growth during credit booms, take more risks, contract lending more in crises, and suffer higher losses. Yet despite their worse performance, large banks are less likely to fail during crises and even tend to gain market share. Our findings are consistent with theories of excessive risk taking by too-big-to-fail institutions and demonstrate how banking sector concentration and financial fragility reinforce one another.
Keywords: financial history, banking crises, financial regulation, too big to fail
JEL Classification: E02, E44, E51, E61, F44, G01, G18, G21
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