Bank Concentration and Crises
City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER
World Bank - Development Research Group; World Bank
UC Berkeley; National Bureau of Economic Research (NBER)
NBER Working Paper No. w9921
Motivated by public policy debates about bank consolidation and conflicting theoretical predictions about the relationship between the market structure of the banking industry and bank fragility, this paper studies the impact of bank concentration, bank regulations, and national institutions on the likelihood of suffering a systemic banking crisis. Using data on 70 countries from 1980 to 1997, we find that crises are less likely in economies with (i) more concentrated banking systems, (ii) fewer regulatory restrictions on bank competition and activities, and (iii) national institutions that encourage competition.
Number of Pages in PDF File: 43
Date posted: August 25, 2003