Bank Consolidation, Internationalization, and Conglomeration: Trends and Implications for Financial Risk

45 Pages Posted: 9 Oct 2004

See all articles by Gianni De Nicolo

Gianni De Nicolo

Johns Hopkins University - Carey Business School; CESifo (Center for Economic Studies and Ifo Institute)

Philip Bartholomew

Independent

Jahanara Zaman

Independent

Mary Zephirin

Independent

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Abstract

This paper documents trends in bank activity, consolidation, internationalization, and financial firm conglomeration with data on more than 100 countries, and explores the extent to which financial firm risk and systemic risk potential in banking are related to consolidation and conglomeration. The relationship between consolidation, conglomeration and financial risk is documented using financial data on the largest 500 financial firms worldwide and on large banks in about 90 countries. We find that (a) large conglomerate firms did not exhibit levels of risk-taking lower than smaller and specialized firms in 1995, while they exhibited higher levels of risk-taking in 2000; (b) highly concentrated banking systems exhibited levels of systemic risk potential higher than less concentrated systems during the 1993-2000 period, and this relationship has strengthened during the 1997-2000 period. We outline research directions aimed at explaining why bank consolidation and conglomeration may not necessarily yield either safer financial firms or more resilient banking systems.

Suggested Citation

De Nicolo, Gianni and Bartholomew, Philip and Zaman, Jahanara and Zephirin, Mary, Bank Consolidation, Internationalization, and Conglomeration: Trends and Implications for Financial Risk. Financial Markets, Institutions & Instruments, Vol. 13, No. 4, pp. 173-217, October 2004. Available at SSRN: https://ssrn.com/abstract=602009

Gianni De Nicolo (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States
(410) 234-4507 (Phone)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Philip Bartholomew

Independent

No Address Available

Jahanara Zaman

Independent

No Address Available

Mary Zephirin

Independent

No Address Available

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