Bank Concentration and Crises

Thorsten Beck, Asli Demirguc-Kunt, Ross Levine

NBER Working Paper No. 9921
Issued in August 2003
NBER Program(s):   IFM   ME   AP

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.

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Published: Beck, Thorsten, Asli Demirguc-Kunt and Ross Levine. "Bank Concentration, Competition, And Crises: First Results," Journal of Banking and Finance, 2006, v30(5,May), 1581-1603.

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