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The effect on competition of banking sector consolidation following the financial crisis of 2008

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  • Pérez Montes, Carlos

Abstract

Consolidation of the Spanish banking sector after the financial crisis of 2008 raises concerns about potential negative effects on competition. I use structural econometric methods to examine these anti-competitive concerns in the Spanish mortgage market. I estimate a mixed-logit model of mortgage demand and recover bank-level cost information with a strategic model of price competition. Counterfactual experiments reveal that the observed increase in concentration is associated only with small variations in mortgage rates and market shares, staying far from collusive levels. This moderate change in industry conduct implies a small direct effect of consolidation on bank exposures to mortgage risk.

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  • Pérez Montes, Carlos, 2014. "The effect on competition of banking sector consolidation following the financial crisis of 2008," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 124-136.
    • Handle: RePEc:eee:jbfina:v:43:y:2014:i:c:p:124-136
    DOI: 10.1016/j.jbankfin.2014.03.004
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    More about this item

    Keywords

    Mortgage; Banking Crisis; Sector consolidation; GMM; Mixed-logit; Counterfactual analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G01 - Financial Economics - - General - - - Financial Crises
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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