Risk, Concentration and Market Power in the Banking Industry: Evidence from the Colombian System (1997-2006)
AbstractThis paper examines the relationship between risk, concentration and the exercise of market power by banking institutions. We use monthly balance-sheet and interest rate data for the Colombian banking system from 1997 to 2006. The evidence shows that, in the face of high risk, banks transfer a larger share of risk to customers through higher intermediation margins. The result suggests that systemic risk acts as a “collusion” device for banks: while high concentration is not enough to have collusion, the true effects of high market concentration on interest rates’ mark-ups emerge when the system is under stress.
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Bibliographic InfoPaper provided by UNIVERSIDAD DE LOS ANDES-CEDE in its series DOCUMENTOS CEDE with number 004385.
Date of creation: 14 Nov 2007
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-05 (All new papers)
- NEP-BAN-2008-01-05 (Banking)
- NEP-COM-2008-01-05 (Industrial Competition)
- NEP-RMG-2008-01-05 (Risk Management)
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