The efficiency implications of financial conglomeration
AbstractThis paper studies the competitive and efficiency implications of financial conglomeration driven by cost-efficiency gains in monitoring credit and insurance customers. The analysis shows that conglomeration is conducive to tougher competition in the credit market and increases profit in insurance. The aggregate profit in the financial sector does not increase, because the conglomerates pass the cost-efficiency gains on to the borrowers in full. More competitive market for financial services also reduces the aggregate risk in the financial markets, indicating that capital requirements in both sectors should be lower in the presence of financial conglomerates.
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Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 17/2004.
Length: 34 pages
Date of creation: 18 Jul 2004
Date of revision:
Publication status: Forthcoming in Journal of Financial Stability, 2008.
financial conglomerates; banking; insurance; capital regulation;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kauppi , Heikki & Koskela , Erkki & Stenbacka , Rune, 2004.
"Equilibrium unemployment and investment under product and labour market imperfections,"
Research Discussion Papers
11/2004, Bank of Finland.
- Kauppi, Heikki & Koskela, Erkki & Stenbacka, Rune, 2004. "Equilibrium Unemployment and Investment Under Product and Labour Market Imperfections," IZA Discussion Papers 1058, Institute for the Study of Labor (IZA).
- Holopainen, Helena, 2007. "Integration of financial supervision," Research Discussion Papers 12/2007, Bank of Finland.
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