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

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Author Info
Gianni De Nicoló
Philip F. Bartholomew
Jahanara Zaman
M. G. Zephirin
Abstract

This paper documents global trends in bank activity, consolidation, internationalization, and financial firm conglomeration, and explores the extent to which financial firm risk and systemic risk potential in banking are related to consolidation and conglomeration. We find that while there is a substantial upward trend in conglomeration globally, consolidation and internationalization exhibit uneven patterns across world regions. Trends in consolidation and conglomeration indicate increased risk profiles for large, conglomerate financial firms, and higher levels of systemic risk potential for more concentrated banking systems. We outline research directions aimed at explaining why bank consolidation and conglomeration do not necessarily yield either safer financial firms or more resilient banking systems.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/158.

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Length: 44 pages
Date of creation: 21 Aug 2003
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Handle: RePEc:imf:imfwpa:03/158

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Keywords: Banking ; Banking systems ; Financial systems ;

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References listed on IDEAS
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.:
  1. Amihud, Yakov & DeLong, Gayle L. & Saunders, Anthony, 2002. "The effects of cross-border bank mergers on bank risk and value," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 857-877, November. [Downloadable!] (restricted)
  2. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring. [Downloadable!] (restricted)
  3. Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999. "The consolidation of the financial services industry: Causes, consequences, and implications for the future," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 135-194, February. [Downloadable!] (restricted)
    Other versions:
  4. Boyan Jovanovic & Peter L. Rousseau, 2002. "The Q-Theory of Mergers," NBER Working Papers 8740, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Frederic S. Mishkin, 1999. "Financial Consolidation: Dangers and Opportunities," NBER Working Papers 6655, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio L., 2002. "Explaining the migration of stocks from exchanges in emerging economies to international centers," Policy Research Working Paper Series 2816, The World Bank. [Downloadable!]
    Other versions:
  7. Ben Craig & João Cabral dos Santos, 1997. "The risk effects of bank acquisitions," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 25-35. [Downloadable!]
  8. De Nicolo, Gianni & Kwast, Myron L., 2002. "Systemic risk and financial consolidation: Are they related?," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 861-880, May. [Downloadable!] (restricted)
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  12. Jean-Charles Rochet & Jean Tirole, 1996. "Interbank lending and systemic risk," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
    Other versions:
  13. Acharya, Viral V & Hasan, Iftekhar & Saunders, Anthony, 2002. "The Effects of Focus and Diversification on Bank Risk and Return: Evidence from Individual Bank Loan Portfolios," CEPR Discussion Papers 3252, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  14. Joseph G. Haubrich, 1998. "Bank diversification: laws and fallacies of large numbers," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-9. [Downloadable!]
    Other versions:
  15. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May. [Downloadable!] (restricted)
  16. Martin Summer, 2002. "Banking Regulation and Systemic Risk," Working Papers 57, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
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  17. Dean Amel & Colleen Barnes & Fabio Panetta & Carmelo Salleo, 2002. "Consolidation and efficiency in the financial sector: a review of the international evidence," Finance and Economics Discussion Series 2002-47, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  18. Roy C. Smith & Ingo Walter, 1998. "Global Patterns of Mergers and Acquisition Activity in the Financial Services Industry," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-060, New York University, Leonard N. Stern School of Business-.
  19. Boyan Jovanovic & Peter L. Rousseau, 2002. "Mergers as Reallocation," NBER Working Papers 9279, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. John H. Boyd & Mark Gertler, 1994. "The role of large banks in the recent U.S. banking crisis," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-21. [Downloadable!]
  21. A. Sinan Cebenoyan & Philip E. Strahan, 2001. "Risk Management, Capital Structure and Lending at Banks," Center for Financial Institutions Working Papers 02-09, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
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  23. Dean Amel & Colleen Barnes & Fabio Panetta & Carmelo Salleo, 2002. "Consolidation and efficiency in the financial sector: a review of the international evidence," Temi di discussione (Economic working papers) 464, Bank of Italy, Economic Research Department. [Downloadable!]
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  25. Buch, Claudia M. & DeLong, Gayle, 2004. "Cross-border bank mergers: What lures the rare animal?," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2077-2102, September. [Downloadable!] (restricted)
    Other versions:
  26. Impavido, Gregorio & Musalem, Alberto R. & Tressel, Thierry, 2001. "Contractual savings institutions and banks'stability and efficiency," Policy Research Working Paper Series 2751, The World Bank. [Downloadable!]
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  28. Benston, George J & Hunter, William C & Wall, Larry D, 1995. "Motivations for Bank Mergers and Acquisitions: Enhancing the Deposit Insurance Put Option versus Earnings Diversification," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 777-88, August. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Elena Loukoianova, 2008. "Analysis of the Efficiency and Profitability of the Japanese Banking System," IMF Working Papers 08/63, International Monetary Fund. [Downloadable!]
  2. Gianni De Nicoló & Alain Ize & Patrick Honohan, 2003. "Dollarization of the Banking System: Good or Bad?," IMF Working Papers 03/146, International Monetary Fund. [Downloadable!]
    Other versions:
  3. Caprio, Gerard & Honohan, Patrick, 2004. "Can the unsophisticated market provide discipline?," Policy Research Working Paper Series 3364, The World Bank. [Downloadable!]
  4. Nicola Cetorelli & Beverly Hirtle & Donald Morgan & Stavros Peristiani & João Santos, 2007. "Trends in financial market concentration and their implications for market stability," Economic Policy Review, Federal Reserve Bank of New York, issue Mar, pages 33-51. [Downloadable!]
  5. Bruce D. Smith & Gianni De Nicoló & John H. Boyd, 2003. "Crisis in Competitive versus Monopolistic Banking Systems," IMF Working Papers 03/188, International Monetary Fund. [Downloadable!]
    Other versions:
  6. Richard Podpiera & Martin Cih�k, 2006. "Is One Watchdog Better Than Three? International Experience with Integrated Financial Sector Supervision," IMF Working Papers 06/57, International Monetary Fund. [Downloadable!]
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