Branch banking dynamics, collective behaviour and overclustering

We provide an empirical and theoretical analysis of branch banking dynamics in Italy, focussing on banks' location choices in the decentralised system emerged after the deregulation of late 1980s and early 1990s. Until the regime change the Italian banking sector was characterised by a centralised system in which the opening of new branches was subject to a Bank of Italy''s authorisation. As a consequence of the 1990 "branch liberalisation" there was a collective phenomenon of new openings that, in some circumstances, has produced overclustering episodes, due to the lack of coordination in an uncertain decisional context. Different performances at the system level can be linked to different aggregation of errors in alternative organisational settings. We suggest that policy intervention may improve information gathering and diffusion at the system level, reducing the incidence of locational errors.