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Has the banking system become more homogeneous? Evidence from banks’ loan portfolios

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  • Fricke, Daniel

Abstract

Have banks become more similar? In this paper we test this hypothesis using data on Japanese banks’ loan portfolios over the period 1996–2013. Using various similarity measures, we find that banks have in fact become less similar over time. This finding would suggest that concerns over a more homogeneous banking system are not necessarily based on facts. However, we also find that the Japanese banking system has become increasingly concentrated, and that the largest banks in fact have become more similar over time. We need theoretical frameworks that allow to disentangle the interplay between diversity and concentration and their impact on systemic risk.

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  • Fricke, Daniel, 2016. "Has the banking system become more homogeneous? Evidence from banks’ loan portfolios," Economics Letters, Elsevier, vol. 142(C), pages 45-48.
    • Handle: RePEc:eee:ecolet:v:142:y:2016:i:c:p:45-48
    DOI: 10.1016/j.econlet.2016.02.024
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    References listed on IDEAS

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    Cited by:

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    2. Ramadiah, Amanah & Caccioli, Fabio & Fricke, Daniel, 2020. "Reconstructing and stress testing credit networks," Journal of Economic Dynamics and Control, Elsevier, vol. 111(C).
    3. Carlos León, 2020. "Banks in Colombia: How Homogeneous Are They?," Revista de Economía del Rosario, Universidad del Rosario, vol. 23(2), pages 1-32, December.
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    6. Nan, Shijing & Wang, Minna & You, Wanhai & Guo, Yawei, 2023. "Making text count: Identifying systemic risk spillover channels in the Chinese banking sector using annual reports text," Finance Research Letters, Elsevier, vol. 55(PA).
    7. Duc Thi Luu, 2022. "Portfolio Correlations in the Bank-Firm Credit Market of Japan," Computational Economics, Springer;Society for Computational Economics, vol. 60(2), pages 529-569, August.

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    More about this item

    Keywords

    Interconnectedness; Portfolio overlap; Homogeneity; Similarity; Diversification; Systemic risk;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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