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When banks meet. From interbank market to internal capital market

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  • A. Giannola

Abstract

This paper considers the process of credit allocation in two regions - two banks system. The Regions are similar in size but one is significantly more developped of the other. The case of independent banks, where an interbank loan market exists is confronted with the case in which one bank incorporates the other giving birth to a unified internal capital market. Two different situations are analysed: in the first, the systemic risk in the less developped Region is higher than in the other one. In the second case there is no difference in risk but only a structural difference represented by a number of firms for each class of risk greater in the more developped Region with respect to the other one. In both cases the amount of loans to firms of the less developped Region decreases after incorporation.

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  • A. Giannola, 2009. "When banks meet. From interbank market to internal capital market," Rivista economica del Mezzogiorno, Società editrice il Mulino, issue 1-2, pages 9-26.
    • Handle: RePEc:mul:jqyfkm:doi:10.1432/29872:y:2009:i:1-2:p:9-26
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    Keywords

    Banks system; Italian Mezzogiorno;

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