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The efficiency implications of financial conglomeration

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  • Mälkönen, Ville

Abstract

This 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 Key words: financial conglomerates, banking, insurance, capital regulation JEL classification numbers: G21, G22, G38, L40

Suggested Citation

  • Mälkönen, Ville, 2004. "The efficiency implications of financial conglomeration," Research Discussion Papers 17/2004, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2004_017
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    References listed on IDEAS

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    1. Herrendorf, Berthold & Teixeira, Arilton, 2003. "Monopoly Rights can Reduce Income Big Time," CEPR Discussion Papers 3854, C.E.P.R. Discussion Papers.
    2. Ellison, Martin & Sarno, Lucio & Vilmunen, Jouko, 2004. "Monetary policy and learning in an open economy," Research Discussion Papers 3/2004, Bank of Finland.
    3. Bagella, Michele & Becchetti, Leonardo & Hasan, Iftekhar, 2004. "The anticipated and concurring effects of the EMU: exchange rate volatility, institutions and growth," Journal of International Money and Finance, Elsevier, vol. 23(7-8), pages 1053-1080.
    4. Mayes, David & Virén, Matti, 2004. "Asymmetries in the Euro area economy," Research Discussion Papers 9/2004, Bank of Finland.
    5. 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.
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    More about this item

    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

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