Bank Location and Financial Liberalization Reforms: Evidence from Microgeographic Data

We examine the effects of bank deregulation on the spatial dynamics of retail-bank branching, exploiting, much like a quasi-natural experiment, the context of intense liberalization reforms in Belgium in the late nineties. Using .ne-grained data on branch network dynamics within the metropolitan area of Antwerp and advancing novel spatial econometric techniques, we show that these liberalization reforms radically shifted and accelerated branch network dynamics. Entry and exit dynamics substantially intensified, the level change in financial void grew significantly, and bank choice markedly declined. Moreover, all these changes consistently extended (even with greater intensity) after the liberalization peak. However, the immediate and longer-term spatial ramifications of the financial sector liberalization were very distinct. All immediate changes systematically, differentially impacted the poorer and wealthier neighborhoods, disenfranchising the poorer neighbourhoods and favoring their wealthier counterparts. The longer-term effects on spatial patterns of change no longer exhibited this systematic relationship with neighborhood income. We draw out the policy implications of our findings.