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The efficiency implications of financial conglomeration

  • Mälkönen , Ville

    ()

    (Government Institute for Economic Research)

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    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.

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    File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0417.pdf
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    Paper provided by Bank of Finland in its series Research Discussion Papers with number 17/2004.

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    Length: 34 pages
    Date of creation: 18 Jul 2004
    Date of revision:
    Publication status: Forthcoming in Journal of Financial Stability, 2008.
    Handle: RePEc:hhs:bofrdp:2004_017
    Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
    Web page: http://www.suomenpankki.fi/en/

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    1. 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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