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Bank Consolidation, Internationalization, and Conglomeration; Trends and Implications for Financial Risk

Author

Listed:
  • Gianni De Nicolo
  • Mary G Zephirin
  • Philip F. Bartholomew
  • Jahanara Zaman

Abstract

This paper documents global trends in bank activity, consolidation, internationalization, and financial firm conglomeration, and explores the extent to which financial firm risk and systemic risk potential in banking are related to consolidation and conglomeration. We find that while there is a substantial upward trend in conglomeration globally, consolidation and internationalization exhibit uneven patterns across world regions. Trends in consolidation and conglomeration indicate increased risk profiles for large, conglomerate financial firms, and higher levels of systemic risk potential for more concentrated banking systems. We outline research directions aimed at explaining why bank consolidation and conglomeration do not necessarily yield either safer financial firms or more resilient banking systems.

Suggested Citation

  • Gianni De Nicolo & Mary G Zephirin & Philip F. Bartholomew & Jahanara Zaman, 2003. "Bank Consolidation, Internationalization, and Conglomeration; Trends and Implications for Financial Risk," IMF Working Papers 03/158, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:03/158
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Melanie S. Milo, 2007. "Integrated Financial Supervision : An Institutional Perspective for the Philippines," Finance Working Papers 22667, East Asian Bureau of Economic Research.
    2. Elena Loukoianova, 2008. "Analysis of the Efficiency and Profitability of the Japanese Banking System," IMF Working Papers 08/63, International Monetary Fund.
    3. John H. Boyd & Gianni De Nicoló & Bruce D. Smith, 2004. "Crises in competitive versus monopolistic banking systems," Proceedings, Federal Reserve Bank of Cleveland, pages 487-509.
    4. Iqbal, Zamir, 2008. "The Impact Of Consolidation On Islamic Financial Services Industry," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 15, pages 80-103.
    5. Caprio, Gerard & Honohan, Patrick, 2004. "Can the unsophisticated market provide discipline?," Policy Research Working Paper Series 3364, The World Bank.
    6. Gianni De Nicolo & Patrick Honohan & Alain Ize, 2003. "Dollarization of the Banking System; Good or Bad?," IMF Working Papers 03/146, International Monetary Fund.
    7. Claudio Agostini & Eduardo Saavedra & Manuel Willington, 2012. "Economies of Scale and Merger Efficiencies: Empirical Evidence from the Chilean Pension Funds Market," Working Papers wp_027, Adolfo Ibáñez University, School of Government.
    8. Nicola Cetorelli & Beverly Hirtle & Donald P. Morgan & Stavros Peristiani & João Santos, 2007. "Trends in financial market concentration and their implications for market stability," Economic Policy Review, Federal Reserve Bank of New York, issue Mar, pages 33-51.
    9. James Crotty, 2007. "If Financial Market Competition is so Intense, Why are Financial Firm Profits so High? Reflections on the Current ‘Golden Age’ of Finance," Working Papers wp134, Political Economy Research Institute, University of Massachusetts at Amherst.
    10. Alicia Garcia-Herrero & Daniel Navia Simon, 2006. "Why Banks go to Emerging Countries and What is the Impact for the Home Economy? A Survey," Working Papers 0602, BBVA Bank, Economic Research Department.
    11. In W Song, 2004. "Foreign Bank Supervision and Challenges to Emerging Market Supervisors," IMF Working Papers 04/82, International Monetary Fund.
    12. Sufian, Fadzlan & Habibullah, Muzafar Shah, 2012. "Globalizations and bank performance in China," Research in International Business and Finance, Elsevier, vol. 26(2), pages 221-239.
    13. Martin Cihak & Richard Podpiera, 2006. "Is One Watchdog Better Than Three? International Experience with Integrated Financial Sector Supervision," IMF Working Papers 06/57, International Monetary Fund.

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