Systemic banking crises: the relationship between concentration and interbank connections

Event Date: 24 March 2021

Speaker: Bruno Lanzer (Federal University of Pelotas)

Time: 2pm

Abstract

In this paper we study the extent to which the nexus between concentration and interbank linkages affects financial stability, using data for a sample of 19,689 banks in 69 countries from 1995 to 2014. We find that high levels of interbank exposures decrease the probability of observing a systemic banking crisis, when the banking system is either highly concentrated or fragmented. The relationship between concentration and stability is found to be non-monotonic, as predicted by Martinez-Miera & Repullo (2010), although not U-shaped.

Published: 7 April 2021