Overcapacities in banking: measurements, trends and determinants

By November 12, 2019 10:37

Overcapacities in banking: measurements, trends and determinants

This paper takes an eclectic approach to investigating the notion of overcapacities in banking along the dimensions of (i) banking sector size, (ii) bank competition and (iii) banking infrastructure/efficiency, thereby offering a nuanced and granular view of the topic. In terms of measurement, a newly developed composite indicator synthesises these different layers into a single metric of overcapacities in banking, comparing developments in major advanced economies across the globe over the period from 2006 to 2017. Offering a relative comparison across countries and time, the composite indicator suggests that most countries in the sample have managed to reduce overcapacities in banking since the onset of the global financial crisis, albeit to varying degrees, as some were better able to adapt to the changing environment than others, in particular by deleveraging, rationalising costly physical infrastructure and exploiting the benefits of technological innovation. A panel framework is then used to analyse a number of hypotheses derived from the literature, with the aim of shedding light on the determinants of overcapacities in banking, the direction of the relationship, and their relative importance. The results indicate that non-bank competition, the interest rate environment as well as bank business models are the most important driving factors of the overall degree of overcapacity in banking. With respect to the specific dimensions, non-bank competition seems to be particularly relevant for the size pillar, while demographic features and technological innovation appear to play a prominent role for explaining the competition and infrastructure/efficiency dimensions. The findings provide useful insights for policy makers concerning the possible design, calibration and effectiveness of potential policy responses that aim to address the issue of overcapacities in banking.

By November 12, 2019 10:37



Don't want to miss #research on #centralbanks? Check out @Opinio_Pro -> https://www.opiniopro.com/tag/central-banks/ #ecb #fed

Check out our events calendar, with a lot of interesting #webinars! https://opiniopro.com/events/ #research #HomeOffice

"Global Asset Allocation: The View From #Emea" -> https://www.opiniopro.com/2020/05/t-rowe-price/global-asset-allocation-the-view-from-emea-6/ via @TRowePrice #global #assetallocation #price #fed

"The #emergence of Covid-19 has destabilised# stock markets the world over" -> https://www.opiniopro.com/2020/05/columbia-threadneedle/the-emergence-of-covid-19-has-destabilised-stock-markets-the-world-over/ via @CTinvest_EMEA #coronavirus

"#Mixfondsen: de juiste cocktail van #rendement en #risico" -> https://www.opiniopro.com/2020/05/actiam/mixfondsen-de-juiste-cocktail-van-rendement-en-risico/ via @ACTIAM

Load More...

Search on date

November 2019