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Has the banking system become more homogeneous? Evidence from banks’ loan portfolios

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  • Fricke, Daniel

Abstract

Have banks become more similar? In this paper we test this hypothesis using data on Japanese banks’ loan portfolios over the period 1996–2013. Using various similarity measures, we find that banks have in fact become less similar over time. This finding would suggest that concerns over a more homogeneous banking system are not necessarily based on facts. However, we also find that the Japanese banking system has become increasingly concentrated, and that the largest banks in fact have become more similar over time. We need theoretical frameworks that allow to disentangle the interplay between diversity and concentration and their impact on systemic risk.

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  • Fricke, Daniel, 2016. "Has the banking system become more homogeneous? Evidence from banks’ loan portfolios," Economics Letters, Elsevier, vol. 142(C), pages 45-48.
    • Handle: RePEc:eee:ecolet:v:142:y:2016:i:c:p:45-48
    DOI: 10.1016/j.econlet.2016.02.024
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    References listed on IDEAS

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    Cited by:

    1. Ren, Meixu & Zhao, Jingmei & Ke, Konglin & Li, Yidong, 2023. "Bank homogeneity and risk-taking: Evidence from China," The Quarterly Review of Economics and Finance, Elsevier, vol. 92(C), pages 142-154.
    2. Mahdiyeh Rezaei Chayjan & Tina Bagheri & Ahmad Kianian & Niloufar Ghafari Someh, 2022. "The optimisation of banking loan portfolio: a case of an Iranian commercial bank," International Journal of Financial Services Management, Inderscience Enterprises Ltd, vol. 11(3), pages 190-215.
    3. Ramadiah, Amanah & Caccioli, Fabio & Fricke, Daniel, 2020. "Reconstructing and stress testing credit networks," Journal of Economic Dynamics and Control, Elsevier, vol. 111(C).
    4. Carlos León, 2020. "Banks in Colombia: How Homogeneous Are They?," Revista de Economía del Rosario, Universidad del Rosario, vol. 23(2), pages 1-32, December.
    5. Nan, Shijing & Wang, Minna & You, Wanhai & Guo, Yawei, 2023. "Making text count: Identifying systemic risk spillover channels in the Chinese banking sector using annual reports text," Finance Research Letters, Elsevier, vol. 55(PA).
    6. Duc Thi Luu, 2022. "Portfolio Correlations in the Bank-Firm Credit Market of Japan," Computational Economics, Springer;Society for Computational Economics, vol. 60(2), pages 529-569, August.
    7. Yan, Guan & Liu, Zhidong, 2023. "Interconnectedness of financial institutions based on pledged shares in China," Finance Research Letters, Elsevier, vol. 57(C).
    8. Saghi, Nadia & Srour, Zainab & Viviani, Jean-Laurent & Jezzini, Mohamad, 2023. "Systemic risk in European banks: Does ownership structure matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 92(C), pages 88-111.
    9. F.H.J. Polzin & M.W.J.L. Sanders & Florian Täube, 2017. "A diverse and resilient financial system for investments in the energy transition," Working Papers 17-03, Utrecht School of Economics.

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    More about this item

    Keywords

    Interconnectedness; Portfolio overlap; Homogeneity; Similarity; Diversification; Systemic risk;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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