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Dynamics of Retail-Bank Branching in Austria
Abstract
This paper examines branch exit from and entry into local banking markets in Austria from 1999 to 2012, as well as changes in concentration and several bank-borrower distance measures. Results from spatial regression models reveal that especially less developed and functionally distant municipalities suffer from branch withdrawal and financial desertification. Bank variety, and thus, choice decreases, for example, in (the vicinity of) communities with ageing population. Most examined processes are found to exhibit spatial correlation and so being geographically extensive. Potential adverse consequences of structural change for non-urban markets should, thus, receive more attention from economic and regional policy.
... Morrison and O'Brien (2001) highlighted the vulnerable segment in terms of the distribution of the branch network, pointing out that residents who live at least 10 km away from the nearest branch are typically in a less favourable income and employment situation. As for regional analyses, in his article analysing Austria, Burgstaller (2017) pointed out that financial desertification is most noticeable in less developed and functionally distant settlements because of the dynamics of the placement and closing of branches, due to which the possibility of choosing a bank also narrows around areas inhabited by an aging social stratum. As a result of these processes, in proportion to the population, 5% of Austrian settlements became branchless, and 5% of the population had to travel at least 5 km to the nearest bank branch (Stix 2020). ...
One of the important issues of banking today is the role bank branches and online banking solutions play in serving consumers. With the help of a representative Survey of 1,000 adults in Hungary conducted in 2022, we examine how well online and mobile banking solutions can provide a suitable alternative to bank branches. Based on our results, online banking solutions cannot fully replace personal banking in Hungary due to the customers' attitudes, as we can see that their use does not significantly affect the frequency of visits to the bank branch, and their usage rate does not increase with the distance from the bank branch. We also point out that for the Hungarian population the trend of bank branch closures may entail the risk of being left out of the formal financial system mostly for the older, digitally less receptive social strata living in small settlements and in a relatively worse financial situation.
... Finally, the functional layout of Nanjing's financial service industry requires optimization, and the carrying capacity of financial space must be enhanced. The government should guide Nanjing's financial service industry to select locations in areas with high market demand, agglomeration of enterprises, close to the city center, convenient transportation, and dense population to optimize the spatial layout of the financial service industry, considering that the phenomenon of financial desertification in underdeveloped areas is serious; moreover, the farther away from the market, the fewer branches of banks (Burgstaller, 2017). The issue of financial fairness should also be considered, and small financial institutions such as "rural credit cooperatives" should be reasonably set up in underdeveloped regions to protect the financial rights of low-income people (Yuan et al., 2019). ...
China’s financial service industry is developing rapidly. Under the background of globalization and informatization, the structure of the financial system is constantly adjusted. Therefore, re-examining the spatial layout characterizing the overall financial industry has profound importance. Based on point of interest data, we utilize Nanjing as a case study and the analysis spatial pattern and agglomerative characteristics of the financial service industry. The research is conducted through various spatial measurement methods and negative binomial regression models as well as factors affecting the overall spatial distribution of the industry. Results indicate that Nanjing’s financial service industry has prominent features of agglomeration-oriented characteristics, while spatial distribution generally presents a “northwest–southeast” trend, i.e., a layout formed along transport lines and facilities and from the central business district to the suburbs is steadily being reduced. The spatial distribution, concentration and scale of financial service companies, business halls, and automatic teller machines in Nanjing vary widely. Market demand, corporate agglomeration effect, geographical location, transportation facilities, and population size and dynamics have profoundly affected the distribution pattern of the financial service industry Nanjing-wide. Accordingly, this research provides some reference and suggestion for the construction of financial centers, the formulation of policies to optimize the layout of financial industries, and as a research benchmark for other developing countries in the process of rapid urbanization.
... On the one hand, there is the expectation that FinTech will foster innovations for banks, for example online credit applications, data analysis, payment transactions, and generate new competitors to established banks, especially with peer-to-peer lending, both of which would positively influence the supply of finance for SMEs (Alt & Puschmann, 2016;Jagtiani & Lemieux, 2017;Philippon, 2016). On the other hand, the banking industry's reactions to FinTech-for example a reduction in the number of branches, the acceleration of bank mergers and acquisitions (M&As)-tend to threaten the supply of finance for firms in affected regions, most of which are peripheral (Burgstaller, 2017;Conrad et al., 2018;Flögel & Gärtner, 2016). Furthermore, some researchers are concerned about privacy issues in the context of big data and the "nudging" of people's behaviour (Gabor & Brooks, 2017). ...
Regional banks have a competitive advantage in that short distances to clients enable the use of soft information for superior lending decisions. If the ambition of FinTech start‐ups to create superior screening and monitoring technologies materialises, this advantage would be diminished and regional banks would become superfluous for small firm finance. To explore this claim, the paper in hand analyses qualitative empirical data about the lending processes and rating system use of regional German savings banks. In essence, the results from participant observation and interviews clarify the importance of “real” soft information for critical lending decisions. The context specificity and limited verifiability of “real” soft information hamper it from being hardened through the use of rating systems and other bank‐ICT. Though FinTech's scoring technologies may overcome the first limitation, it appears likely that in the course of scoring development “real” soft information will be systematically crowded out due to the manipulation problem. The paper expects improved access to finance for SMEs if FinTech solutions overcome both limitations of “real” soft information use, or if peer‐to‐peer lending and regional banks coexist. Deteriorated access to finance is expected if FinTech companies displace the relationship banking of regional banks due to enhanced competition, without preserving the advantages of “real” soft information with superior screening and monitoring technologies. The paper concludes with recommendations on how to prevent deteriorated access to finance for small firms by promoting fair competition and FinTech innovations.
... Associated with locational shifts is a rationalisation of corporate hierarchies and the introduction of a more "entrepreneurial" approach to selling bank services, involving new types of gender-segmented work. • Johann Burgstaller 2017 This paper examines branch exit from and entry into local banking markets in Austria from 1999 to 2012, as well as changes in concentration and several bank-borrower distance measures. Results from spatial regression models reveal that especially less developed and functionally distant municipalities suffer from branch withdrawal and financial desertification. ...
... B. Finanzierungslücken in peripheren Regionen (Klagge und Martin 2005). Wissenschaftliche Studien weisen jedoch darauf hin, dass Banken sich zuerst oder zunehmend aus weniger entwickelten oder schrumpfenden Regionen zurückziehen (Burgstaller 2017 (Brevoort und Wolken 2009). In Belgien ist der Median Kreditnehmer (kleines Unternehmen) nur ca. ...
This paper explores the physical and digital accessibility of financial services at public savings banks and cooperative banks in Germany to assess whether the reduced regional presence due to branch closures can be compensated by digital offerings. To measure physical accessibility at the business area level we use variables of topography, settlement structure, age structure and age-dependent choice as regards means of transport. Digital accessibility is measured by broadband internet access. Comparing both measures of access to financial services shows that in particular inhabitants of sparsely populated rural regions have both a relatively poor physical and a below average digital access. In the next years, an improvement of broadband internet access will be of utmost importance in these regions, since projected population decline will induce further branch closures particularly there. However, the substitutability between both distribution channels depends on the kind of financial service offered. Finally, the comparison between savings banks and cooperative banks reveals no major differences in physical accessibility. However, savings banks—with regard to the indicators used for assessing physical accessibility—have a much more homogeneous presence in Germany than the cooperative banks.
How to cite this paper: Moro-Visconti, R., Quirici, M. C., & Borroni, M. (2020). Matching financial closeness with social distancing: Networking digital platforms within a corporate governance ecosystem. The Covid-19-Coronavirus pandemic has rapidly spread around the world, demanding for social distancing measures as a strategy to soften contagion. Whereas social closeness proves dangerous, financial proximity is increasingly needed and can be guaranteed by FinTechs or applications, like digital platforms. Networking platforms may be represented by bridging nodes like Mobile banking (M-banking) hotspots. M-banking and FinTech applications are fully consistent with distancing prescriptions and ease financial inclusion, allowing for 24/7 operativity. This study proposes an innovative interpretation of the networking properties of digital platforms and M-banking that represent a new-virtual-stakeholder, showing how they improve corporate governance interactions. Due to their scalability, platforms foster cooperative value co-creating patterns, with deep albeit still under-investigated governance implications. Network governance is a novel approach to describe the stakeholders" ecosystem, and its value-adding physical and virtual interactions. The paper shows how to match virtual financial proximity with apparently contradicting social distancing. This study represents an advance in the literature, as it investigates about its smart (digital) extensions that can represent a shield against pandemic adversities, reducing transaction costs, and information asymmetries.
Financial accessibility as a way of ensuring financial inclusion has received increasing attention. However, most of studies have drawn attention to the likelihood of becoming branchless and not on the differential characteristics of branchless municipalities. The aim this paper is to assess financial accessibility in branchless municipalities of the most populated region of Spain, Andalusia, and to examine their distribution across space. To that end, we identify the nearest bank branch for each branchless municipality. In addition, we incorporate socio-economic characteristics of each municipality in order to identify different groups of branchless municipalities. The results obtained suggest that there are substantial differences across branchless municipalities. In particular, we identify two degrees of financial accessibility: moderate and poor. Population dynamics are revealed as a key factor in explaining financial accessibility although this can be ameliorated by a higher per capita income and a greater industrial specialization. From a territorial point of view, we find a high concentration of branchless municipalities across space. Some initiatives should be taken in order to avoid that people become financially excluded. In this sense, local action groups responsible for rural development policies could identify the main negative effects and propose the most suitable alternative services.
Bu çalışmada, sürdürülebilir bir büyümenin en önemli unsurlarından birisi olan imalat sanayii, piyasa yapısı analizi çerçevesinde piyasaya giriş modeli oluşturularak incelenmektedir. Bu çerçevede kullanılan modellerde düşük teknolojili ve yüksek teknolojili imalat sanayii sektörleri, 2003-2015 yılları için lojistik regresyon modeli kullanılarak analiz edilmektedir. Analiz sonuçlarına göre piyasaya girişte, farklı teknoloji düzeyindeki firmalar farklı değişkenlerden etkilenmektedir. Diğer taraftan makroekonomik gelişmelerin, firmaların sektöre giriş kararında firma ve piyasa özelindeki gelişmelerden daha etkili olduğu da görülmektedir. Özellikle teknoloji yoğun firmaların makroekonomik gelişmelerden çok fazla etkilendiği dikkat çekmektedir. Çalışmanın, firmaların piyasaya giriş kararlarının mikro ve makro düzeyde nasıl değiştiğini görebilmek adına politika yapıcılar için önemli olduğu düşünülmektedir.
Regional scientists frequently work with regression relationships involving sample data that is spatial in nature. For example, hedonic house-price regressions relate selling prices of houses located at points in space to characteristics of the homes as well as neighborhood characteristics. Migration, commodity, and transportation flow models relate the size of flows between origin and destination regions to the distance between origin and destination as well as characteristics of both origin and destination regions. Regional growth regressions relate growth rates of a region to past period own- and nearby-region resource inputs used in production. Spatial data typically violates the assumption that each observation is independent of other observations made by ordinary regression methods. This has econometric implications for the quality of estimates and inferences drawn from nonspatial regression models. Alternative methods for producing point estimates and drawing inferences for relationships involving spatial data samples comprise the broad topic covered by spatial econometrics. Like any subdiscipline, spatial econometrics has its quirks, many of which reflect influential past literature that has gained attention in both theoretical and applied work. This article asks the question: “What should regional scientists who wish to use regression relationships involving spatial data in an effort to shed light on questions of interest in regional science know about spatial econometric methods?”
We formulate and test hypotheses about the role of bank type – small versus large, single-market versus multimarket, and local versus nonlocal banks – in banking relationships. The conventional paradigm suggests that "community banks" – small, single market, local institutions – are better able to form strong relationships with informationally opaque small businesses, while "megabanks" – large, multimarket, nonlocal institutions – tend to serve more transparent firms. Using the 2003 Survey of Small Business Finance (SSBF), we conduct two sets of tests. First, we test for the type of bank serving as the "main" relationship bank for small businesses with different firm and owner characteristics. Second, we test for the strength of these main relationships by examining the probability of multiple relationships and relationship length as functions of main bank type and financial fragility, as well as firm and owner characteristics. The results are often not consistent with the conventional paradigm, perhaps because of changes in lending technologies and deregulation of the banking industry.
Most of the studies available on relationship lending focuses on the benefits for borrowers and neglects those achievable for banks. In particular, empirical studies on the benefits achieved for banks in terms of loans recovery rate, in connection with loss given default rate, are very few. In contrast, choosing the best approach to managing loans is crucial in the current credit market considering the high deterioration in quality of bank loans.This paper empirically tests whether the banks more oriented towards a relationship lending approach report a lower level of loss given default. Bank size and functional distance are used to measure the relationship lending approach in banks.This paper takes into account the Italian banking system and the effectiveness of their debt recovery processes during the 2005-2008 period. The data has been collected by ABI Banking Data and Bank of Italy. The empirical analysis highlights that banks more oriented in the relationship lending model have a greater capacity to recover bad loans. These findings have some managerial implications.
Recent empirical findings by Sapienza (2004), Micco and Panizza (2006) and Berger et al. (2008) have pointed to the correlation between bank ownership and lending behavior. We formulate and test hypotheses on the role played by the type of bank ownership (Independent and Dependent) and by the functional distance of the bank in influencing the Loss Given Default Rate (LGDR). This paper refers to data on the Italian Banking System. The empirical results are consistent with our hypotheses on the LGDR and control variables relation. We provide evidence that the LGDR is positively related to the distance between the bank headquarters and the borrower’s location. Besides, the resulting data support the idea that Independent Banks present a low LGDR. Finally, our findings indicate that market power and LGDR are negatively related.
Decentralized versus centralized banking systems? Geographic market orientation and the -location of decision-making as characteristics for a classification of banking systems. In the light of global financial integration many authors expect a homogenization of financial systems and thus the well-established classification in bank and capital market-based systems is questioned. We conceptualised an alternative classification in decentralized and centralized banking and apply this classification to the German banking system. Banking groups differ clearly in terms of their spatial distribution of employees, which we use as an approximate indicator for geographic market orientation. It was also observed that decentralized banks increased their share in the credit market at the expense of centralized banks and granted the majority of corporate loans. Compared internationally the German banking system is presumably very decentralized, however more research is needed to assess the state and influence of banking systems' spatial organisation on a cross country base.
The European Commission criticized cooperation among savings and cooperative banks for potentially anticompetitive effects. Using an industrial economics model of banks taking deposits and giving loans, we look at regional demarcation as one of such cooperative practices. We study two adjacent markets comprising one savings or cooperative bank that focuses on one market and one private commercial bank serving both. We acknowledge that savings and cooperative banks have atypical objective functions. We find that abolishing regional demarcation does increase total loan volume. Due to their partially nonprofit objectives, savings or cooperative banks improve market performance, and they do better without the regional demarcation that shields the private commercial bank from aggressive competition.
In this article we present the Bayesian estimation of spatial probit models in R and provide an
implementation in the package spatialprobit. We show that large probit models can be estimated with
sparse matrix representations and Gibbs sampling of a truncated multivariate normal distribution with
the precision matrix. We present three examples and point to ways to achieve further performance
gains through parallelization of the Markov Chain Monte Carlo approach.
We construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By using this indicator we show that the level of local financial development enhances the probability an individual starts his own business, increases the creation of new firms and the level of competition, eases liquidity constraints, and promotes growth of firms. As predicted by theory, these effects are stronger for smaller firms than for larger ones, which can more easily raise funds outside of the local area. Overall, the results suggest local financial development is an important determinant of the economic success of an area.
A recurrent element in the debate on the future of the German banking system is the claim that Germany is “overbanked”, as a result of which its banking industry suffers from structurally induced weakness in its profitability. This thesis does not stand up to any thoroughgoing analysis. According to the findings of empirical studies, the productivity of German banks is above average by international standards. The relatively low level of profitability is due not to the banks being too small or to their cost structures being too inefficient, but to the relatively low margins they are able to achieve as a result of the intense competition between them. This is of benefit to consumers, who pay considerably less for banking services than in countries such as Italy or the UK. In view of this (positive) market effect, it is difficult to understand why so many people should be raising their voices to demand changes to the organisational and regulatory framework which would allow a greater consolidation of the German banking market, especially as it has so far not been possible to demonstrate any connection between the size of banking institutions and profitability in the sector. The question needs to be asked – and that not only in view of the most recent crisis on the financial markets – whether the capital market orientated approach is the right one to pursue when determining the regulatory structure of the banking sector. The way the rating agencies, with their less than transparent methodologies, differentiate in their assessments between the various elements of the value chain in banking, the effects of market-orientated accounting practices in terms of high volatility in the reporting of results, and dysfunctional corporate governance all give rise to doubts about the advisability of such an orientation. The recent financial crisis has served only to reinforce these doubts. What consequences in terms of structural and regulatory models for the banking sector can be drawn from the current turbulences on the markets will be discussed in a further article in the next issue of this magazine.
The aim of this study is to confirm the presence of a relationship between the territory and the bank, verifying empirically the effect of the functional distance (headquarters-branches distance) on bank performance. To support this hypothesis we also test the effects that the bank size, the intensity of labour factor, the bank type (and its lending features) have on bank performance. We aim to shed light on the impact of bank size on the link between distance and performance. The analysis is based on a sample of almost 3,000 Italian banks over the period 2005-2008, and demonstrates the existence of a positive relationship between functional distance, foreign control, institutional type of intermediary and bank performance. In the model the control variables used take into account local market competition, relationship lending features and banking business structure. The robustness checks, conducted excluding the outlier observations and using other variables, confirm the negative effect of the functional distance on bank performance and, consequently, the importance of relationship lending to SMEs. Finally, on the basis of these outcomes, some managerial implications are proposed related to the intermediary size.
Banking is going through a revolution that is radically altering the way banks work and the way customers use them. It is a revolution driven by global competition and enabled by technology. Unlike the back-room developments of previous decades, contemporary restructuring is directly affecting the network of bank branches and opportunities customers have to interact with them. Today virtually all retailing banks are seeking ways of reducing their extensive and costly network of branches and experimenting with alternative means of interacting with customers. Many of the difficulties of deciding what branches to close relate to predicting the impact of such closures on remaining parts of the bank’s network. The aim of this paper is to illustrate the application of a GIS-based spatial interaction model designed to help banks make that decision. Applied in the New Zealand context, it draws attention to some of the opportunities, as well as difficulties, a spatial interaction model creates in assessing the consequences of closing branches, both for the bank itself and for the wider community.
How do banks react to increased competition?Recent banking theory offers conflicting predictions about the impact of competition on bank orientation - i.e., the choice of relationship based versus transactional banking.We empirically investigate the impact of interbank competition on bank branch orientation.We employ a unique data set containing detailed information on bank-firm relationships.We find that bank branches facing stiff local competition engage considerably more in relationship-based lending.Our results illustrate that competition and relationships are not necessarily inimical.
We study the effects of physical distance on the acquisition and use of private information in informationally opaque credit
markets. Using a unique data set of all loan applications by small firms to a large bank, we show that borrower proximity
facilitates the collection of soft information, leading to a trade-off in the availability and pricing of credit, which is
more readily accessible to nearby firms albeit at higher interest rates ceteris paribus. Analyzing loan rates and firms’ decision to switch lenders provides further evidence for banks’ strategic use of private
information. However, distance erodes our lender’s ability to collect proprietary intelligence and to carve out local captive
markets, suggesting that the requisite soft information is primarily local.
Regional scientists frequently work with regression relationships involving sample data that is spatial in nature. For example, hedonic house-price regressions relate selling prices of houses located at points in space to characteristics of the homes as well as neighborhood characteristics. Migration, commodity, and transportation flow models relate the size flows between origin and destination regions to the distance between origin and destination as well as characteristics of both origin and destination regions. Regional growth regressions relate growth rates of a region to past period own- and nearby-region resource inputs used in production.Spatial data typically violates the assumption that each observation is independent of other observations made by ordinary regression methods. This has econometric implications for the quality of estimates and inferences drawn from non-spatial regression models. Alternative methods for producing point estimates and drawing inferences for relationships involving spatial data samples is the broad topic covered by spatial econometrics. Like any sub-discipline, spatial econometrics has its quirks, many of which reflect influential past literature that has gained attention in both theoretical and applied work.This article asks the question -- what should regional scientists who wish to use regression relationships involving spatial data in an effort to shed light on questions of interest in regional science know about spatial econometric methods?
In recent years, the industrial organization of the banking system has received a large amount of attention. In particular, it is generally viewed that the size distribution of the banking sector has changed where it is dominated by a small number of large institutions. In this paper, we develop a model of imperfectly competitive banks that differ in terms of the size of their deposit base. Such differences are important for aggregate credit market activity and the effects of monetary policy. Notably, we explain how the optimal size distribution of the banking system involves trade-offs from distortions in credit markets due to imperfect competition across banking markets. Second, the effects of monetary policy on credit market activity are weaker in an economy dominated by a small number of large banks. Empirical analysis examining the role of concentration among the current members of the European Monetary Union is consistent with the predictions of the model.
This article discusses the effects of small banks on economic growth. We first theoretically show that small banks operating at a regional level can spur local economic growth. As compared with big interregional banks, small regional banks are more effective in promoting local economic growth, especially in regions with lower initial endowments and severe credit rationing. We then test the model predictions using a sample of German banks and corresponding regional statistics. We find that small regional banks are more important funding providers in regions with low access to finance. The empirical results support the theoretical hypotheses. © 2014 © The Authors 2014. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved. For Permissions, please email: [email protected]
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Purpose
The purpose of this paper is to provide the first empirical study of external economies (agglomeration economies) in the banking industry.
Design/methodology/approach
The author extends a standard specification of banking costs to control for community and market characteristics.
Findings
Banks' costs are a decreasing function of the number of rival banks and an increasing function of market population. Estimated magnitudes of these effects, modest at the bank level, are large in aggregate. Multimarket operation of rival banks is also important.
Originality/value
These findings suggest a previously unrecognized cost‐side benefit of structure‐based antitrust policies, and have additional implications for public policy toward banking structure, as well as calling for a re‐interpretation of previous studies of scale economies, cost efficiency, and price‐cost margins in banking.
This paper examines the association between consolidation and changes in levels of bank branching as measured by changes in the number of bank branches per capita. Using a specially-constructed data set, we address this issue as well as how this relationship varies with the type of consolidation and initial regulatory, competitive, and market conditions. We find that merges where merging institutions have branch networks which overlap within a ZIP code (within-ZIP merger) are strongly associated with a reduction in offices per capita in that ZIP code. This result is robust across time and holds in both rural and urban areas. The findings also suggest that, contrary to popularly held views, consolidation is not unambiguously negatively associated with changes in the number of banking offices per capita. Neither within-market-but-not-within-ZIP mergers nor out-of-market mergers consistently show such a relationship.We also find that the relationships between within-ZIP and within-market-but-not-within-ZIP mergers and changes in the number of bank offices per capita are more negative in low-income neighborhoods than in other neighborhoods. However, because most states now have unrestricted branching and because savings associations are less prevalent and financially healthier than in the past, these findings may not be indicative of future branching patterns.
I test the implications of borrower–lender physical and organizational distance for the loan default rate of Italian firms. I use a macro data set for the 1997–2011 period, which allows me to consider the effects of the international financial crisis too. I find that physical distance impedes information collection and monitoring and is inversely linked to credit quality. I also find that hard information can mitigate the adverse effects of physical distance on financing enterprises, showing the increasing importance of technological changes. Finally, I find evidence of the impact of organizational distance on default rates in less developed regions.
Of all of the EU member states, Germany has the largest banking market. However, not all German banking institutions necessarily face fierce competition. Because the industry is highly fragmented, strict separation of the three existing banking pillars may impede competition, with negative effects on financial stability. We assess the competitive stances of 1,888 universal banks from 2001 to 2009 by using the Panzar–Rosse revenue test. We find evidence that measuring competition at an average country level does not necessarily generate valid evaluations of fragmented markets. In addition, we find no clear indication that either the particular objectives of cooperative and savings banks or the legal protection of these institutions impedes competition or discriminates against private banks. Therefore, as long as the relationship between competition and financial stability is dubious, the overall effect and the social costs or benefits of political measures that influence the structure of the German banking market are at least questionable.
We exploit a comprehensive new panel dataset on retailbank branch locations in 233 neighborhoods (local markets) in the metropolitan area of Antwerp to describe (i) how between 1991 and 2006 the patterns of bank presence, entry, exit and choice deeply evolve and (ii) whether and how changes in these “on the ground” patterns systematically diverge across Antwerp’s different, highly segregated neighborhoods. We show that over the 15-year period under study entry and exit dynamics substantially intensify, the level change in branch desert grows significantly, and bank choice markedly declines; and that between 1996 and 2001, these changes are robustly associated with the neighborhood average income. In doing so, we advance a new technique for generating spatial measures that both minimize the discretization bias and can be reliably linked to neighborhoods. We demonstrate that the resulting measures are indeed more precise than traditional count measures.
This paper investigates SME financing in Italy. The literature distinguishes between two main different lending technologies (LTs) for SMEs: transactional and relationship LTs. We find that banks lend to SMEs by using both LTs together, independently of the size and proximity of borrowers. Moreover, we show that when soft information is taken into account in transactional (relationship) lending it increases (decreases) the probability of firms being credit rationed. These results support the view that LTs can be complementary, but reject the hypothesis that substitutability among LTs is somehow possible for outsiders by means of hardening of soft information.
In this paper we assess the impact of multimarket contact of banks
on their market power by means of a simultaneous equation
model, in which the divergence of price from marginal cost is a
function of multimarket linkages. The model is estimated using
aggregate data from the Italian regions for the years 1997–2009.
Our results show that multimarket contact is positively and
significantly correlated to the market power index, and is also
connected to both home and non-home market concentration. The
evidence is robust to changes in model specification and multimarket
contact measures, and supports the idea that firms which
have a greater amount of contact are more likely to collude.
A major policy issue is whether troubles in the banking system re ected in the bankruptcy of Lehman Brothers in September 2008 have spurred a credit crunch and, if so, how and why its severity has been different across markets and firms. In this paper, we tackle this issue by looking at the Italian case. We take advantage of a dataset on a large sample of manufacturing firms, observed quarterly between January 2008 and September 2009. Thanks to detailed information about loan applications and lending decisions, we are able to identify the occurrence of a credit crunch in Italy which has been found to be harsher in provinces with a large share of branches owned by distantly-managed banks. Inconsistent with the flight to quality hypothesis, however, we do not find evidence that economically weaker and smaller firms suffered more during the crisis period than during tranquil periods. By contrast, we find that large and healthy firms, the segment of borrowers which, according to theoretical predictions, are cream-skimmed by distantly-headquartered banks, were more intensely hit by the credit tightening in functionally distant credit markets than in the ones populated by less distant banks. This last result is consistent with the hypothesis of a home bias on the part of nationwide banks.
This paper examines an apparent anomaly that lies at the heart of processes of financial exclusion within Britain. Given that the branch networks of banks and building societies have shrunk in size by about one-third since 1989, a period during which the Government has launched a wide-ranging set of policies to tackle financial exclusion, why is it that the issue of branch closure has been neutralised as a political issue? After providing evidence to show the extent of branch closure in Britain and illustrating the ways in which geographical research in particular has drawn attention to the nature of this problem, we look at the way the issue of physical access to financial services has been discursively and politically marginalised. We undertake a detailed history of public policy in the area, and the ways in which research funded by industry bodies and Government departments has been used and framed to build a pro-market, neoliberal policy programme that constructs branch closures as natural and inevitable.
This paper provides new evidence on the role of distance between banks and borrowers in bank lending. We argue that delegated monitors face higher costs of collecting information about nonlocal borrowers due to the difficulty of obtaining and verifying soft information over distances. Further, the higher information collection and monitoring costs associated with distance should be reflected in loan terms. Empirically, loan spreads are increasing in the distance between borrowers and lenders. Finally, banks are more likely to include covenant provisions or require collateral when lending to borrowers located far away.
Over the last 20 years, the Spanish banking industry has undergone a profound reshaping in several respects. One of the factors that has allowed this has been the geographic expansion of most savings banks into other regions outside their regions of origin that has been taking place at a significant pace since 1989. Almost simultaneously, the Spanish economy has grown at remarkable annual rates, a growth pattern that came to an abrupt halt in 2008. Under these circumstances, this paper analyzes the geographic expansion patterns of Spanish financial institutions during the postderegulation period. This goal extends previous analyses in two main ways: by considering a broader set of variables affecting bank branch location and by using a quantile regression in order to obtain results that go beyond conditional mean models. Results indicate that 1) location and geographic diversification patterns vary mostly across firms and by type of firm; 2) the evaluation of growth and financial development at municipal level indicates that some communities have experienced financial exclusion; and 3) it is difficult to establish a linear relationship to explain bank branch geographic diversification strategies
Burgstaller J. Bank office outreach, structure and performance in regional banking markets, Regional Studies. This paper studies bank penetration, market structure and banking conduct across Austrian districts. Neither differences in market concentration nor in the activity of out-of-market banks can explain the regional dispersion of interest rates, bank profitability and efficiency. A higher bank density is connected to more competition and lower mark-ups, and indicates more efficient banking markets as well. As efficiency is the main determinant of bank profits and competition seems to be (mildly) indicative of stronger regional growth, the preservation of a fair regional bank outreach appears to be an important policy target.
Burgstaller J. 区域性银行市场中银行的外部性拓展、结构以及绩效，区域研究。本文研究了澳洲银行的渗入、市场结构以及银行行为。 市场集中或者市场外的银行活动都无法解释利率、银行收益以及效率的区域性差异。 较高的银行密度与激烈的竞争及较低的加价相关。同时表明存在更加有效的银行市场。正如效率是决定银行获益的主要因素, 竞争反映出增强的区域增长，维持银行进行公平的区域性拓展似乎是重要的政策目标。
银行拓展 地区性市场 市场结构 竞争 银行绩效 区域发展
Burgstaller J. Le rayon d'action des guichets bancaires, la structure et les résultats des marchés bancaires régionaux, Regional Studies. Cet article cherche à étudier la pénétration bancaire, la structure du marché et le comportement des banques à travers les districts autrichiens. Ni les différences de la concentration du marché, ni la variation de l'activité bancaire hors marché n'expliquent ni la dispersion des taux d'intérêt, ni la profitabilité, ni l'efficacité des banques. Une densité des banques plus élevée se rapporte à une augmentation de la concurrence et aux marges moins élevées, et indique aussi des marchés bancaires plus efficaces. Etant donné que l'efficacité est le déterminant sine qua non des profits bancaires et que la concurrence semble (dans une certaine mesure) indiquer une croissance régionale plus forte, la pérennité d'un rayon d'action bancaire régional loyal semble être un objectif important de la politique.
Rayon d'action bancaire Marchés locaux Structure du marché Concurrence Résultats des banques Aménagement du territoire
Burgstaller J. Bankstellendichte, Marktstruktur und Performance in regionalen Bankenmärkten, Regional Studies. Die vorliegende Arbeit untersucht Bankendispersion, Marktstrukturen und Bankverhalten auf der Ebene von Bezirken in Österreich. Weder Unterschiede in der Marktkonzentration noch in der Dichte nicht bezirksansässiger Banken tragen zur Erklärung der Variation in Bankzinsen, Profitabilität und Effizienz bei. Eine höhere Bankendichte steht in Verbindung mit verstärkter Konkurrenz und niedrigeren Aufschlägen und ist auch ein Indiz für höhere Bankeneffizienz. Da Effizienz die Hauptdeterminante für die Gewinne der Banken darstellt und stärkerer Wettbewerb zwischen Banken positiv mit regionaler Entwicklung verbunden scheint, ist die Erhaltung einer gewissen Bankendichte durchaus ein erstrebenswertes wirtschaftspolitisches Ziel.
Bankstellendichte Lokale Märkte Marktstruktur Wettbewerb Bankenperformance Regionalentwicklung
Burgstaller J. Densidad, estructura y rendimiento de filiales bancarias en los mercados bancarios regionales, Regional Studies. En este artículo analizamos la penetración bancaria, la estructura del mercado y las operaciones bancarias en los distritos de Austria. Ni las diferencias en la concentración del mercado ni la actividad de los bancos fuera del mercado explican la dispersión regional de los tipos de interés, la rentabilidad y la eficacia de los bancos. Una densidad más alta de los bancos está relacionada con más competencia y menos márgenes e indica también mercados bancarios más eficientes. Puesto que la eficiencia es el principal determinante de los beneficios bancarios y la competencia parece ser un indicio (moderado) de un crecimiento regional más fuerte, el mantenimiento de una densidad bancaria regional justa parece ser un objetivo político importante.
Densidad bancaria Mercados locales Estructura del mercado Competencia Desempeño bancario Desarrollo regional
The provision of financial services in rural Australia is a significant public policy issue, reflected in the high level of media and political interest in the recent spate of branch closures. There are, however, many aspects of the current debate regarding the delivery of financial services to rural communities that are, at best, less than ideal and, at worst, erroneous. Using telephone directories for New South Wales, non-metropolitan bank branch listings for the period 1981 to 1998 were collated. A recategorisation of these data according to the Rural, Remote and Metropolitan Areas classification reveals, amidst a spatial realignment of financial service provision, that rural and remote New South Wales have been disproportionately affected by a relatively recent and concerted withdrawal of services. The research demonstrates that corporate-level responses to increased competition within the financial system are significantly more important in deciding rural access to banking services than local and regional population trends. Indeed, two-thirds of rural localities that have lost branches had experienced healthy population growth during the study period. In the wake of the post-deregulation reconfiguration of the bank branch network, the socio-economic marginalisation of rural communities is being compounded, a process of ‘financial exclusion’ recognised in other parts of the developed world.
Financial exclusion refers to those processes by which individuals and households face difficulties in accessing financial services. Economic geography was an important catalyst in developing research into processes of financial exclusion in the 1990s, focusing initially on the geographies of physical access. This research was motivated by a concern with the equity effects of financial systems, and identifying a general process of branch closure across industrial economies. The paper contains an analysis of the changing geographies of bank and building society closure in Britain between 1995 and 2003 and reveals that closures continue to be disproportionately concentrated within poorer areas, yet the geography of financial infrastructure has been written out of UK financial exclusion policy. The paper concludes by arguing that policy needs to take greater account of the uneven geography of retail financial services production and consumption.
The paper examines the withdrawal of branches from local communities by financial institutions. It assesses whether mutually owned building societies are more adept than the former societies that have converted to public limited companies (plcs), or the high street banks, in serving disadvantaged communities. The paper shows that during the mid-1990s: mutual building societies were more likely than former societies that have converted to plcs to maintain their branch network; mutual societies were less likely than banks to withdraw from socially deprived locations and more likely to open branches in such places; differences between mutual societies and convertors are less marked, but mutual institutions appear less likely than convertors to close branches in deprived communities. Among the remaining mutual building societies there are differences of perspective, with more commercially-minded societies less positive than socially-concerned mutuals about the need to maintain or even expand branches in disadvantaged areas.
We formulate and test hypotheses about the role of bank type – small versus large, single-market versus multimarket, and local versus nonlocal banks – in banking relationships. The conventional paradigm suggests that “community banks” – small, single-market, local institutions – are better able to form strong relationships with informationally opaque small businesses, while “megabanks” – large, multimarket, nonlocal institutions – tend to serve more transparent firms. Using the 2003 Survey of Small Business Finance (SSBF), we conduct two sets of tests. First, we test for the type of bank serving as the “main” relationship bank for small businesses with different firm and owner characteristics. Second, we test for the strength of these main relationships by examining the probability of an exclusive relationship and main bank relationship length as functions of main bank type and financial fragility, as well as firm and owner characteristics. The results are often not consistent with the conventional paradigm, perhaps because of changes in lending technologies and deregulation of the banking industry.
This paper examines the firms’ credit availability during the 2007-2009 financial crisis using a dataset of 5,331 bank-firm relationships provided by borrowers’ credit folders of three Italian banks. It aims to test whether a strong lender-borrower relationship can produce less credit rationing for borrowing firms even during a credit crunch period. The results show that exclusivity of the relationship can mitigate the firm credit rationing. We also verify the influence of lending organizational structure during crisis. A new measure of distance in lending technologies has been introduced: the hierarchical distance calculated as the distance between the branch that originates the loan and the location of the hierarchical level responsible for financing decision. Our findings document a negative impact of distance on credit availability, consistent with the idea that proximity facilitates the transmission of soft information.
Recent empirical findings by Sapienza (2004), Micco and Panizza (2006) and Berger et al. (2008) have pointed to the correlation between bank ownership and lending behavior. We formulate and test hypotheses on the role played by the type of bank ownership (Independent and Dependent) and by the functional distance of the bank in influencing the Loss Given Default Rate (LGDR). This paper refers to data on the Italian Banking System. The empirical results are consistent with our hypotheses on the LGDR and control variables relation. We provide evidence that the LGDR is positively related to the distance between the bank headquarters and the borrower’s location. Besides, the resulting data support the idea that Independent Banks present a low LGDR. Finally, our findings indicate that market power and LGDR are negatively related.
The causes and consequences of financial exclusion have become a policy concern in Britain in recent years. This paper analyses policy discourses around financial exclusion and considers the (social and economic) geographical issues surrounding one particular policy response – universal banking services. It examines the policy background which led to the introduction of these services, and the institutional role of the Post Office, before discussing their potential social and spatial consequences.
Since the period of bank deregulation in the 1980s, deferred deposit loan operations, better known as payday lenders, have become commonplace in the landscapes of many American cities. At the same time, traditional banking facilities have become less common, especially in the inner city. Growing disparities in the type of and accessibility to credit in the inner city has generated calls for greater regulation to curb practices by payday lenders that critics claim disproportionately affect poor and minority consumers. Payday lenders argue that they serve communities neglected by traditional banks. This article analyzes the site-location strategies of banks and payday lenders in metropolitan Louisiana, and in Cook County, Illinois, and finds that disenfranchised neighborhoods are simultaneously targeted by payday lenders and neglected by traditional banks. The implications these findings have for public policy and for ongoing discourses on the urban condition, race, and class are briefly discussed.
This paper yields a rationale for why subsidized public banks may increase regional welfare in a financially integrated economy. We present a model with credit rationing and heterogeneous regions in which public banks prevent a capital drain from poorer to richer regions by subsidizing local depositors, for example, through public guarantees. Under some conditions, cooperative banks can perform the same function without any subsidies; however, they may be crowded out by public banks. We also discuss the influence of the political structure on the emergence of public banks in simple political-economy settings and the role of interregional mobility.
We investigate the impact of banking deregulation during the 1990s on consumer welfare. We estimate a spatial model of consumer demand for retail bank deposits that explicitly accounts for consumer disutility from distance traveled. This is important given the substantial changes in banks' branch networks observed in the data. Our model indicates that cross-price elasticities between banks whose branches are close to consumers ('close' banks) are larger than those between 'far' banks and more than double the cross-price elasticity of 'close' banks with respect to 'far' banks. We distinguish between thrifts and other banks and find that within-thrift competitive effects are stronger than within-bank effects or those between thrifts and banks. We use our estimates to predict the effect of changes in market structure on consumer welfare following the branching deregulation of the Riegle-Neal Act of 1994. Our results indicate that the median household gained around $60 per year from the changes. Approximately two thirds of the gains come from within-market changes in market structure. The gains were greater in markets with high initial numbers of banks than elsewhere.
We survey the extant literature on the effects of both a bank's organizational structure and the physical distance separating
it from the borrower on lending decisions. The available evidence suggests that banks engage in spatial pricing, which can
be rationalized by the existence of transportation costs and information asymmetries. Moreover, their ability to price-discriminate
seems to be bounded by the reach of the lending technology of surrounding competitors. It is not entirely clear from an empirical
viewpoint that small, decentralized banks have a comparative advantage in relationship lending. This advantage is motivated
theoretically by the existence of agency and communication costs within a bank. However, differences in data and methodology
may explain the inconclusive evidence.
A growing body of research focuses on banking organizational issues, emphasizing the culties encountered by hierarchically organized banks in lending to borrowers/projects with high intensity of soft information. However, as the two extreme cases of hierarchical and non-hierarchical organizations are typically contrasted, what actually shapes the degree of hierarchy and how to measure it remain fairly vague. In this paper we compare bank size and distance between bank's branches and headquarter as possible sources of organizational frictions. In particular, we study the impact of distance and bank size on the firms' likelihood of introducing innovations and financing constraints on a sample of Italian SMEs. Our results show that firms located in provinces where the local banking system is functionally distant are less inclined to introduce innovations and are more likely to be credit rationed. Conversely, we find that the market share of large banks is only rarely statistically significant and when it is, the economic impact on the probability of introducing innovation and credit rationing is appreciably smaller than that of functional distance.
We document a substantial and accelerating increase in the distance between small business borrowers and their lenders during the 1990s, based on a large random sample of U.S. Small Business Administration loans. Importantly, this increase was disproportionately large for borrowers located in low-income and minority neighborhoods. These phenomena are coincident in time with the adoption of credit scoring models, and we find indirect evidence consistent with this link. Our results suggest that automated lending processes have facilitated lender entry into local markets and have, at the margin, increased small business credit access in historically underserved markets.
How do banks react to increased competition? Recent banking theory significantly disagrees regarding the impact of competition on bank orientation—i.e., the choice of relationship-based versus transactional banking. We empirically investigate the impact of interbank competition on bank branch orientation. We employ a unique data set containing detailed information on bank–firm relationships. We find that bank branches facing stiff local competition engage considerably more in relationship-based lending. Our results illustrate that competition and relationships are not necessarily inimical.
In this study, we test whether regional growth in 11 European countries depends on financial development and suggest the use of cost- and profit-efficiency estimates as quality measures of financial institutions. Contrary to the usual quantitative proxies of financial development, the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds. An improvement in bank efficiency spurs five times more regional growth then an identical increase in credit does. More credit provided by efficient banks exerts an independent growth effect in addition to direct quantity and quality channel effects.
Recent empirical findings by and document a U-shaped effect of market concentration on relationship lending which cannot be easily accommodated by the investment and strategic theories of bank lending orientation. In this paper, we suggest that this non-monotonicity can be explained by looking at the organizational structure of local credit markets. We provide evidence that marginal increases in interbank competition are detrimental to relationship lending in markets where large and out-of-market banks are predominant. By contrast, where relational lending technologies are already widely in use in the market by a large group of small mutual banks, an increase in competition may drive banks to further cultivate their extensive ties with customers.
Theories based on incomplete contracting suggest that small organizations have a comparative advantage in activities that make extensive use of “soft” information. We provide evidence consistent with small banks being better able to collect and act on soft information than large banks. In particular, large banks are less willing to lend to informationally “difficult” credits, such as firms with no financial records. Moreover, after controlling for the endogeneity of bank-firm matching, we find that large banks lend at a greater distance, interact more impersonally with their borrowers, have shorter and less exclusive relationships, and do not alleviate credit constraints as effectively.
Market size structure refers to the distribution of shares of different size classes of local market participants, where the sizes are inclusive of assets both within and outside the local market. We apply this new measure of market structure in two empirical analyses of the US banking industry to address concerns regarding the effects of the consolidation in banking. Our quantity analysis of the likelihood that small businesses borrow from large versus small banks and our small business loan price analysis that includes market size structure as well as conventional measures yield very different findings from most of the literature on bank size and small business lending. Our results do not suggest a significant net advantage or disadvantage for large banks in small business lending overall, or in lending to informationally opaque small businesses in particular. We argue that the prior research that excluded market size structure may be misleading and offer some likely explanations of why our results differ.
This paper analyzes determinants of the incidence of relationship lending. We explore self-assessments of German universal banks with respect to their Hausbank status in corporate lending and relate loan contract and borrower characteristics to this attribution. The analysis shows that Hausbank status is positively related to better access to information and the bank's influence on borrower management. While the duration of the bank–borrower relationship is not related to Hausbank status, banks are more likely to be Hausbanks when their share of borrower debt financing is higher and when the number of bank relationships is lower. We also find that the likelihood of observing a Hausbank relationship is non-monotonically related to bank concentration in local debt markets. For low and intermediate values of concentration, Hausbank relationships become more likely as competition increases. This contradicts the conjecture that relation lending requires monopolistic market structures. Nevertheless, in highly concentrated markets, less competition fosters Hausbank relationships.