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Risk, Concentration and Market Power in the Banking Industry: Evidence from the Colombian System (1997-2006)
Abstract

This paper examines the relationship between risk, concentration and the exercise of market power by banking institutions. We use monthly balance-sheet and interest rate data for the Colombian banking system from 1997 to 2006. The evidence shows that, in the face of high risk, banks transfer a larger share of risk to customers through higher intermediation margins. The result suggests that systemic risk acts as a “collusion” device for banks: while high concentration is not enough to have collusion, the true effects of high market concentration on interest rates’ mark-ups emerge when the system is under stress.

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Autores:
Tovar, Jorge; Jaramillo, Christian; Hernández, Carlos.
Palabras clave:
Banking, concentration, intermediation margins, market power, risk
Archivo:
Año:
2007
Mes:
Noviembre
Número:
27