Bank market power, in both loan and deposit markets, has important implications for credit provision and for financial stability. This article discusses these issues through the lens of a simple theoretical framework. On the asset side, banks choose the quality and quantity of loans. On the liability side, they may be subject to depositor runs whenever they offer demandable contracts. This structure allows us to review the literature on the role of market power for credit provision and stability and also highlight the interactions between the two sides of banks' balance sheets. Our approach identifies relevant channels that deserve further analysis, especially given the rising importance of bank market power for monetary policy transmission and the rise of the digital economy.

Market power in banking

Carletti, Elena;
2024

Abstract

Bank market power, in both loan and deposit markets, has important implications for credit provision and for financial stability. This article discusses these issues through the lens of a simple theoretical framework. On the asset side, banks choose the quality and quantity of loans. On the liability side, they may be subject to depositor runs whenever they offer demandable contracts. This structure allows us to review the literature on the role of market power for credit provision and stability and also highlight the interactions between the two sides of banks' balance sheets. Our approach identifies relevant channels that deserve further analysis, especially given the rising importance of bank market power for monetary policy transmission and the rise of the digital economy.
2024
2024
Carletti, Elena; Leonello, Agnese; Marquez, Robert
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4073216
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