15
Aug 2016

14:15 - 15:45
IWH Research Seminar

Why Are Big Banks Getting Bigger?

The U.S. banking sector has become substantially more concentrated since the 1990s, raising questions about both the causes and implications of this consolidation.

Who
Christoffer Koch  (Federal Reserve Bank of Dallas)
Where
IWH conference room

Personal details

Christoffer Koch is a research economist in the macroeconomics group of the Federal Reserve Bank of Dallas specializing in macroeconomics, money and banking. He joined the Dallas Fed in 2011. He obtained his undergraduate degree from the University of St. Andrews and received a MPhil and DPhil in economics from Oxford University.

The U.S. banking sector has become substantially more concentrated since the 1990s, raising questions about both the causes and implications of this consolidation. We address these questions using nonparametric empirical methods that characterize dynamic power law distributions in terms of two shaping factors – the reversion rates (a measure of crosssectional mean reversion) and idiosyncratic volatilities of assets for different size-ranked banks. Using quarterly data for subsidiary commercial banks and thrifts and their parent bank-holding companies, we show that the greater concentration
of U.S. bank-holding company assets is a result of lower mean reversion, a result consistent with policy changes such as interstate branching deregulation and the repeal of Glass-Steagall. In contrast, the greater concentration of both U.S. commercial bank and thrift assets is a result of higher idiosyncratic volatility, yet, idiosyncratic volatility of parent bank-holding company assets fell. This contrast suggests that diversification through non-banking activities has reduced the idiosyncratic asset volatilities of the largest bank-holding companies and affected systemic risk. (read more)

Ansprechpartner

Felix Pohle
Felix Pohle
Economist

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