Cooperative banking entails a typical trade-off. The small size, specialization and high correlation of customers’ credit risks are often considered typical weaknesses of local mutual banks. Nonetheless, these banks appear to be largely non-substitutable providers of loans to local economies, given their comparative advantages in screening, monitoring and enforcement with respect to other banks. We explore the idea that the solution of this trade-off is affected by the interplay between banks’ ownership structures and the competitive conditions of the markets in which they operate. Focusing on the banking market of the Italian province of Trento, characterized by a significant presence of cooperative banks and a variety of different competitive environments at the local level, we find that a heightened competition among mutual banks is not socially beneficial with respect to market conditions in which a mutual bank only competes with non-mutual banks. We find that mutual banks competing with each other show a lower ability to transform local savings into local loans, as well as a worse risk allocation.

Barbetta, G., Colombo, L. V. A., Colombo, S., Grillo, M., Intra-Competitiveness and Inter-Competitiveness Among Mutual Banks: the case of Trento, <<INTERNATIONAL REVIEW OF ECONOMICS>>, 2016; (N/A): N/A-N/A. [doi:DOI 10.1007/s12232-016-0249-0] [http://hdl.handle.net/10807/79194]

Intra-Competitiveness and Inter-Competitiveness Among Mutual Banks: the case of Trento

Barbetta, Gianpaolo
Primo
;
Colombo, Luca Vittorio Angelo
Secondo
;
Colombo, Stefano
Penultimo
;
Grillo, Michele
Ultimo
2016

Abstract

Cooperative banking entails a typical trade-off. The small size, specialization and high correlation of customers’ credit risks are often considered typical weaknesses of local mutual banks. Nonetheless, these banks appear to be largely non-substitutable providers of loans to local economies, given their comparative advantages in screening, monitoring and enforcement with respect to other banks. We explore the idea that the solution of this trade-off is affected by the interplay between banks’ ownership structures and the competitive conditions of the markets in which they operate. Focusing on the banking market of the Italian province of Trento, characterized by a significant presence of cooperative banks and a variety of different competitive environments at the local level, we find that a heightened competition among mutual banks is not socially beneficial with respect to market conditions in which a mutual bank only competes with non-mutual banks. We find that mutual banks competing with each other show a lower ability to transform local savings into local loans, as well as a worse risk allocation.
Inglese
Barbetta, G., Colombo, L. V. A., Colombo, S., Grillo, M., Intra-Competitiveness and Inter-Competitiveness Among Mutual Banks: the case of Trento, <>, 2016; (N/A): N/A-N/A. [doi:DOI 10.1007/s12232-016-0249-0] [http://hdl.handle.net/10807/79194]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10807/79194
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