Research Discussion Papers, Bank of Finland
No 17/2004:
The efficiency implications of financial conglomeration
Ville Mälkönen ()
Abstract: This paper studies the competitive and efficiency
implications of financial conglomeration driven by cost-efficiency gains in
monitoring credit and insurance customers. The analysis shows that
conglomeration is conducive to tougher competition in the credit market and
increases profit in insurance. The aggregate profit in the financial sector
does not increase, because the conglomerates pass the cost-efficiency gains
on to the borrowers in full. More competitive market for financial services
also reduces the aggregate risk in the financial markets, indicating that
capital requirements in both sectors should be lower in the presence of
financial conglomerates.
Keywords: financial conglomerates; banking; insurance; capital regulation; (follow links to similar papers)
JEL-Codes: G21; G22; G38; L40; (follow links to similar papers)
34 pages, July 18, 2004
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- This paper is forthcoming as:
-
Mälkönen, Ville, 'Financial conglomerates and monitoring incentives', Journal of Financial Stability.
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