Publication: Bank Concentration and Crises
Loading...
Published
2003-05
ISSN
Date
2014-05-09
Author(s)
Editor(s)
Abstract
The authors study the impact of bank concentration, regulations, and national institutions on the likelihood of suffering a systemic banking crisis. Using data on 79 countries over the period 1980-97, they find that crises are less likely (1) in more concentrated banking systems, (2) in countries with fewer regulatory restrictions on bank competition and activities, and (3) in economies with better institutions, that is, institutions that encourage competition and support private property rights.
Link to Data Set
Citation
“Levine, Ross; Beck, Thorsten; Demirguc-Kunt, Asli. 2003. Bank Concentration and Crises. Policy Research Working Paper;No. 3041. © http://hdl.handle.net/10986/18208 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication Climate and Social Sustainability in Fragility, Conflict, and Violence Contexts(Washington, DC: World Bank, 2026-01-07)Climate change is widely recognized as a driver of violent conflict, but its broader social effects remain less understood. Ignoring these dimensions risks a vicious cycle where climate policies might undermine socially just adaptation. Evidence is still limited on how climate shocks influence political participation, trust, or migration. This paper helps fill that gap by examining links between climate change, conflict, and social sustainability, with a focus on inclusion, resilience, cohesion, and legitimacy. Using secondary data from 2019–24, the study applies simple correlation-based methods to test three hypotheses on the nature, severity, and composition of these associations. The analysis combines multiple climate impact measures, new conflict classifications, recent social sustainability frameworks, and controls for population and geography. The results reveal strong correlations—not causation—between climate events and contexts of fragility, conflict, and violence. Climate impacts are most pronounced in both national and subnational conflict settings. The study also finds robust links between fragility, conflict, and violence and low levels of social sustainability, reflecting its role as both a driver and consequence of conflict. Some dimensions—such as violent events and insecurity—appear weaker in areas most affected by climate shocks. Two of the hypotheses are supported, and one remains inconclusive.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Institutional Capacity for Policy Implementation: An Analytical Framework(Washington, DC: World Bank, 2026-01-07)State capacity is an important prerequisite for policy implementation, yet at the country level it is difficult to measure, assess, and reform. This paper proposes a focus on institutional capacity: the ability of public institutions to implement the specific policy mandates for which they are responsible. Based on a review of existing literature, the paper defines the different dimensions that compose institutional capacity and groups them into two cross-cutting categories: organizational dimensions (personnel, financial resources, information systems, and management practices) and governance dimensions (transparency, independence, and accountability). The paper proposes measures for organizational and governance dimensions using existing data, shows intra-institutional variation of these measures within countries, and discusses how new data could be collected for better measurement of these concepts. Finally, the paper illustrates how the framework can be used to diagnose the sources of common problems related to weak policy implementation.Publication South Africa’s Fragmented Cities: The Unequal Burden of Labor Market Frictions(Washington, DC: World Bank, 2026-01-08)Using high-resolution administrative, census, and satellite data, this paper shows that South African cities are characterized by spatial mismatches between where people live and where jobs are located, relative to 20 global peers. Areas within 5 kilometers of commercial centers have 9,300 fewer residents per square kilometer than expected, which is 60 percent below the global median. Poor, dense neighborhoods are most affected. In Johannesburg, a 10-percentile increase in distance from the nearest business hub corresponds to a 3.7-percentile drop in asset wealth (a proxy of household wellbeing) and 4.9-percentile drop in employment. In Cape Town, the declines are 4.0 and 3.7 percentiles, respectively. Employment is 87 percent lower in the poorest decile than the richest in Johannesburg and 61 percent lower in Cape Town. These findings suggest that South Africa’s spatial organization of people and economic activity constrains agglomeration and reinforces inequality. This methodology provides a scalable and standardized data-driven framework to analyze spatial accessibility and agglomeration frictions in complex, data-constrained urban systems.Publication Investment in Emerging and Developing Economies(Washington, DC: World Bank, 2026-01-07)The world faces a pressing challenge to meet key development objectives amid slowing growth and rising macroeconomic and geopolitical risks. With the number of job seekers rising rapidly, infrastructure shortfalls continuing to be large, and climate costs mounting, the case for a significant investment push has never been stronger. Yet the capacity to respond in many emerging markets and developing economies has eroded. Since the global financial crisis, investment growth has slowed to about half its pace in the 2000s, with both public and private investment weakening. Foreign direct investment inflows—a critical source of capital, technology, and managerial know-how—have also fallen sharply and become increasingly concentrated, leaving low-income countries with only a marginal share. The risks of further retrenchment are significant, as trade tensions, policy uncertainty, and elevated debt levels continue to weigh on investment. Reigniting momentum will require ambitious domestic reforms to strengthen institutions, rebuild macro-fiscal stability, and deepen trade and investment integration—the foundations of a supportive business climate. At the same time, international cooperation is indispensable. A renewed commitment to a predictable system of cross-border trade and investment flows, combined with scaled-up financial support and sustained technical assistance, is essential to help emerging markets and developing economies—especially low-income countries and economies in fragile and conflict situations—bridge financing gaps and implement the domestic reforms needed to restore investment as an engine of growth, jobs, and development.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Finance, Financial Sector Policies, and Long-Run Growth(World Bank, Washington, DC, 2008-01)The first part of this paper reviews the literature on the relation between finance and growth. The second part of the paper reviews the literature on the historical and policy determinants of financial development. Governments play a central role in shaping the operation of financial systems and the degree to which large segments of the financial system have access to financial services. The paper discusses the relationship between financial sector policies and economic development.Publication Finance, Financial Sector Policies, and Long-Run Growth(World Bank, Washington, DC, 2008)In this paper, authors first review the literature on the relation between finance and growth. Theory provides ambiguous predictions concerning the question of whether financial development exerts a positive, causative impact on long-run economic growth. The second part of this paper reviews the literature on the historical and policy determinants of financial development. Governments play a central role in shaping the operation of financial systems and the degree to which large segments of the financial system have access to financial services. The authors discuss the relationship between financial sector policies and economic development. The remainder of the paper proceeds as follows. Sections one and two review theory and evidence on the relation between finance and growth. Section three turns to an examination of financial sector policies, and section four concludes.Publication Finance in Africa - Achievements and Challenges : Finance in Africa - Achievements and Challenges(2009-08-01)In spite of shallow financial markets, Sub-Saharan Africa will not escape the repercussions of the global financial crisis. The global turmoil threatens the progress Sub-Saharan Africa has made in financial sector deepening and broadening over the recent years and underlines the importance of continuing and deepening the necessary institutional reforms. In this context it is important to define the role of government in expanding financial sectors in a sustainable and market-friendly manner. Foreign banks have brought more benefits than risks for their host economies in Sub-Saharan Africa, but are certainly not a panacea and not a substitute for institutional and policy reform. The profile of foreign banks, however, has changed, with more and more regional banks emerging. This trend toward regional integration is promising as it might allow the small African financial system to reap benefits from scale economies, but it also requires regulatory and supervisory improvements and coordination across the region.Publication Small and Medium Enterprises, Growth, and Poverty : Cross-Country Evidence(World Bank, Washington, DC, 2003-12)The authors explore the relationship between the relative size of the small and medium enterprise (SME) sector, economic growth, and poverty using a new database on the share of SME labor in the total manufacturing labor force. Using a sample of 76 countries, they find a strong association between the importance of SMEs and GDP per capita growth. This relationship, however, is not robust to controlling for simultaneity bias. So, while a large SME sector is characteristic of successful economies, the data fail to support the hypothesis that SMEs exert a causal impact on growth. Furthermore, the authors find no evidence that SMEs reduce poverty. Finally, they find qualified evidence that the overall business environment facing both large and small firms-as measured by the ease of firm entry and exit, sound property rights, and contract enforcement-influences economic growth.Publication The Impact of Bank Regulations, Concentration, and Institutions on Bank Margins(World Bank, Washington, DC, 2003-04)This paper examines the impact of bank regulations, concentration, inflation, and national institutions on bank net interest margins using data from over 1,400 banks across 72 countries while controlling for bank-specific characteristics. The data indicate that tighter regulations on bank entry and bank activities boost net interest margins. Inflation also exerts a robust, positive impact on bank margins. While concentration is positively associated with net interest margins, this relationship breaks down when controlling for regulatory impediments to competition and inflation. Furthermore, bank regulations become insignificant when controlling for national indicators of economic freedom or property rights protection, while these institutional indicators robustly explain cross-bank net interest margins. So, bank regulations cannot be viewed in isolation. They reflect broad, national approaches to private property and competition.
Users also downloaded
Showing related downloaded files
Publication Better Jobs and Brighter Futures(World Bank, Washington, DC, 2020-12)In this paper, the authors present the evidence on why childcare matters for building human capital, look at the current status of childcare provision worldwide, including an estimate of the global gaps in access, and present specific actions countries can take to expand access to quality, affordable childcare for all families that need it, especially the most vulnerable. This paper was originally drafted prior to the Coronavirus 2019 (COVID-19) pandemic and has been updated to include new content, taking into account the unique challenges that the COVID-19 pandemic poses for families, children, governments, and the childcare industry, as well as the importance of investing in childcare to drive countries’ economic recovery. In section one the authors make the case for why childcare matters for building human capital and how it relates to a web of diverse issues that include women’s employment, family welfare, child development, business productivity, and the overall economy. In section two, the authors present the scope of the challenge worldwide, with projections of the unmet need for quality childcare and, ultimately, the size of the market opportunity. In section three the authors suggest five policy goals that all governments should work toward to ensure affordable, quality childcare for those families that need it. In section four, the authors lay out an agenda to better leverage existing resources and cross-sectoral opportunities, support country-level processes, and expand the research agenda. Detailed annexes are included at the end of the paper, which include additional research, guidance for countries, and specific policy and country examples that may be helpful in policy dialogue. These annexes can be used as standalone resources to go into more depth on specific topics.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Lights Off, Lights On: The Effects of Electricity Shortages on Small Firms(Published by Oxford University Press on behalf of the World Bank, 2019-11-09)Entrepreneurs in developing countries report that unreliable electricity imposes a serious constraint, yet little evidence exists on how blackouts impact the micro-firms that account for the majority of employment. This article estimates the effects of outages on small firms using original firm-level panel data and finds evidence of differential effects by firm size. Firms without employees experience large reductions in revenues and profits. Outages have no measurable effect on the output of firms with employees, where worker hours increase, weekly wages paid decrease, and the analysis fails to reject the null hypothesis that blackouts have no effect on (average firm-level) worker hourly wages.Publication Financial Sector Assessment : Republic of Korea(Washington, DC, 2014-06-01)The initial assessment under the Financial Sector Assessment Program (FSAP) was undertaken in 2003. The first Update mission (April 2013) assessed the observance of selected international standards and codes, and initiated discussions on a broad range of financial sector stability issues. In the case of each of the sector assessments new methodologies adopted since the global financial crisis were employed. The second mission (July 2013) completed its review, documented its assessment in a draft Aide-Memoire, and reviewed with the authorities the Aide-Memoire as well as draft technical notes covering a range of topics. The objectives of the FSAP were to review developments in the financial sector since the initial 2003 FSAP and in light of the lessons from the global financial crisis, assess and formulate recommendations related to financial stability and the financial sector oversight framework. This report presents main findings and recommendations.Publication Integrating Green and Gray(Washington, DC: World Bank and World Resources Institute, 2019-03-21)A new generation of infrastructure projects that harness the power of nature can help achieve development goals, including water security and climate resilience. In this report from the World Bank and World Resources Institute, both organizations are calling for green infrastructure, such as mangroves and wetlands, to play a bigger role in traditional infrastructure planning. Integrating nature into mainstream infrastructure systems can produce lower cost and more resilient services. This report guides developing country service providers and their partners on how to seize this opportunity. It reviews approaches and examples of how to integrate green infrastructure into mainstream project appraisal processes and investments.