Bank mergers, competition and liquidity
نویسندگان
چکیده
We provide a model of the impact of bank mergers on loan competition, individual reserve management and aggregate liquidity risk. Banks hold reserves against liquidity shocks, refinance in the interbank market and compete in a differentiated loan market. A merger creates an internal money market that induces financial cost advantages and may increase reserve holdings. We assess the liquidity risk and the expected liquidity needs for each bank and for the system, and relate them to the degree of competition in the loan market. Plausible scenarios emerge in which a more competitive environment is beneficial for the liquidity situation of the interbank market. JEL Classification: D43, G21, G28, L13
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