Bank Networks and Systemic Risk: Evidence from the National Banking Acts
American Economic Review
vol. 109,
no. 9, September 2019
(pp. 3125-61)
(Complimentary)
Abstract
The National Banking Acts (NBAs) of 1863–1864 established rules governing the amounts and locations of interbank deposits, thereby reshaping the bank networks. Using unique data on bank balance sheets and detailed interbank deposits in 1862 and 1867 in Pennsylvania, we study how the NBAs changed the network structure and quantify the effect on financial stability in an interbank network model. We find that the NBAs induced a concentration of interbank deposits at both the city and bank levels, creating systemically important banks. Although the concentration facilitated diversification, contagion would have become more likely when financial center banks faced large shocks.Citation
Anderson, Haelim, Mark Paddrik, and Jessie Jiaxu Wang. 2019. "Bank Networks and Systemic Risk: Evidence from the National Banking Acts." American Economic Review, 109 (9): 3125-61. DOI: 10.1257/aer.20161661Additional Materials
JEL Classification
- E44 Financial Markets and the Macroeconomy
- G01 Financial Crises
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G28 Financial Institutions and Services: Government Policy and Regulation
- L14 Transactional Relationships; Contracts and Reputation; Networks
- N21 Economic History: Financial Markets and Institutions: U.S.; Canada: Pre-1913