The geography of banking: Evidence from branch closings

Abstract

In the aftermath of the Great Recession, the number of bank branches declined in most developed countries. In this paper, we investigate how banks have downsized their branch networks in Italy, by comparing the pre‐ and post‐crisis spatial distribution of branches. By using a detailed data set that includes a wide set of controls for the characteristics of each bank branch, we estimate the probability of a branch being closed as a function of its distance from both proprietary and competitors' branches. We find that banks are more prone to close branches in those areas where other proprietary branches are closer and where competitors' branches are closer. This indicates that, since the start of the crisis, banks have closed branches especially in those areas where their proprietary network was relatively more populated and the competition was fiercer.

De‐branching, too‐much‐branching, and cost of debt of SMEs in Slovakia

“…However, positive coefficient associated with the within variation related to past changes in bank competition suggests that, individually, banks tend to open branches in more concentrated markets which could, once again, indirectly hint to the observed tendency to concentrate their physical presence to few selected finance centers. Under Slovak conditions, we, therefore, partially observe the patterns suggested by other studies that show that operational distance can affect the decisions of banks to expand or reduce their bank network (Galardo et al, 2021; Gobbi & Lotti, 2004).…”

“…In the majority of cases, local banks are owned by either some of the systematically important international banks or by multinational investment groups oriented towards investments in the CESEE region (Cupic & Siranova, 2018). In contrast to Poland (Hasan et al, 2017) or other large economies (Agarwal & Hauswald, 2010; Chen & Strathearn, 2020; Cohen & Mazzeo, 2010; Galardo et al, 2021), no truly local banks are present; thus, all banks can be considered multimarket banks. There are no regulatory barriers to entry due to being part of the European common market, with the exception of third countries.…”

“…Almost every decade, it has been predicted that technology will render the physical presence of banks unnecessary (Petersen & Rajan, 1994, 2002). Concerns regarding loss of efficiency, the newest technological advancements, the regulatory environment and greater pressure from FinTech competitors have caused many countries to witness substantial redesign of their bank networks (Alessandrini et al, 2009a; Galardo et al, 2021; Ho & Berggren, 2020).…”

The Role of Technology in Improving the Customer Experience in the Banking Sector: A Systematic Mapping Study

“…Driven by the increasing costs in running branches (e.g. salaries, rent, utilities, security) banks have been closing most of the nonredditive branches [22][23] [24]. For example in Italy in the last decade 10.000 branches (out of 33.600) definitely closed [25].…”

Unintended effects of broadband grants on bank branches

“…Kim (2022) develops a structural model presenting that banks close more branches in a county with higher broadband penetration until the penetration rate reaches a certain threshold of 80%, which means that more than 80% of households have broadband available at their home. Outside the United States, Galardo et al (2021) estimate the probability a branch closes and show that banks were more prone to close branches in areas where the diffusion of the broadband was greater in Italy.…”