Bundesbank paper finds benefits in concentrated bank lending
The more concentrated a bank's credit portfolio is, the lower its expected write-offs and unexpected risk are, according to a discussion paper published today by the Deutsche Bundesbank.
In Banks' concentration versus diversification in the loan portfolio: new evidence from Germany, Nadya Jahn, Christoph Memmel and Andreas Pfingsten test the theory that banks can accumulate expertise and, in the long-term, minimise losses by concentrating lending on certain industries or sectors.
The authors
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