Banking Diversity, Financial Complexity and Resilience to Financial Shocks: Evidence From Italian Provinces

Pisicoli Beniamino
CEIS Research Paper
In this paper we investigate the influence of banking and financial diversity on stability. We compute an index of banking diversity for Italian provinces and, drawing from network theory, we propose a measure of the diversity and development of the overall provincial financial sector. Our results show that diversity in the banking and financial markets promotes greater stability. Such beneficial effects are particularly evident during periods of financial distress. We ascribe our findings to the better diversification achieved by more diverse financial systems, as documented by lower loans concentration and higher loans diversification in terms of economic destination and borrower category.

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Number: 526
Keywords: Financial diversity, Financial stability, Non-performing loans, Financial complexity, Financial crises, Banking diversity
JEL codes: G01,G20,P34
Volume: 19
Issue: 8
Date: Tuesday, November 9, 2021
Revision Date: Tuesday, November 9, 2021