Market Concentration and Banking Crisis

I studied the effect of banking concentration on bank runs using the theoretical framework of Diamond and Dybvig ( 1983), and others. When banks have market power they are more prone to run in cases of low long-term return rates. Under asymmetric information about the quality of banks, depositors can discriminate them according the concentration level. In that way, there exists a threshold for concentration where the bank is identified as a good bank, if it is under the threshold and as a bad bank if it is over the threshold. Data for 54 countries between 1990 and 2003 confirm the existence of warning zones in which the relationship between probability of run and concentration is not linear. On the other hand, in most of the cases, there is a negative correlation between deposit rates and concentration