Does banking consolidation worsen ﬁrms’ access to credit?
Evidence from the German economy
Christian Schmieder Æ Katharina Marsch Æ
Katrin Forster-van Aerssen
Accepted: 8 December 2008 / Published online: 24 January 2009
Ó Springer Science+Business Media, LLC. 2009
Abstract This paper deals with the question
whether the ongoing process of banking consolida-
tion, which can be observed all over the world,
worsens SMEs’ access to credit. We focus in our
empirical study on SMEs in Germany, a country
where SMEs are the backbone of the economy. A
negative trend in the provision with bank credit may
thus adversely affect growth and employment. Based
on a comprehensive dataset on German ﬁrms and
banks we ﬁnd—contrary to public fear—that the
ongoing banking consolidation in Germany does not
have a signiﬁcant negative impact on the ﬁnancing of
German ﬁrms during the observation period from
1996 to 2002.
Keywords Banking consolidation Á
Bank mergers Á SME ﬁnancing
JEL Classiﬁcations G2 Á G21 Á L26
Over the past few decades, improvements in infor-
mation technology, ﬁnancial deregulation and
have contributed to create a more
competitive environment and have encouraged an
unprecedented consolidation in the banking sector
within and across many industrial countries.
U.S. and the Euro area, M&A activity in the ﬁnancial
industry sector has led to a drastic and continuous
decline in the number of banks and increased
concentration. While the number of banks in the
U.S. fell by more than one-third until the end of the
1990s, the number of credit institutions in the Euro
area has also declined substantially, from around
C. Schmieder (&)
European Investment Bank and Deutsche Bundesbank,
Department of Economics, University of Mainz, Mainz,
K. Forster-van Aerssen
European Central Bank, Frankfurt am Main, Germany
The causes of consolidation have been well documented (e.g.
Berger et al. 1999).
This paper represents the authors’ personal opinions and
does not necessarily reﬂect the views of the Deutsche
Bundesbank or its staff, nor those of the University of Mainz,
the European Investment Bank or the European Central Bank.
We are grateful to Beatrice Weder, Thilo Liebig, Frank Heid
and Christoph Memmel for stimulating comments and contri-
butions to this study. Moreover, we would like to thank the
participants of the Workshop ‘‘Forschung zu Finanzstabilita
mit Hilfe von Bankdaten der Bundesbank’’ held at Deutsche
Bundesbank on December 5, 2005 and the participants of the
GBAS workshop held at the Goethe University Frankfurt
March 20, 2006 for their feedback and comments.
Small Bus Econ (2010) 35:449–465