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The Functions of Australian Banks’ Branch Networks: The Diversification of Risks and Spatial Allocation of Capital
Author(s) -
Seltzer Andrew J.
Publication year - 2018
Publication title -
australian economic history review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.493
H-Index - 16
eISSN - 1467-8446
pISSN - 0004-8992
DOI - 10.1111/aehr.12151
Subject(s) - diversification (marketing strategy) , boom , business , capital (architecture) , branching (polymer chemistry) , financial stability , capital requirement , financial system , economics , finance , geography , market economy , engineering , materials science , archaeology , marketing , environmental engineering , incentive , composite material
This paper examines the consequences of branch banking for the Australian economy. There is little evidence to show that branching increased the stability of Australian banking. During the 1893 crisis, banks with more extensive branch networks, particularly those that had rapidly expanded their networks during the long boom of 1866‐89, were more likely to suspend payments. However, it is shown that branching increased the availability of capital and provision of banking services in rural areas. This occurred because, unlike unit banks, which were tied to a specific location, branch banks could internally reallocate capital from urban to rural regions at low cost.