The geographical network of bank organizations: issues and evidence for Italy

In this work, we first discuss why and how geographical distances between the key actors of the credit market (the borrowing firm, the lending branch, the lending bank, and the rival banks) forge bank–firm relationships and interbank competition. Then, using the metrics and graph techniques for network analysis we provide evidence about the evolution of the geography of banking industry in Italy and the spatial distribution of bank power between core and peripheral regions. More specifically, we discuss the role of geographical distance in banking. We present the different concepts of distance and review why bank proximity should affect the provision of financial services and the extant empirical evidence on the role of distance in different realms of banking activity. We summarize what it is known and what it is not known about the determinants of distances and the emergence of banking centers and peripheries. Eventually, using the network analysis, we investigate the changing geography of bank organizations, the spatial network of bank power and the geographical interconnectedness among bank structures in the Italian banking industry. We conclude by suggesting directions for policy initiatives and further research.