Abstract
Are local banks special ? Local banks have a small size and offer a limited scope of services. Being located near their customers (individuals, small and medium size firms) is their main, or even single competitive edge. Location factors are usually viewed as the core explanation of local banks' market power and differentiation advantages. This paper puts forward another explanation for differentiation : the bank's reputation (defined as the capability to offer high quality services and to raise confidence, thus allowing for long lasting customer relationships). The paper examines successively proximity and reputation, and then articulates these two concepts, in order to identify the specificity of local banking.
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