The geography of Spanish bank branches

Abstract

This article analyzes the determinants of bank branch location in Spain taking the role of geography explicitly into account. After a long period of intense territorial expansion, especially by savings banks, many of these firms are now involved in merger processes triggered off by the financial crisis, most of which entail the closing of many branches. However, given the contributions of this type of banks to limit financial exclusion, this process might exacerbate the consequences of the crisis for some disadvantaged social groups. Related problems such as new banking regulation initiatives (Basel III), or the current excess capacity in the sector add further relevance to this problem. We address this issue from a Bayesian perspective, using a Poisson regression model within the framework of generalized linear mixed models. This proposal allows us to assess whether over-branching or under-branching has taken place. Our results suggest, among other findings, that both phenomena are present in the Spanish banking sector, although the implications for the three types of banks in the industry, namely commercial banks, savings banks or credit unions, vary a great deal.