The effect on competition of banking sector consolidation following the financial crisis of 2008

Consolidation of the Spanish banking sector after the financial crisis of 2008 raises concerns about potential negative effects on competition. I use structural econometric methods to examine these anti-competitive concerns in the Spanish mortgage market. I estimate a mixed-logit model of mortgage demand and recover bank-level cost information with a strategic model of price competition. Counterfactual experiments reveal that the observed increase in concentration is associated only with small variations in mortgage rates and market shares, staying far from collusive levels. This moderate change in industry conduct implies a small direct effect of consolidation on bank exposures to mortgage risk.