Consider two countries with the following characteristics. Country A has no restrictions on bank branching and banks in Country A are permitted to offer investment and insurance products along with traditional banking services. In Country B, there are strict limits on branch banking and on the geographical spread of a bank’s business. In addition, banks in Country B are not permitted to offer investment or insurance services.
a. In which country do you think the banking system is more concentrated?
b. In which country do you think the banking system is more competitive?
c. In which country do you think, everything else being equal, banking products are cheaper?
Explain each of your choices.