The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach and Education function engages, empowers and educates the Second District communities that the Bank serves, especially civic leaders, students, educators, small business owners, policymakers and the general public. It furthers the Bank's commitment to the region by listening to the communities we serve and leveraging our unique attributes to positively impact school and university programs, as well as analysis and research.
The link between financial market concentration and stability is a topic of great interest to policymakers and other market participants. Are concentrated markets—those where a relatively small number of firms hold large market shares—inherently more prone to disruption? This article considers that question by drawing on academic studies as well as introducing new analysis. Like other researchers, the authors find an ambiguous relationship between concentration and instability when a large firm in a concentrated market fails. In a complementary review of concentration trends across a number of specific markets, the authors document that most U.S. wholesale credit and capital markets are only moderately concentrated, and that concentration trends are mixed—rising in some markets and falling in others. The article also identifies market characteristics that might lead to greater, or less, concern about the consequences of a large firm’s exit. It argues that the ease of substitution by other firms in concentrated markets is a critical factor supporting market resiliency.