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Business Definition for: concentration
concentration
- condition of a bank's loan portfolio measured by the number of loans extended to a particular industry. Excessive lending to a single industry (agriculture, oil and gas exploration, real estate) indicates a lack of diversification condition of a bank's loan portfolio measured by the number of loans extended to a particular industry. Excessive lending to a single industry (agriculture, oil and gas exploration, real estate) indicates a lack of See also asset quality ; liquidity .
- share of deposits owned by a bank in a given market. The U.S. Department of Justice uses a statistical yardstick, the herfindahl index , in gauging the anticompetitive effects of bank mergers. The index is calculated by adding the market shares of a product, such as deposits, owned by banks in a market and squaring the results. The index indicates both the number of firms in a market and their relative size. For example, a market with five firms, each having individual market shares of 30, 20, 20, 20, and 10 percent would have an index of 2200. Generally, the Justice Department will not challenge a merger unless the post-merger index is at least 1800 and the merger causes an increase of at least 200 on the scale.
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