Deregulation and its long-run effects on the availability of banking services in low-income communities

The objective of this paper is to analyze the possible long-term consequences of deregulation on financial exclusion in a European context. Although this is an issue frequently treated by US researchers, it has traditionally received much less attention in Europe. The deregulation that took place mainly during the 1980s may have contributed to an increase in the importance of this phenomenon. Therefore, our aim in this paper is to assess the effect of deregulation on the availability of banking services, especially in low-income municipalities in Spain. Our results show that, although the level of service is lower in low-income towns, the differences in the level of service between the high-income and low-income towns have decreased in the last decade. Interestingly, we provide evidence on the ability of the different types of financial intermediaries to avoid financial exclusion. Our results show that the Savings Banks appear as the main contributors to financial inclusion.