The objective of the present article is to present a general model of the banking firm beha-vior which encompasses the post Keynesian theory of bank's liquidity preference, the Stiglitz-Weiss´s hypothesis that expected default rate is an increasing function of loan interest rate and the Tobinisque hypothesis that the deposit retention coefficient is an increasing function of the concentration ratio in banking industry. This general model allows us to arrive at some interesting conclusions. First of all, we show that the optimal banking spread is an increasing function of the concentration ratio in banking industry. Second, we show that an increase in the level of the interest rate controlled by the Central Bank will (i) reduce the optimal level of the banking spread, and (ii) will reduce de supply of banking credit. Last, but not least, we show that an increase in the concentration ratio in banking industry has an ambiguous effect over the supply of banking credit.
banks; financial fragility; market structure