Financial sector not too concentrated, study says

The Federal Reserve Bank of New York found in a study of American financial markets little evidence that the industry was becoming more dominated by a small number of securities companies.

The “review of how U.S. financial market structure has changed over the last decade finds no pervasive pattern of high and increasing concentration,” the New York Fed said in a statement Thursday. The paper was written by a group of New York Fed economists and researchers.

Most wholesale credit and capital markets are only “moderately concentrated,” the study concluded. “The authors’ findings can offer some reassurance to policymakers and others concerned about whether high or rising financial market concentration could suggest greater market instability.”

A highly concentrated financial market may create problems should a large firm fail. The ability of other banks and securities companies to substitute liquidity is a “critical factor,” the study said.

Fed Chairman Ben S. Bernanke told Congress last week that financial markets were “working well” after U.S. stocks declined the most in four years amid a global sell-off.