Competition and stability in banking

Arbeitspapier

I review the state of the art of the academic theoretical and empirical literature on the potential trade-off between competition and stability in banking. There are two basic channels through which competition may increase instability: by exacerbating the coordination problem of depositors/investors on the liability side and fostering runs/panics, and by increasing incentives to take risk and raise failure probabilities. The competition-stability trade-off is characterized and the implications of the analysis for regulation and competition policy are derived. It is found that optimal regulation may depend on the intensity of competition.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3050

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation ; Antitrust Issues and Policies: General
• Subject: antitrust ; regulation ; crisis ; risk-taking ; mergers ; state aid ; bail-outs ; Bank ; Bankenaufsicht ; Wettbewerbspolitik ; Bankrisiko ; Bankenkrise ; Wettbewerb ; Theorie der Regulierung

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Vives, Xavier
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/39006
• Last update: 10.03.2025, 11:44 AM CET