Publication: Competition in the Financial Sector
Loading...
Files in English
6,318 downloads
Published
2009-03-30
ISSN
1564-6971
Date
2012-03-30
Author(s)
Editor(s)
Abstract
Competition in the financial sector, as in other sectors, matters for allocative, productive, and dynamic efficiency. Theory suggests, however, that unfettered competition is not necessarily best given the special features of financial services. The author discusses these analytical complications before reviewing how to assess competition in the financial sector and its determinants. It is shown that competitiveness varies greatly across countries, in perhaps surprising ways, and that it is not driven by financial system concentration. Rather, systems with greater foreign entry and fewer entry and activity restrictions tend to be more competitive, confirming that contestability—the lack of barriers to entry and exit—determines effective competition. The author then analyzes how competition policy in the financial sector has generally been conducted and how changes in competition in the financial services industries should affect competition policy going forward. In part based on comparison with other industries, the author provides some suggestions on how competition policy in the financial sector could be better approached as well as what institutional arrangements best fit a modern view of competition policy in the sector. The specific competition challenges for developing countries is also highlighted. The author concludes that practices today fall far short of the need for better competition policy in the financial sector.
Link to Data Set
Citation
“Claessens, Stijn. 2009. Competition in the Financial Sector. World Bank Research Observer. © World Bank. http://hdl.handle.net/10986/4425 License: CC BY-NC-ND 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
No results found.
Users also downloaded
Showing related downloaded files
Publication Corporate Governance of State-Owned Enterprises : A Toolkit(Washington, DC, 2014-10-04)This Toolkit provides an overall framework with practical tools and information to help policymakers design and implement corporate governance reforms for state-owned enterprises. It covers the key elements of corporate governance, including legal and regulatory framework, state ownership arrangements, performance management systems, financial and fiscal discipline, boards of directors, transparency and disclosure, and protection of shareholders in mixed ownership companies. Experience shows that no one approach is universally applicable and the choice of measures depends on country and enterprise circumstances. The Toolkit thus provides a range of frameworks, concepts, case examples, checklists, and model documents that together aim to help government officials make the appropriate choices for their circumstances. The Toolkit concludes with guidance on managing the reform process, in particular how to prioritize and sequence reforms, build capacity, and engage with stakeholders.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication Digital Progress and Trends Report 2023(Washington, DC: World Bank, 2024-03-05)Digitalization is the transformational opportunity of our time. The digital sector has become a powerhouse of innovation, economic growth, and job creation. Value added in the IT services sector grew at 8 percent annually during 2000–22, nearly twice as fast as the global economy. Employment growth in IT services reached 7 percent annually, six times higher than total employment growth. The diffusion and adoption of digital technologies are just as critical as their invention. Digital uptake has accelerated since the COVID-19 pandemic, with 1.5 billion new internet users added from 2018 to 2022. The share of firms investing in digital solutions around the world has more than doubled from 2020 to 2022. Low-income countries, vulnerable populations, and small firms, however, have been falling behind, while transformative digital innovations such as artificial intelligence (AI) have been accelerating in higher-income countries. Although more than 90 percent of the population in high-income countries was online in 2022, only one in four people in low-income countries used the internet, and the speed of their connection was typically only a small fraction of that in wealthier countries. As businesses in technologically advanced countries integrate generative AI into their products and services, less than half of the businesses in many low- and middle-income countries have an internet connection. The growing digital divide is exacerbating the poverty and productivity gaps between richer and poorer economies. The Digital Progress and Trends Report series will track global digitalization progress and highlight policy trends, debates, and implications for low- and middle-income countries. The series adds to the global efforts to study the progress and trends of digitalization in two main ways: · By compiling, curating, and analyzing data from diverse sources to present a comprehensive picture of digitalization in low- and middle-income countries, including in-depth analyses on understudied topics. · By developing insights on policy opportunities, challenges, and debates and reflecting the perspectives of various stakeholders and the World Bank’s operational experiences. This report, the first in the series, aims to inform evidence-based policy making and motivate action among internal and external audiences and stakeholders. The report will bring global attention to high-performing countries that have valuable experience to share as well as to areas where efforts will need to be redoubled.Publication Empowerment in Practice : From Analysis to Implementation(Washington, DC: World Bank, 2006)This book represents an effort to present an easily accessible framework to readers, especially those for whom empowerment remains a puzzling development concern, conceptually and in application. The book is divided into two parts. Part 1 explains how the empowerment framework can be used for understanding, measuring, monitoring, and operationalizing empowerment policy and practice. Part 2 presents summaries of each of the five country studies, using them to discuss how the empowerment framework can be applied in very different country and sector contexts and what lessons can be learned from these test cases. While this book can offer only a limited empirical basis for the positive association between empowerment and development outcomes, it does add to the body of work supporting the existence of such a relationship. Perhaps more importantly, it also provides a framework for future research to test the association and to prioritize practical interventions seeking to empower individuals and groups.Publication Environmental, Social, and Governance Investing(World Bank, Washington, DC, 2021-03-01)This primer responds to central banks’ growing demand for knowledge on social, governance, and environmental considerations (ESG) in the investment process. This area has gained traction in the last two decades. More recently, central banks’ interest in ESG has increased, but much of the information available is aimed at investors with different investment objectives and broadly diversified portfolios. The authors fill that information gap by reviewing the definitions of ESG and the main ESG investment approaches, including their applicability to asset classes. The authors then examine how foreign reserve managers can apply ESG investing in their reserve management operations. The authors find limited scope for implementing ESG strategies in reserve management, given that most central banks still invest primarily in sovereign bonds of major economies. Yet, the authors also identify opportunities and critical considerations for central banks interested in implementing ESG investing in their reserve management operations.