Publication: Bank Competition and Financial Stability : Friends or Foes?
Date
2008-06
ISSN
Published
2008-06
Author(s)
Abstract
Theory makes ambiguous predictions about
the relationship between market structure and
competitiveness of the banking system and banking sector
stability. Empirical studies focusing on individual
countries provide similarly ambiguous results, while
cross-country studies point mostly to a positive
relationship between competition and stability in the
banking system. Where liberalization and unfettered
competition have resulted in fragility, this has been mostly
the consequence of regulatory and supervisory failures. The
advantages of competition for an efficient and inclusive
financial system are strong, and regulatory and supervisory
policies should focus on an incentive-compatible environment
for banking rather than try to fine-tune market structure or
the degree of competition.
Citation
“Beck, Thorsten. 2008. Bank Competition and Financial Stability : Friends or Foes?. Policy Research Working Paper No. 4656. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/426b1f2c-9c00-5dd3-bbf6-e3351434c9a8 License: CC BY 3.0 IGO.”
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