Publication: Competition and Scope of Activities in Financial Services
Date
2001-04
ISSN
Published
2001-04
Author(s)
Claessens, Stijn
Klingebiel, Daniela
Abstract
This article analyzes the costs and
benefits of different degrees of competition and different
configurations of permissible activities in the financial
sector and discusses the related implications for regulation
and supervision. Theory and experience demonstrate the
importance of competition for efficiency and confirm that a
competitive environment requires a contestable system
meaning one that is open to competition-but not necessarily
a large number of institutions. A competitive banking system
can improve the distribution of consumer credit, enhance the
corporate sector's access to financing, and mitigate
the risks of financial crises. In an open market, in which
services and products are provided in response to market
signals, financial institutions respond by offering a wider
scope of financial services. The optimal institutional
design for supervisory functions is less obvious. This
article reviews alternative frameworks for financial
services markets from an economic perspective using
experiences in several countries as a guide. Authors focus
first on the role of competition in the financial sector and
the tradeoffs between competition on the one hand and
stability and innovation on the other. Authors next examine
alternative structures of financial services dictated in
many countries.
Citation
“Claessens, Stijn; Klingebiel, Daniela. 2001. Competition and Scope of Activities in Financial Services. World Bank Research Observer. © Washington, DC: World Bank. http://openknowledge.worldbank.org/handle/10986/17134 License: CC BY-NC-ND 3.0 IGO.”
Report Series
Other publications in this report series
Journal
Journal
Journal Volume
Journal Volume
Journal Issue
Journal Issue