On the optimality of bank competition policy

Ioannis G. Samantas

International Review of Financial Analysis, 2017, vol. 54, issue C, 39-53

Abstract: This study examines whether the effect of market structure on financial stability is persistent, subject to current regulation and supervision policies. The methodology of Sala-I-Martin (1997) is employed over a sample of 2450 banks operating within the EU-27 during the period 2003–2010. The results show a potential trade-off between market power and soundness, and how possible it is to regulate this trade-off above 21% markups. Financial stability appears more pronounced in markets of less concentration, where policies lean towards limited restrictions on non-interest income, official intervention in bank management and book transparency. Regulation and competition can act as substitute or complementary policies vis-à-vis a more stable financial system with less competition distortions.

Keywords: Market power; Financial stability; Regulation; Extreme bound analysis (search for similar items in EconPapers)
JEL-codes: D24 D4 G21 L11 L51 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521917301072
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:54:y:2017:i:c:p:39-53

DOI: 10.1016/j.irfa.2017.09.005

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().