Competition and stability in banking

Xavier Vives

No D/852, IESE Research Papers from IESE Business School

Abstract: 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.

Keywords: trade-off; competition; stability; banking (search for similar items in EconPapers)
Pages: 58 pages
Date: 2010-04-05
New Economics Papers: this item is included in nep-ban, nep-com, nep-cta, nep-his and nep-reg
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Citations: View citations in EconPapers (53)

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Related works:
Chapter: Competition and Stability in Banking (2011)
Journal Article: Competition and Stability in Banking (2010)
Working Paper: Competition and Stability in Banking (2010)
Working Paper: Competition and Stability in Banking (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:iesewp:d-0852

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