Bank Competition and Risk-Taking under Market Integration

Kaniska Dam () and Rajdeep Sengupta

No RWP 20-21, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: Linkages between bank competition and risk-taking are analyzed in a model where market integration is the principal driver of increased competition. Risk implications of across-market competition un-der banking market integration are significantly different from that of within-market competition. While both modes of competition increase the number of competitor banks, across-market competition yields a bank-customer effect that can potentially reverse any relation that prevails be- tween within-market competition and risk-taking. This result suggests that the lack of consensus in the bank competition-financial stability literature is not an anomaly but an inherent feature of the analysis.

Keywords: Bank Competition; Market Integration (search for similar items in EconPapers)
JEL-codes: D82 G21 L13 (search for similar items in EconPapers)
Pages: 42
Date: 2020-12-30, Revised 2024-10-23
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedkrw:89533

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DOI: 10.18651/RWP2020-21

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