Bank competition and financial (in)stability in Europe: A sensitivity analysis

Ioannis Samantas

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines the effect of market structure variables on stability subject to regulation and supervision variables. The Extreme Bound Analysis (EBA) is employed over a sample of banks operating within the enlarged European Union during the period 2002-2010. The results show an inverse U-shaped association between market power and bank soundness and stabilizing tendency in markets of less concentration, where policies lean towards limited restrictions on non-interest bearing activities, official intervention to bank management and book transparency. However, in markets with higher share of foreign owned assets, the pattern is inverted. The significant impact of regulatory variables contributes to the ongoing reform as a stability channel of bank competition.

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: 2013-11
New Economics Papers: this item is included in nep-ban, nep-cba and nep-com
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:51621

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