Competition and Stability in Banking

Xavier Vives

Working Papers Central Bank of Chile from Central Bank of Chile

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.

Date: 2010-05
New Economics Papers: this item is included in nep-ban, nep-com, nep-cta, nep-his and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

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https://www.bcentral.cl/documents/33528/133326/DTBC_576.pdf (application/pdf)

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:chb:bcchwp:576

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