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Competition and Stability in Banking (Vives H.)

Competition and Market Power Regulation Risk-taking and Risk Management Stability&Soundness

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.
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Libref/ Vives H. (2010) “Competition and Stability in Banking”, CESifo Working Paper № 3050, pp. 1-45
© Программирование — Александр Красильников, 2008
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