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A reexamination on the effect of bank competition on bank non-performing loans

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  • Alan T. Wang

Abstract

This article examines whether competition in the deposit and loan markets results in a more stable or fragile banking industry. Following the assumption that deposit and loan competitions are not separable, a simple equilibrium model is developed. Then, using the aggregate time-series data of Federal Deposit Insurance Corporation (FDIC)-insured financial institutions, we estimate the generalized VAR model of deposit rate (DR), interest margin between the loan and DRs, and non-performing loan ratio. Our results support the competition–fragility hypothesis.

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  • Alan T. Wang, 2018. "A reexamination on the effect of bank competition on bank non-performing loans," Applied Economics, Taylor & Francis Journals, vol. 50(57), pages 6165-6173, December.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:57:p:6165-6173
    DOI: 10.1080/00036846.2018.1489505
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    Cited by:

    1. Kelly, Robert & Byrne, David, 2019. "Bank asset quality and monetary policy pass-through," ESRB Working Paper Series 98, European Systemic Risk Board.
    2. Maryem Naili & Younes Lahrichi, 2022. "The determinants of banks' credit risk: Review of the literature and future research agenda," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 334-360, January.
    3. Karadima, Maria & Louri, Helen, 2020. "Non-performing loans in the euro area: Does bank market power matter?," International Review of Financial Analysis, Elsevier, vol. 72(C).
    4. Elena Deryugina & Alexey Ponomarenko & Andrey Sinyakov, 2021. "Exploring the conjunction between the structures of deposit and credit markets in the digital economy under information asymmetry," Bank of Russia Working Paper Series wps78, Bank of Russia.

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