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Bank Market Structure, Competition, and Stability: Issues and Concepts

In: The Changing Geography of Banking and Finance

Author

Listed:
  • Klaus Schaeck

    (Bangor Business School, University of Wales, Hen Goleg)

Abstract

A perceived simultaneous increase in consolidation and competition in banking systems around the world has intensified public policy debates on the nexus between consolidation and competition on one hand, and bank soundness on the other hand. In light of these developments, this paper reviews and evaluates the contemporary literature on the effect of structural and nonstructural measures of competition on bank soundness. While the established literature points toward negative trade-offs between competition and bank soundness, this review concludes that recent studies increasingly bolster the view that competition is beneficial for bank stability. This paper starts out with a survey of key studies from the literature on competition, concentration, and soundness. I then provide an assessment of the underlying concepts in the industrial organization literature and review alternatives to the Structure-Conduct-Performance paradigm that dominates the extant literature. Second, I point out several issues that have been widely ignored in contemporary studies but that are critical for public policy recommendations. Finally, I suggest some avenues for future research.

Suggested Citation

  • Klaus Schaeck, 2009. "Bank Market Structure, Competition, and Stability: Issues and Concepts," Springer Books, in: Alberto Zazzaro & Michele Fratianni & Pietro Alessandrini (ed.), The Changing Geography of Banking and Finance, edition 1, chapter 0, pages 133-153, Springer.
    • Handle: RePEc:spr:sprchp:978-0-387-98078-2_7
    DOI: 10.1007/978-0-387-98078-2_7
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    Cited by:

    1. Chu, Kam Hon, 2015. "Bank consolidation and stability: The Canadian experience, 1867–1935," Journal of Financial Stability, Elsevier, vol. 21(C), pages 46-60.
    2. Samantas, Ioannis, 2013. "Bank competition and financial (in)stability in Europe: A sensitivity analysis," MPRA Paper 51621, University Library of Munich, Germany.
    3. Carmen Vargas Pérez & Juan Luis Peñaloza Figueroa, 2018. "Tracking the New Demand for Justice in the Big Data Ecosystem," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 4, January -.

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