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Competition in the Financial Sector: Overview of Competition Policies

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Author Info

  • Stijn Claessens

Abstract

As in other sectors, competition in finance matters for allocative, productive and dynamic efficiency. Theory suggests, however, that unfettered competition is not first best given the special features of finance. I review these analytics and describe how to assess the degree of competition in markets for financial services. Existing research shows that the degree of competition greatly varies across markets, largely driven by barriers to entry and exit. I argue that changes in financial services industries require updated competition policies and institutional arrangements, but that practices still fall short. Furthermore, I show that developing countries face some specific competition challenges.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/45.

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Length: 50
Date of creation: 01 Mar 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/45

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Related research

Keywords: Emerging markets; Financial sector; Financial institutions; Securities regulations; Economic models;

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References

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Citations

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Cited by:
  1. Olivero, María Pía & Li, Yuan & Jeon, Bang Nam, 2011. "Competition in banking and the lending channel: Evidence from bank-level data in Asia and Latin America," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 560-571, March.
  2. Jeon, Bang Nam & Olivero, María Pía & Wu, Ji, 2011. "Do foreign banks increase competition? Evidence from emerging Asian and Latin American banking markets," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 856-875, April.
  3. Chun-Yu Ho, 2010. "Deregulation, competition and consumer welfare in a banking market: evidence from Hong Kong," Journal of Regulatory Economics, Springer, vol. 37(1), pages 70-97, February.
  4. Claessens, Stijn & Ayhan Kose, M. & Terrones, Marco E., 2010. "The global financial crisis: How similar? How different? How costly?," Journal of Asian Economics, Elsevier, vol. 21(3), pages 247-264, June.
  5. Yu Sun, 2011. "Recent Developments in European Bank Competition," IMF Working Papers 11/146, International Monetary Fund.

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