Competition and stability in banking
More competition among banks typically enhances the welfare of consumers. However, it may also involve a threat to financial stability, that is of vital importance for the functioning of economies. Read also the accompanying press release . This study reveals that many forms of competition do not endanger financial stability, however. For instance, intensified competition among incumbent banks usually has little impact on financial stability. Moreover, in cases where competition does affect financial stability, the latter might best be safeguarded by sound prudential regulation or good corporate governance.
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Finance and Economics Discussion Series
1997-9, Board of Governors of the Federal Reserve System (U.S.).
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