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Competition and stability: what's special about banking?

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  • Carletti, Elena
  • Hartmann, Philipp

Abstract

This paper examines the relationship between competition policies and policies to preserve stability in the banking sector. Market structures and the relative importance of the three classical antitrust areas for banking are discussed, showing the predominance of merger review considerations for loan and deposit markets as well as the relevance of cartel considerations for payment systems. A core part of the paper is an analysis of the relative roles of competition and supervisory authorities in the review of bank mergers for the G-7 industrialised countries. A wide variety of approaches emerges, with some countries giving a stronger role to prudential supervisors than to competition authorities and other countries doing it the other way round. In search for explanations for this diversity the theoretical and empirical literature on the competition-stability nexus in banking is surveyed. It turns out that the widely accepted trade-off between competition and stability does not generally hold. JEL Classification: G21, G28, G34, K21, L4

Suggested Citation

  • Carletti, Elena & Hartmann, Philipp, 2002. "Competition and stability: what's special about banking?," Working Paper Series 146, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2002146
    Note: 229414
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    antitrust policies; bank competition; banking supervision; Financial Stability; mergers & acquisitions;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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