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Competition and Stability: What's Special about Banking?

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Listed author(s):
  • Philipp Hartmann
  • Elena Carletti

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.

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File URL: http://www.lse.ac.uk/fmg/documents/specialPapers/2002/sp140.pdf
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Paper provided by Financial Markets Group in its series FMG Special Papers with number sp140.

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Date of creation: Apr 2002
Handle: RePEc:fmg:fmgsps:sp140
Contact details of provider: Web page: http://www.lse.ac.uk/fmg/

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Find related papers by 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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