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Bank competition and stability: cross-country heterogeneity

  • T. BECK

    ()

  • O. DE JONGHE

    ()

  • G. SCHEPENS

    ()

This paper documents a large cross-country variation in the relationship between bank competition and stability and explores market, regulatory and institutional features that can explain this heterogeneity. Combining insights from the competition-stability and regulation-stability literatures, we develop a unied framework to assess how regulation, supervision and other institutional factors may make it more likely that the data favor the charter-value paradigm or the risk-shifting paradigm. We show that an increase in competition will have a larger impact on banks’ risk taking incentives in countries with stricter activity restrictions, more homogenous market structures, more generous deposit insurance and more effective systems of credit information sharing.

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File URL: http://wps-feb.ugent.be/Papers/wp_11_732.pdf
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Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 11/732.

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Length: 59 pages
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:rug:rugwps:11/732
Contact details of provider: Postal: Hoveniersberg 4, B-9000 Gent
Phone: ++ 32 (0) 9 264 34 61
Fax: ++ 32 (0) 9 264 35 92
Web page: http://www.ugent.be/eb

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