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Bank competition and stability: Cross-country heterogeneity

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  • Beck, Thorsten
  • De Jonghe, Olivier
  • Schepens, Glenn

Abstract

This paper documents large cross-country variation in the relationship between bank competition and bank stability and explores market, regulatory and institutional features that can explain this variation. We show that an increase in competition will have a larger impact on banks’ fragility in countries with stricter activity restrictions, lower systemic fragility, better developed stock exchanges, more generous deposit insurance and more effective systems of credit information sharing. The effects are economically large and thus have important repercussions for the current regulatory reform debate.

Suggested Citation

  • Beck, Thorsten & De Jonghe, Olivier & Schepens, Glenn, 2013. "Bank competition and stability: Cross-country heterogeneity," Journal of Financial Intermediation, Elsevier, vol. 22(2), pages 218-244.
  • Handle: RePEc:eee:jfinin:v:22:y:2013:i:2:p:218-244
    DOI: 10.1016/j.jfi.2012.07.001
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    More about this item

    Keywords

    Bank competition; Financial stability; Herding; Deposit insurance; Information sharing; Risk shifting;
    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
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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