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Bank competition and financial (in)stability in Europe: A sensitivity analysis

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  • Samantas, Ioannis

Abstract

This study examines the effect of market structure variables on stability subject to regulation and supervision variables. The Extreme Bound Analysis (EBA) is employed over a sample of banks operating within the enlarged European Union during the period 2002-2010. The results show an inverse U-shaped association between market power and bank soundness and stabilizing tendency in markets of less concentration, where policies lean towards limited restrictions on non-interest bearing activities, official intervention to bank management and book transparency. However, in markets with higher share of foreign owned assets, the pattern is inverted. The significant impact of regulatory variables contributes to the ongoing reform as a stability channel of bank competition.

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  • Samantas, Ioannis, 2013. "Bank competition and financial (in)stability in Europe: A sensitivity analysis," MPRA Paper 51621, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:51621
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    2. Richter Toni, 2021. "Bankenwettbewerb und die Stabilität von Finanzsektoren: Nur eine Frage der Messmethode?," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 70(1), pages 1-36, May.
    3. Shijaku, Gerti, 2016. "Does bank competition affect bank stability after the global financial crisis?," MPRA Paper 79084, University Library of Munich, Germany.
    4. Samangi Bandaranayake & Kuntal K. Das & Robert W. Reed, 2020. "Another Look At ‘Bank Competition And Financial Stability: Much Ado About Nothing’?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(2), pages 344-371, April.
    5. Samangi Bandaranayake & Kuntal K. Das & W. Robert Reed, 2018. "A Replication of “Bank Competition and Financial Stability: Much Ado About Nothing?” (Journal of Economic Surveys, 2016)," Working Papers in Economics 18/18, University of Canterbury, Department of Economics and Finance.

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    More about this item

    Keywords

    Market power; financial stability; regulation; extreme bound analysis;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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