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Title:Competition and stability in banking PDF Logo
Authors:Vives, Xavier
Issue Date:2010
Series/Report no.:CESifo working paper Trade Policy 3050
Abstract:I review the state of the art of the academic theoretical and empirical literature on the potential trade-off between competition and stability in banking. There are two basic channels through which competition may increase instability: by exacerbating the coordination problem of depositors/investors on the liability side and fostering runs/panics, and by increasing incentives to take risk and raise failure probabilities. The competition-stability trade-off is characterized and the implications of the analysis for regulation and competition policy are derived. It is found that optimal regulation may depend on the intensity of competition.
Subjects:antitrust
regulation
crisis
risk-taking
mergers
state aid
bail-outs
JEL:G21
G28
L40
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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