Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212340
Authors: 
Stenbacka, Rune
Takalo, Tuomas
Year of Publication: 
2016
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 2/2016
Abstract: 
We establish that the effect of intensified deposit market competition, measured by reduced switching costs, on the probability of bank failures depends critically on whether we focus on competition with established customer relationships or competition for the formation of such relationships. With inherited customer relationships, intensified competition (i.e., lower switching costs) destabilizes the banking market, whereas it stabilizes the banking market if we shift our focus to competition for the formation of customer relationships. These findings imply that the proportion between new and locked-in depositors is decisively important when determining whether intensified competition destabilizes the banking market or not.
JEL: 
G21
D43
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-094-1
Document Type: 
Working Paper

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