Banking Competition and Capital Ratios
University of Wales - Bangor Business School
IMF Working Paper No. 07/216
We use data for more than 2,600 European banks to test whether increased competition causes banks to hold higher capital ratios. Employing panel data techniques, and distinguishing between the competitive conduct of small and large banks, we show that banks tend to hold higher capital ratios when operating in a more competitive environment. This result holds when controlling for the degree of concentration in banking systems, inter-industry competition, characteristics of the wider financial system, and the regulatory and institutional environment.
Number of Pages in PDF File: 42
Keywords: Working Paper, Banks, Capital, Competition, Bank supervision, Industrial structureworking papers series
Date posted: September 26, 2007
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