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Bank Competition and Stability: Cross-Country Heterogeneity

54 Pages Posted: 19 Nov 2010 Last revised: 21 Oct 2012

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Olivier De Jonghe

Tilburg University - Department of Finance; Tilburg University - European Banking Center

Glenn Schepens

European Central Bank

Multiple version iconThere are 2 versions of this paper

Date Written: June 11, 2012

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.

Keywords: Competition, Stability, Banking, Herding, Deposit Insurance, Information Sharing, Risk Shifting

JEL Classification: G21, G28, L51

Suggested Citation

Beck, Thorsten and De Jonghe, Olivier and Schepens, Glenn, Bank Competition and Stability: Cross-Country Heterogeneity (June 11, 2012). Journal of Financial Intermediation, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1711165 or http://dx.doi.org/10.2139/ssrn.1711165

Thorsten Beck

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Olivier De Jonghe (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
0031-13-466.2650 (Phone)

Tilburg University - European Banking Center ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Glenn Schepens

European Central Bank ( email )

Financial Research
Sonnemannstrasse 20
Frankfurt am Main, D-60314
Germany

HOME PAGE: http://https://sites.google.com/site/schepensglenn

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