Bank Competition and Stability: Cross-Country Heterogeneity

European Banking Center Discussion Paper No. 2012-026

CentER Working Paper Series No. 2012-085

55 Pages Posted: 21 Jul 2011 Last revised: 22 Oct 2012

See all articles by Thorsten Beck

Thorsten Beck

City University London - The Business School; Tilburg University - European Banking Center, CentER

Olivier De Jonghe

Tilburg University - Department of Finance; National Bank of Belgium - Research Department; Tilburg University - European Banking Center

Glenn Schepens

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: October 22, 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 De Jonghe, Olivier and Schepens, Glenn, Bank Competition and Stability: Cross-Country Heterogeneity (October 22, 2012). European Banking Center Discussion Paper No. 2012-026, CentER Working Paper Series No. 2012-085, Available at SSRN: https://ssrn.com/abstract=1890674 or http://dx.doi.org/10.2139/ssrn.1890674

Thorsten Beck (Contact Author)

City University London - The 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

National Bank of Belgium - Research Department ( email )

Research Department
Boulevard de Berlaimont 14
B-1000 Brussels, 1000
Belgium

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 (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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