Economics, Econometrics and Finance
8 years ago

Intense banking competition leads to excessive risk-taking and regulatory challenges

European Economic Review
Imperfect competition, risk taking, and regulation in banking
Carmen Matutes, Xavier Vives

Paper Summary

Related papers

Economics, Econometrics and Finance
8 years ago

Deposit insurance fuels risky behavior in commercial banks, study finds.

Banking Finance
International Finance
Credit Risk
2 views
Economics, Econometrics and Finance
2 years ago

Deposit Protection Systems: Key to Neutralizing Market Distortions

Financial Governance
1 view
Economics, Econometrics and Finance
4 years ago

Risk-prone banks exploit deposit insurance, leading to system failures.

Banking Finance
Islamic Banking
Economic Governance
1 view

The article explores how competition and regulation in banking affect risk-taking and welfare. It shows that in a competitive market with high social failure costs, deposit rates can be too high. Different regulatory measures are needed depending on the level of competition and the type of deposit insurance. In some cases, deposit regulation and asset restrictions can improve welfare in the banking sector.