Review Bank Risk-Taking and Competition Revisited

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Bank Risk-Taking and Competition Revisited
By:Mr. Gianni De Nicoló,John H. Boyd
Published on 2003-06-01 by International Monetary Fund

This study reinvestigates the theoretical relationship between competition in banking and banks'' exposure to risk of failure. There is a large existing literature that concludes that when banks are confronted with increased competition, they rationally choose more risky portfolios. We briefly review this literature and argue that it has had a significant influence on regulators and central bankers, causing them to take a less favorable view of competition and encouraging anti-competitive consolidation as a response to banking instability. We then show that existing theoretical analyses of this topic are fragile, since they do not detect two fundamental risk-incentive mechanisms that operate in exactly the opposite direction, causing banks to aquire more risk per portfolios as their markets become more concentrated. We argue that these mechanisms should be essential ingredients of models of bank competition.

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Book ID of Bank Risk-Taking and Competition Revisited's Books is Fkwjiw8Z6r0C, Book which was written byMr. Gianni De Nicoló,John H. Boydhave ETAG "fR0OZHOGrMQ"

Book which was published by International Monetary Fund since 2003-06-01 have ISBNs, ISBN 13 Code is 9781452797656 and ISBN 10 Code is 145279765X

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Book which have "24 Pages" is Printed at BOOK under CategoryBusiness and Economics

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