scholarly journals Competition and Financial Stability in the European Listed Banks

SAGE Open ◽  
2021 ◽  
Vol 11 (3) ◽  
pp. 215824402110326
Author(s):  
Maria Celia López-Penabad ◽  
Ana Iglesias-Casal ◽  
José Fernando Silva Neto
Keyword(s):  
Market Power ◽  
Risk Taking ◽  
Financial Stability ◽  
Banking System ◽  
Political Community ◽  
Bank Risk ◽  
Bank Competition ◽  
Banking Competition ◽  
The Impact ◽  
The Relationship

The analysis of the relationship between bank competition and financial stability remains a controversial issue and widely discussed in the academic and political community. Using a sample of 117 listed banks in 16 European countries for the years 2011 to 2018, the article explores the impact of market power, measured by the Lerner index, on the bank stability, measured by distance-to-default and Z score. Our results show that for the overall sample, higher market power in banking decreases the risky behavior of banks, confirming the “competition-fragility” view. We do not find any support for a U-shaped relationship between competition and bank risk-taking. However, our findings differ from previous studies pointing out that the relationship between bank competition and risk-taking is differentiated depending on whether the bank is based in a country with a more stable banking system or a less stable one. In countries with a less financially stable banking system, increased competition leads to increased bank risk-taking. In countries with a more stable banking system, market power seems not to influence banks’ financial stability. Public policies must guarantee banking competition but limiting excessive bank risk-taking, especially in countries with less financially sound banking systems. The consolidation of European banking can be a key element for achieving these policies.

scholarly journals The Impact of Regulatory Capital and Bank Characteristics on the Relationship between Bank Competition and Risk Taking in the Banking System

2021 ◽  
Vol 28 (1) ◽  
pp. 87
Author(s):  
Eman Abdel-Wanis
Keyword(s):  
Risk Taking ◽  
Negative Impact ◽  
Positive Impact ◽  
Banking System ◽  
Bank Risk ◽  
Bank Competition ◽  
Regulatory Capital ◽  
The Impact ◽  
The Relationship ◽  
Positive Effect

This paper explores the association between bank competition, regulatory capital, and bank risk taking in an Egyptian setting and to examine the interaction between bank competition and regulatory capital and their impact on bank risk taking in developing countries like Egypt and also investigate the effect of bank characteristics on the relationship between bank competition and bank risk taking through a sample of 27 Egyptian listed banks during the period 2012-2018 using OLS regression . Results indicated that there is a negative impact of bank competition on the bank risk taking and a positive effect of regulatory capital on bank risk taking in the Egyptian listed banks. Results show that increase regulatory play a vertical role in enhance association between competition and bank risk taking and also, there is a positive impact of bank characteristics like: bank size and divarication on bank risk taking in the Egyptian banks. Results refer to there is no effect of bank type, leverage and profitability to support the relationship between bank competition and risk taking

scholarly journals Effect of Bank Competition on Financial Stability: Empirical Evidence from Nepal

2018 ◽  
Vol 13 ◽  
pp. 19
Author(s):  
Surya Bahadur G.C. ◽  
Gyaneswar Sharma
Keyword(s):  
Financial Stability ◽  
Fixed Effects ◽  
Banking Sector ◽  
Banking System ◽  
System Stability ◽  
Annual Data ◽  
Bank Competition ◽  
Financial Industry ◽  
Banking Competition ◽  
The Impact

<p>There are two hypotheses about the relationship between competition and financial stability in the banking system: “competition-fragility” view argues that competition makes banks more likely totake excessive risks, thereby leading to fragility, while “competition-stability” view suggests that higherinterest rates in less competitive environments may cause borrowers to take higher risks,resulting in higher probability of non-performing loans and a more fragile system. This paper empirically examines the impact of competition on Nepalese banking system employing annual data of commercial banks from 1999 to 2012 period using fixed effects panel data model. The study period represents the era of rapid growth in financial institutions in Nepal. The HHI and n-bank concentration ratios are used as measure of competition while Z-index and nonperforming loans ratioare used as proxies of financial stability. The effects of macroeconomic factors and bank specific indicators are also taken into account. The results reveal that there is apositive relationship between greater banking competition and financial stability in Nepal, supporting the “competition-stability” view. Competition in banking sector is found to result in decrease in credit risk and contribute for financial stability. Mixed results have been achieved incase of the impact of bank competition on overall stability. The findings indicate that both higher concentration and higher competition are detrimental for stability. Hence, policymakers should facilitate further consolidation in the financial industry, however, it should be ensured that excessive consolidation doesn’t result in an environment that hinders competition. In addition,besides competition level in the banking system, macroeconomic situation of the country is found to be an important determinant of banking system stability.</p><p><em> </em><strong><em>Economic Literature</em></strong><em>, </em>Vol. XIII August 2016, page 19-31</p>

scholarly journals Competition, performance and financial stability in US agricultural banking

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Madhav Regmi ◽  
Allen M. Featherstone
Keyword(s):  
Market Power ◽  
Financial Stability ◽  
Relationship Lending ◽  
Net Income ◽  
Bank Competition ◽  
Content Type ◽  
Linear Effect ◽  
And Performance ◽  
The Impact ◽  
Agricultural Banking

PurposeThe number of US commercial banks has declined by about 50% over the last two decades. This change could lead to a potential decline in competition and a potential increase in market power in the agricultural banking market. The focus of this study is to examine whether the risk of failure and the performance of agricultural banks has been affected by bank consolidations.Design/methodology/approachThe impact of bank competition on performance and financial stability of agricultural banks is studied using a Lerner index as a measure of market power. A Z-score is constructed to measure bank stability. Similarly, the return on assets (net income to total assets ratio), return on equity (net income to the total equity ratio), agricultural loan ratio and agricultural loan volume are used as performance measures for agricultural banks. Two-way fixed effect regression models are estimated to measure the impact of competition on financial stability and performance.FindingsResults indicate that bank competition has a U-shaped effect on the probability of default and an inverted U-shaped effect on volume and proportion of agricultural lending. There also exists evidence of a positive but non-linear effect of bank market power on the profitability of agricultural banks.Originality/valueThere is limited literature on the impact of bank competition on financial stability and performance of US agricultural banks. Agricultural banks hold more than 40% of US farm debt. A decrease in the number of banks or the level of competition in agricultural banking may cause an adverse effect on relationship lending. The key findings imply that bank regulatory strategies should focus on enhancing (reducing) competition in more (less) concentrated banking markets to improve the financial health and performance of agricultural banks.

scholarly journals Restructuring and Bank Performance in Dual Banking System

2021 ◽  
Vol 10 (2) ◽  
pp. 223-247
Author(s):  
Raditya Sukmana ◽  
Mansor H Ibrahim
Keyword(s):  
Banking System ◽  
Extensive Study ◽  
Bank Risk ◽  
Bank Performance ◽  
Islamic Banking ◽  
Panel Var ◽  
Bank Competition ◽  
Islamic Bank ◽  
Conventional Banks ◽  
The Impact

While extensive study deals with bank competition and performance relationship, this study pioneers in focusing the existence Islamic bank in the presence of well established conventional banking system in Malaysia. This paper assesses the impact of changing competition landscape and Islamic bank penetration on bank risk, profitability and capitalization.  This study utilizes an unbalanced panel dataset consisting of 37 commercial banks over the period 1997 to 2015. the paper uses a panel VAR methodology to discern the interactions between bank competition and Islamic banking presence on one hand and bank performance on the other hand.Findings: We find evidence supportive of both competition – stability and competition – fragility views for conventional banks. The results suggest that bank competition improves conventional bank risk and, at the same time, lower profitability and capital holdings.  As for Islamic banks, competition seems to robustly influence only bank profitability.  Finally, we note that increasing Islamic bank penetration improves the risk profile of conventional banks and, as expected, reduces their market power.  These results bear important implications on the design of competition policies in a dual banking system as well as on the development of the Islamic banking sector.JEL Classification: C23, G21, G28How to Cite:Sukmana, R., & Ibrahim, M. H.. (2021). Restructuring and Bank Performance in Dual Banking System. Signifikan: Jurnal Ilmu Ekonomi, 10 (2), 223-247. https://doi.org/10.15408/sjie.v10i2.20740. 

COMPETITION-STABILITY RELATIONSHIP IN DUAL BANKING SYSTEMS: EVIDENCE FROM EFFICIENCY-ADJUSTED MARKET POWER

2021 ◽  
pp. 1-24
Author(s):  
MUDEER AHMED KHATTAK ◽  
OMAR ALAEDDIN ◽  
MOUTAZ ABOJEIB
Keyword(s):  
Market Power ◽  
Financial Stability ◽  
Banking Sector ◽  
Market Competition ◽  
Policy Implications ◽  
Islamic Banks ◽  
Banking Competition ◽  
Precise Measure ◽  
Conventional Banks ◽  
The Impact

This research attempts to explore the impact of banking competition on financial stability employing a more precise measure of market power. It was found that Islamic banks are less stable and are enjoying lower market power. The analysis shows that higher market competition makes the banking sector vulnerable to defaults, supporting the “competition-fragility view”. This research finds no difference in the relationship for Islamic banks indicates that Islamic banks might be involved in traditional banking activities as conventional banks. The results are consistent and robust to different estimation approaches and subsamples. This research carries regulatory and policy implications.

The impact of multimarket contacts on bank stability in Vietnam

2019 ◽  
Vol 31 (3) ◽  
pp. 336-357 ◽  
Author(s):  
Tu DQ Le ◽  
Son H. Tran ◽  
Liem T. Nguyen
Keyword(s):  
Risk Taking ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Banking System ◽  
Asia Pacific ◽  
Asia Pacific Region ◽  
Bank Stability ◽  
Content Type ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this study is to investigate the impact of multimarket contacts on bank stability in the Vietnamese banking system between 2006 and 2015. Design/methodology/approach The system generalized method of moments proposed by Arellano and Bover (1995) is used to examine the relationship between multimarket contacts and bank stability. Findings The findings show that multimarket contacts among Vietnamese commercial banks improve bank stability. In addition, more x-efficient banks appear to be more stable. The same is true for banks with less holding liquid assets, for those with less excessive lending, for smaller banks, for those with the greater level of intermediation and for those with a higher level of foreign ownership. Listed banks are found to be less-risk taking than unlisted banks. Originality/value This study is the first attempt to examine the relationship between multimarket contacts and bank stability in an emerging market in the Asia-Pacific region.

scholarly journals Does Bank Competition Enhance or Hinder Financial Stability? Evidence from Indian Banking

2020 ◽  
Vol 9 (s1) ◽  
pp. 75-102
Author(s):  
Bijoy Rakshit ◽  
Samaresh Bardhan
Keyword(s):  
Commercial Banks ◽  
Financial Stability ◽  
Positive Impact ◽  
Banking System ◽  
Bank Competition ◽  
Z Score ◽  
Dynamic Panel ◽  
Dynamic Panel Model ◽  
Panel Model ◽  
The Impact

AbstractThe primary purpose of this paper is to empirically investigate the impact of bank competition on financial stability in India. We use a dynamic panel model to examine whether an increase in bank competition hindrances financial stability of commercial banks in India over the period 1996 to 2016. Findings reveal that in India, a higher degree of bank competition is positively associated with the prevalence of non-performing loans. Additionally, the positive impact of the Lerner index on Z-score lends support to competition-fragility hypothesis. However, we argue that both the views of competition-stability and competition-fragility can coexist in a single banking system like India.

scholarly journals The impact of monetary policy and bank competition on banking industry risk: A default analysis

2021 ◽  
Vol 16 (1) ◽  
pp. 205-215
Author(s):  
Sri Ayomi ◽  
Eleonora Sofilda ◽  
Muhammad Zilal Hamzah ◽  
Ari Mulianta Ginting
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Banking Industry ◽  
Negative Impact ◽  
Generalized Method Of Moments ◽  
Dynamic Panel Data ◽  
Probability Of Default ◽  
Bank Competition ◽  
Banking Competition ◽  
The Impact

In the financial system and economy, the banking industry plays a crucial role. Default risk takes central stage in preserving financial stability and needs to be mitigated as it can trigger a crisis. The study examines the combined effects of monetary policy and bank competition on banking defaults. Using a sample of 95 commercial banks in Indonesia between 2009 and 2019, this study employs the Generalized Method of Moments, a two-step dynamic panel-data estimation system, to analyze it. Empirical estimation results show that monetary policy, through an increase in the benchmark interest rate, negatively affects probability of default. The extent of banking stability is also enhanced by monetary policy. Banking competition has a negative and significant effect on probability of default and has a positive effect on the banking distance to default. Furthermore, the combined impact of monetary policy and banking competition positively affects probability of default but has a negative impact on the distance of default. Building on this study, to promote a stable and more efficient banking system, policymakers should develop policies that foster complementary monetary and competition policies.

Impact of Noninterest Income on Bank Risk-Taking and Bank Lending Spread

2021 ◽  
Author(s):  
Muhammad Jawad ◽  
Munazza Naz ◽  
Muhammad Aftab Shamsi
Keyword(s):  
Risk Taking ◽  
Regulatory Authority ◽  
Generalized Method Of Moments ◽  
Banking System ◽  
Bank Lending ◽  
Bank Risk ◽  
Risky Assets ◽  
Interest Income ◽  
Regulatory Perspective ◽  
The Impact

This study investigates the impact of diversification between traditional margin income and nontraditional income (noninterest-based income) on bank risk-taking and bank lending spread for banks operating in Pakistan. Bank risk is measured with the nonperforming loan ratio and bank [Formula: see text]-score. Data of this study is obtained from financial statements, which are an annual publication of State Bank of Pakistan, for the period 2006–2016 for 52 banks in Pakistan. Panel regression with the generalized method of moments (GMM) estimator is employed. The study reveals that an increase in noninterest income increases bank risk-taking (spending on highly risky assets), as noninterest income is riskier than interest income. It is also revealed that banks with greater dependence on noninterest income may grant a loan with lower lending spread. These results have implications for the betterment of the banking system, regulatory authority, and stakeholders as well. From a regulatory perspective, the study provides guidelines for making rules and regulations to control and monitor the dependence on noninterest income as well as on interest income. Pakistan banks regulatory authority should focus on the increase in disclosure of the composition of noninterest income and this disclosure would increase understanding of changing environment of banking in Pakistan.

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