Competition and stability in banking

@inproceedings{Vives2010CompetitionAS,
  title={Competition and stability in banking},
  author={Thomas Vives},
  year={2010}
}
I review the state of the art of the academic theoretical and empirical literature on the potential trade-off between competition and stability in banking. There are two basic channels through which competition may increase instability: by exacerbating the coordination problem of depositors/investors on the liability side and fostering runs/panics, and by increasing incentives to take risk and raise failure probabilities. The competition-stability trade-off is characterized and the implications… CONTINUE READING

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