Working Paper Revision

Bank Competition and Risk-Taking under Market Integration

Abstract: Linkages between bank competition and risk-taking are analyzed in a model where market integration is the principal driver of increased competition. Risk implications of across-market competition un-der banking market integration are significantly different from that of within-market competition. While both modes of competition increase the number of competitor banks, across-market competition yields a bank-customer effect that can potentially reverse any relation that prevails be- tween within-market competition and risk-taking. This result suggests that the lack of consensus in the bank competition-financial stability literature is not an anomaly but an inherent feature of the analysis.

JEL Classification: D82; G21; L13;

https://doi.org/10.18651/RWP2020-21

Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Research Working Paper

Publication Date: 2024-10-23

Number: RWP 20-21

Related Works

• Working Paper Revision (2024-10-23) : You are here.
• Working Paper Original (2020-12-30) : Market Integration and Bank Risk-Taking