Market structure and risk taking in the banking industry

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dc.contributor Suomen Pankki Shy, Oz Stenbacka, Rune 2014-09-22T07:58:34Z 2014-09-22T07:58:34Z 1998
dc.identifier.isbn 951-686-592-5
dc.identifier.issn 0785-3572
dc.description.abstract This study demonstrates that the common view, whereby an increase in competition leads banks to increased risk taking, fails to hold in an environment where consumers can choose in which bank to make a deposit based on their knowledge of the riskiness incorporated in the banks' outstanding loan portfolios.We show that, in the absence of deposit insurance, competition between differentiated banks will increase the returns from diversification.We offer a welfare analysis establishing that introduction of competition into the banking industry can only improve social welfare.However, competition cannot always guarantee that diversification will occur to a socially optimal extent.Finally, we show that deposit insurance would eliminate the beneficial effects of banks competing with asset quality as a strategic instrument. Keywords: Risk taking in banking, banks' portfolio diversification, bank competition, deposit insurance
dc.format.extent 28 s.
dc.language.iso eng
dc.relation.ispartofseries Bank of Finland Research Discussion Papers
dc.subject kilpailu
dc.subject pankkitoiminta
dc.subject riskit
dc.subject talletussuoja
dc.subject SP
dc.title Market structure and risk taking in the banking industry
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-20140807452 Suomen Pankin keskustelualoitteita
dc.series.year 1998
dc.series.number 22/1998
dc.series.sortingnumber 22 27.10.1998

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