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Competition and Stability in BankingThe Role of Regulation and Competition Policy$
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Xavier Vives

Print publication date: 2016

Print ISBN-13: 9780691171791

Published to Princeton Scholarship Online: January 2018

DOI: 10.23943/princeton/9780691171791.001.0001

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Summary of Findings and Policy Implications

Summary of Findings and Policy Implications

(p.222) Chapter 8 Summary of Findings and Policy Implications
Competition and Stability in Banking

Xavier Vives

Princeton University Press

This book has examined the evolution of the banking sector, the role of regulation and the response to the perceived regulatory failure in the 2007–2009 crisis, the nature of competition in banking, and the trade-off between competition and stability. It has argued that competition in banking is good for society, provided that regulation and supervision are adequate. Competition is a main source of static and dynamic efficiency, and the banking sector is no exception. While competition is not responsible for fragility in banking, there is a trade-off between competition and financial stability along some dimensions. This trade-off could be “regulated away” in principle, but regulation is imperfect. This chapter presents a summary of the book's findings and their implications for competition policy and regulation. It concludes with an overview of challenges for researchers, bankers, and regulators/supervisors.

Keywords:   banking sector, regulation, regulatory failure, financial crisis, competition, stability, competition policy

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