EU banking markets

Exploring the Short- and Long-Run Links from Bank Competition to Risk – Reconciling Conflicting Hypotheses?

The subject of bank competition and risk has returned to the fore with the financial crisis of 2008-9, with a common view being that competition between financial institutions during the preceding boom was at the core of the crisis. This in turn implies that the benefits of banking competition for economic growth and efficiency need to be placed in the balance. On the other hand, there is an extensive literature, generally estimated on pre-crisis data, which finds conflicting results on the relation between competition and risk.