Linking the Concepts of Financial Stability: Crises, Competition, and Concentration

Abstract

Findings herein indicate that there is a chance that competition engenders systemic banking crisis for ASEAN emerging market economies, that is, there could be a competition-fragility nexus. On the other hand, at decreasing levels of competition, increasing concentration could harm financial stability. Meanwhile, when banking markets are already highly concentrated, increased competition would either not encourage fragility or be good for stability, i.e., a concentration-stability link is established. When controls for regulation and macroprudential tools are introduced, the opposite effects of competition and concentration on financial stability become more apparent.