Handbook of Financial Intermediation and Banking

CHAPTER 14 Competition and Regulation in Banking

Elena Carletti

University of Frankfurt

1. Introduction

2. Bank Instability and the Need of Regulation

2.1. Bank Fragility: Individual Runs and Systemic Crises

2.2. Excessive Risk Taking

2.3. The Need of Regulation

3. Competition in Banking

3.1. Competition Under Asymmetric Information

3.2. Competition and Switching Costs

3.3. Competition and Networks

4. Competition and Stability: A Positive or a Negative Link?

4.1. Market Structure and Financial Fragility

4.2. Market Structure and Risk Taking

5. Competition and Regulation

6. Conclusion

References

I would like to thank Franklin Allen, Hans Degryse, Martin Hellwig, Steven Ongena, and Xavier Vives for valuable comments and discussions.