Download A New Measure of Competition in the Financial Industry: The by Jacob A Bikker, Michiel van Leuvensteijn PDF

By Jacob A Bikker, Michiel van Leuvensteijn

The 2008 credits concern began with the failure of 1 huge financial institution: Lehman Brothers. considering the fact that then the point of interest of either politicians and regulators has been on stabilising the economic climate and combating destiny monetary instability. At this juncture, we're on the final level of future-proofing the monetary region through elevating capital requisites and tightening monetary legislation. Now the coverage time table must be aware of remodeling the banking quarter into an engine for development. Reviving festival within the banking region after the kingdom interventions of the previous years is a key step during this process.

This booklet introduces and explains a comparatively new suggestion in festival size: the performance-conduct-structure (PCS) indicator. the major proposal in the back of this degree is firm’s potency is extra hugely rewarded by way of industry proportion and revenue, the better aggressive strain is. The e-book starts via explaining the monetary market’s basic hindrances to festival providing a short survey of the advanced courting among monetary balance and pageant. The theoretical contributions of Hay and Liu and Boone give you the theoretical underpinning for the computers indicator, whereas its software to banking and assurance illustrates its empirical traits. ultimately, this booklet provides a scientific comparability among the result of this method and (all) present tools as utilized to forty six nations, over an analogous pattern interval.

This e-book offers a complete evaluate of the knowns and unknowns of monetary zone festival for advertisement and primary bankers, policy-makers, supervisors and lecturers alike.

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Additional resources for A New Measure of Competition in the Financial Industry: The Performance-Conduct-Structure Indicator

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Welch (2002). Financial literacy: An overview of practice, research and policy. Federal Reserve Bulletin 88 (11), 445–457. Cap Gemini (2005). World Retail Banking Report. D. Cummins, K. A. x. D. Cummins, K. A. Weiss (2013b) Systemic risk measures in the insurance industry: A copula approach, Working paper, Temple University, Philadelphia. Claessens, S. (2009). Competition in the financial sector: Overview of competition policies. IMF Working Paper WP/09/45, International Monetary Fund. CPB (2003).

Although many financial market failures are difficult to solve, the discussion above explains that there are many – general and specific – possible steps in the right direction, which would help to foster competition on financial markets. 4. The relationship between competition and financial stability Healthy competition may also be important as far as it affects financial stability. For that reason, this section investigates the relationship between competition and financial stability. Banks are opaque financial entities; their health and inherent risks are difficult to foresee.

More competitive markets will weed out high cost firms. The second approach is that low costs are the result of good investment and R&D decisions, and the degree of managerial effort in keeping costs down (Hermalin, 1992). Responsibility for the performance of the firms in terms of market share and profits is naturally assigned to the management. So there is a strong incentive for the manager to ensure that the firm’s costs do not get out of line with those of its rivals, especially where the competitive environment is aggressive.

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