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The influence of competition on the financial stability of banks in the GCC countries

Aktham I. Maghyereh|Basel Awartani
경제연구소 (Hanyang Economic Research Institute)|2016.05|Journal of Economic Research (JER)|제21권 제1호|pp. 135-173|DOI 10.17256/jer.2016.21.1.005

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키워드

regulationsLerner indexbank competitionbank stabilityGCC banks
주제분류경제학

초록

This paper tests the average relationship between competition and bank stability for 70 banks operating in the Gulf Cooperation Council (GCC) countries during the period 2001-2011. Our results show that an increase in competition contributes to bank fragility and that its contribution depends on the strength of regulations. In particular, the negative impact on bank soundness will be stronger the lower the capital requirements, the weaker the supervisory power, the looser the regulations imposed on bank activities, and the less the transparency and the market discipline. These findings carry important policy implications for banks' stability in the GCC countries.

Abstract

This paper tests the average relationship between competition and bank stability for 70 banks operating in the Gulf Cooperation Council (GCC) countries during the period 2001-2011. Our results show that an increase in competition contributes to bank fragility and that its contribution depends on the strength of regulations. In particular, the negative impact on bank soundness will be stronger the lower the capital requirements, the weaker the supervisory power, the looser the regulations imposed on bank activities, and the less the transparency and the market discipline. These findings carry important policy implications for banks' stability in the GCC countries.

참고문헌 (79)

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