Exploring the Impacts of Bank Competition on Financial Stability: A South Asian Perspective

Abstract

The aim of this study is to explore impact of bank competition on financial stability in South Asia to provide profound insights into the dynamics of the banking industry within the region. To achieve this objective, current study used multiple regressions on the data from Pakistan, India, Sri Lanka and Bangladesh for the period 2000–2022. Results show that delicate competition encourages the banks to assume more robust risk management practices and operational efficiency, contributing to overall stable financial environment. The study invokes the attention of government and policymakers to find the results valuable as they navigate delicate balance amid fostering competition and maintaining secure banking sector. The research contributes to ongoing discourse on role of competition in shaping the stability of financial systems, particularly in emerging economies. This adds to scarce literature on impact of bank competition on financial stability in South Asian countries. Study contributes to literature on issue like role of competition in shaping stability of financial systems, mainly in emerging economies by challenging earlier studies that proposed negative link between competition & stability in diverse satiations & context.