Financial Integration, Competition and Bank Risk-Taking Behavior: Evidence from Africa’s Sub-Regional Markets

Abstract

Risk is an inherent aspect of the banking business, and the effect of financial integration and changes to competition on banking stability is a central issue in the active debate among academics, practitioners, and policymakers in the financial services industry. This debate is even more critical for emerging economies, given the prevalence of information asymmetry in largely underdeveloped and bank-dominated financial systems (Bourgain et al., 2012). Additionally, excessive bank risk-taking poses a threat to bank profitability and survival and imperils the stability and productivity of economies overall (Schoemaker, 2011). 1) Following the recent global financial crisis, the debate has largely centered on the role played by financial integration in the crisis and how future such occurrences can be averted.Generally, banking supervision is guided by the fundamental principle that actors' distortion of the bank market structure pose a threat to banking stability through influencing the risk-taking

Impact of economic integration on banking performance in Vietnam

“…In the research of Shkolnyk et al (2020), the economic categories of financial stability and financial security are closely related, since in both cases the ability of the country's financial system to absorb external and internal shocks is evaluated. Financial integration is generally associated with the development of synergies through cross-border banking and investment activities and increased competitiveness among banks, financial integration directly increases bank risk-taking behavior (Banyen, 2021).…”