How does competition affect bank systemic risk?

Bank Business Models and Performance During Crisis in Central and Eastern Europe

“…This might be explained by the fact that larger banks in terms of total assets are expected to have a greater diversification among products. The results indicate a negative relation between inflation and ROE meaning that an increase of inflation has a negative impact on bank performance, in line with previous studies of Demirgüc-Kunt and Huizinga (2010), Köhler (2015) or Anginer et al (2014). …”

Effect of Bank Competition on Financial Stability: Empirical Evidence from Nepal

“…There is a large empirical literature which aims to examine the impact of banking system structure on its stability and hence shed light on the conflicting theoretical predictions and policy debates on this issue. However, similar to the theoretical literature, empirical studies produce different findings and do not offer concrete single evidence on the validity of either the competitionstability or the competition-fragility views (Boyd et al, 2006;Schaeck & Cihak, 2008;Berger et al, 2009;Fungacova & Weill, 2009;Liu et al, 2012;Anginer et al, 2014).Overall, it appears that empirical studies for specific countries have not reached conclusiveevidence for either a stabilityenhancing or a stability-deteriorating view of competition. Beck et al (2006) argue that this relation is complex and has important interactions with macroeconomic, regulatory and institutional framework of countries and changes with different model specifications.…”

Systemic risk, bank’s capital buffer, and leverage

“…The fragility of the banking system due to the increasing probability of an individual bank failures threatens financial system and the economy as a whole. The stability of the banking system is no longer affected by the absolute risk of an individual bank, but rather how serious contribution of an individual bank into a failure of the banking system as a whole (Anginer, Demirguc-Kunt, & Zhu, 2014). This phenomenon directs a new orientation in update macro-prudential regulation and banking supervisions.…”

“…(Anginer et al, 2014) define systemic impact of a bank as correlation of bank default risk which is measured by the R 2 of the regression equation between the change of a bank default risk and the change of all banks' default risk. The high correlation of all banks' risk taking behavior increase probability of simultaneous bank failures.…”

“…Recent researches like Anginer et al (2014) and Sundaresan (2013) show that measurement of bank default risk which is the most powerful and widely accepted among academics and practitioners is Merton (1974). Merton model can estimate the probability of bank default on a daily basis by using market value of bank equity in the stock market.…”