Coexistence, cooperation, and competition between banks and non-banking entities

Abstract

Financial stability is essential for the functioning of the economy, and competition between banks is seen as an essential factor for their stability. Reframing the conflict and each party’s goals in such a way that they are mutually dependent increases a party’s chances of reaching an agreement. This study investigates the relationship between bank size and the institution’s stability. Government regulators and anyone else’s ability to keep an eye on the entire financial system is jeopardized when large portions of it are left largely unregulated. Price competition (marginal-cost pricing) reduces the market power of a single firm as the number of firms in an industry grows. Since the 1990s, the banking industry, according to previous studies, has been experiencing concentration and competition. Some argue that the lack of technology in small banks may put them at an advantage in terms of customer satisfaction, but this is not necessarily the case.