Abstract
This article explores factors that explain the coexistence of public and private banks in the debt market. Starting from the objective function that underpins each institution type, the article identifies the sources of growth in a public bank relative to a private bank under the constraint that both types of institutions compete for the same funds in the debt market. The optimal response functions associated with each objective function also underscore differences in the correlation across key financial ratios for a public bank versus a private bank. Theoretical results also serve as a reference for the role of assumptions on projections of financial ratios for a public bank versus a private bank.
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