Study on the impact of Taiwan's deposit and loan market competition on the risk bearing of the bank

Abstract

The “third financial reforms” in Taiwan set off a wave of merger and reorganization of the banking. In this paper, by constructing the Lerner Index of commercial bank deposit and loan market, it is found that the degree of competition in the loan market of commercial banks in Taiwan is decreasing, and the competition degree of the deposit market is rising. Based on the balance panel data of Taiwan's commercial Banks from 2012 to 2014, the paper empiricised the impact of the competition on the bank's deposit and loan market on its risk-taking behavior after the “third financial reform”. The research conclusion shows that :(1) the competition of commercial bank loan market and its risk bearing are”U”type relationship; (2) the deposit market competition can significantly reduce the risk of commercial Banks; (3) the assets scale of commercial Banks has contributed to the relationship between their “deposit market forces --financial fragility”; (4) the capital of commercial Banks can effectively enhance the degree of the loan market forces’ inhibition of bank risk behaviors.