01984cas a2200253 a 4500 AALejournalIMF002401 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451853810 1018-5941 BD-DhAAL BD-DhAAL De Nicolo, Gianni. Bank Risk-Taking and Competition Revisited / Gianni De Nicolo, John Boyd. Washington, D.C. : International Monetary Fund, 2003. 1 online resource (24 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This study reinvestigates the theoretical relationship between competition in banking and banks' exposure to risk of failure. There is a large existing literature that concludes that when banks are confronted with increased competition, they rationally choose more risky portfolios. We briefly review this literature and argue that it has had a significant influence on regulators and central bankers, causing them to take a less favorable view of competition and encouraging anti-competitive consolidation as a response to banking instability. We then show that existing theoretical analyses of this topic are fragile, since they do not detect two fundamental risk-incentive mechanisms that operate in exactly the opposite direction, causing banks to aquire more risk per portfolios as their markets become more concentrated. We argue that these mechanisms should be essential ingredients of models of bank competition. Mode of access: Internet Boyd, John. IMF Working Papers; Working Paper ; No. 2003/114 Full text available on IMF http://elibrary.imf.org/view/journals/001/2003/114/001.2003.issue-114-en.xml IMF e-Library