02153cas a2200265 a 4500 AALejournalIMF002492 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451859584 1018-5941 BD-DhAAL BD-DhAAL Smith, Bruce. Crisis in Competitive Versus Monopolistic Banking Systems / Bruce Smith, Gianni De Nicolo, John Boyd. Washington, D.C. : International Monetary Fund, 2003. 1 online resource (38 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 We study a monetary, general equilibrium economy in which banks exist because they provide intertemporal insurance to risk-averse depositors. A "banking crisis" is defined as a case in which banks exhaust their reserve assets. Under different model specifications, the banking industry is either a monopoly bank or a competitive banking industry. If the nominal rate of interest (rate of inflation) is below (above) some threshold, a monopolistic banking system will always result in a higher (lower) crisis probability. Thus, the relative crisis probabilities under the two banking systems cannot be determined independently of the conduct of monetary policy. We further show that the probability of a "costly banking crisis" is always higher under competition than under monopoly. However, this apparent advantage of the monopoly bank is due strictly to the fact that it provides relatively less valuable intertemporal insurance. These theoretical results suggest that banking system structure may matter for financial stability. Mode of access: Internet Boyd, John. De Nicolo, Gianni. IMF Working Papers; Working Paper ; No. 2003/188 Full text available on IMF http://elibrary.imf.org/view/journals/001/2003/188/001.2003.issue-188-en.xml IMF e-Library