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Does Competition Make Banking More Dangerous?

Thorsten Beck's picture

Post-Debate Update:

The debate is over, opening statements, rebuttals and closing remarks have attracted lots of comments and the votes been cast and counted. The results show that a (probably not very representative) majority do not think that competition is dangerous for stability, though the reasons for this might vary quite a lot. Some might have been swayed by my argument that it is regulation that makes banking more dangerous – if of the wrong kind. This is also consistent with Ross Levine’s view that the recent crisis "represents the unwillingness of the policy apparatus to adapt to a dynamic, innovating financial system." Understanding the links between competition, regulatory policies and stability is certainly a topic that deserves to be to be explored more – stay tuned for an update over the summer.

Original Post:

Does competition make banking more dangerous? This is the topic Franklin Allen and I are discussing in the most recent Economist debate. Recent reforms aimed at the split-up of large banks deemed too-big-to-fail and at developing more competitive banking markets are the background to this important and policy-relevant debate. 
 
You might remember the debate on financial innovation between Ross Levine and Joe Stiglitz—this one follows the same format. Our opening statements will be online tomorrow, with rebuttals following next week. Voting is open until June 11. So please read, participate, and vote!
 
It'll all be happening on the Economist's website here.