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0:00
Hello, I am Claudia Girardone,
I am professor
of banking and finance
at the Essex Business School
of the University of Essex.
Today's lecture is about
competition in banking.
The aims of this lecture
are to appreciate
the benefits of composition
in the banking sector,
to understand how to measure
bank competition levels,
to explain the link between
competition and bank stability.
0:30
The main reference
for this lecture
is the Casu, Girardone,
Molyneux 2015 edition
of the Introduction to Banking
by Pearson Education.
Well, we start off
by giving an introduction
and then focusing
on the structural approaches
to measuring competition.
0:54
Competition is good
for many reasons.
Competition
is generally considered
an essential force
in the economy
as it should encourage firms
to be more efficient
in the way
they produce outputs
and consequently promote
a better allocation
of resources.
In the banking industry,
higher efficiency
should entail lower costs,
which should then be
passed onto bank customers.
How does this happen?
In the form of lower charges,
higher deposit rates
and reduced lending costs.
1:36
So why is competition
in banking markets important?
Competition should have
a positive impact
on the economy,
influencing a broad array
of factors that can,
for example,
improve access to finance,
increase competitiveness
in other sectors of the economy,
foster innovation
and improve
the quality of products
and services offered,
widen consumer choice,
and promote economic growth.
A healthy degree of rivalry
is considered necessary
for the dynamic efficiency
of the banking industry
and for the economy as a whole.
However, we need to keep in mind
that the issue
of the perceived benefits
derived from
increased competition
has always been
controversial in banking
as these have to be weighted
against the risks
of potential instability.
As a consequence,
the banking industry
has been historically
heavily regulated.
