Competition, financial intermediation and riskiness of banks: Evidence from the Asia-Pacific region

Wahyoe Soedarmono (1) , Amine Tarazi (2)

1 Universitas Siswa Bangsa Internasional, Faculty of Business / Sampoerna School of Business
2 LAPE - Laboratoire d'Analyse et de Prospective Economique

From a sample of commercial banks in the Asia-Pacific region over the 1994-2009 period, this study highlights that banks in less competitive markets exhibit lower loan growth and higher instability. Such instability is further followed by a decline in deposit growth, suggesting that Asian banks are also subject to indirect market discipline mechanisms through bank competition. This study therefore sheds light on the importance of enhancing bank competition to overcome bank risk and strengthen financial intermediation. Likewise, this study advocates the importance of strengthening market discipline to reduce bank riskiness regardless of the degree of competition in the banking industry.

Mots clés: Bank competition; loan growth; risk; market discipline; Asia Pacific JEL Classification: G21; G28

Domaines: Economies et finances

Wahyoe Soedarmono, Amine Tarazi. Competition, financial intermediation and riskiness of banks: Evidence from the Asia-Pacific region. 2015. ⟨hal-01114380⟩