Competition in the Financial Sector
Competition in the financial sector, as in other sectors, matters for allocative, productive, and dynamic efficiency. Theory suggests, however, that unfettered competition is not necessarily best given the special features of financial services. The author discusses these analytical complications be...
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| Format: | Journal Article |
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World Bank
2012
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| Online Access: | http://hdl.handle.net/10986/4425 |
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okr-10986-4425 |
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okr-10986-44252021-04-23T14:02:17Z Competition in the Financial Sector Claessens, Stijn barriers to entry competition policies competition policy deregulation developing countries financial contracts financial markets financial products financial sector financial sector stability financial services financial services industries financial stability financial system financial systems global financial markets globalization liberalization liquidity stock exchanges Competition in the financial sector, as in other sectors, matters for allocative, productive, and dynamic efficiency. Theory suggests, however, that unfettered competition is not necessarily best given the special features of financial services. The author discusses these analytical complications before reviewing how to assess competition in the financial sector and its determinants. It is shown that competitiveness varies greatly across countries, in perhaps surprising ways, and that it is not driven by financial system concentration. Rather, systems with greater foreign entry and fewer entry and activity restrictions tend to be more competitive, confirming that contestability—the lack of barriers to entry and exit—determines effective competition. The author then analyzes how competition policy in the financial sector has generally been conducted and how changes in competition in the financial services industries should affect competition policy going forward. In part based on comparison with other industries, the author provides some suggestions on how competition policy in the financial sector could be better approached as well as what institutional arrangements best fit a modern view of competition policy in the sector. The specific competition challenges for developing countries is also highlighted. The author concludes that practices today fall far short of the need for better competition policy in the financial sector. 2012-03-30T07:12:34Z 2012-03-30T07:12:34Z 2009-03-30 Journal Article World Bank Research Observer 1564-6971 http://hdl.handle.net/10986/4425 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ World Bank World Bank Journal Article Latin America Brazil Mexico Colombia Bolivia |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| topic |
barriers to entry competition policies competition policy deregulation developing countries financial contracts financial markets financial products financial sector financial sector stability financial services financial services industries financial stability financial system financial systems global financial markets globalization liberalization liquidity stock exchanges |
| spellingShingle |
barriers to entry competition policies competition policy deregulation developing countries financial contracts financial markets financial products financial sector financial sector stability financial services financial services industries financial stability financial system financial systems global financial markets globalization liberalization liquidity stock exchanges Claessens, Stijn Competition in the Financial Sector |
| geographic_facet |
Latin America Brazil Mexico Colombia Bolivia |
| description |
Competition in the financial sector, as in other sectors, matters for allocative, productive, and dynamic efficiency. Theory suggests, however, that unfettered competition is not necessarily best given the special features of financial services. The author discusses these analytical complications before reviewing how to assess competition in the financial sector and its determinants. It is shown that competitiveness varies greatly across countries, in perhaps surprising ways, and that it is not driven by financial system concentration. Rather, systems with greater foreign entry and fewer entry and activity restrictions tend to be more competitive, confirming that contestability—the lack of barriers to entry and exit—determines effective competition. The author then analyzes how competition policy in the financial sector has generally been conducted and how changes in competition in the financial services industries should affect competition policy going forward. In part based on comparison with other industries, the author provides some suggestions on how competition policy in the financial sector could be better approached as well as what institutional arrangements best fit a modern view of competition policy in the sector. The specific competition challenges for developing countries is also highlighted. The author concludes that practices today fall far short of the need for better competition policy in the financial sector. |
| format |
Journal Article |
| author |
Claessens, Stijn |
| author_facet |
Claessens, Stijn |
| author_sort |
Claessens, Stijn |
| title |
Competition in the Financial Sector |
| title_short |
Competition in the Financial Sector |
| title_full |
Competition in the Financial Sector |
| title_fullStr |
Competition in the Financial Sector |
| title_full_unstemmed |
Competition in the Financial Sector |
| title_sort |
competition in the financial sector |
| publisher |
World Bank |
| publishDate |
2012 |
| url |
http://hdl.handle.net/10986/4425 |
| _version_ |
1764391303102070784 |