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Bank Competition and Financial Stability

image of Bank Competition and Financial Stability

This report examines the interplay between banking competition and financial stability, taking into account the experiences in the recent global crisis and the policy response to it. The report has been prepared by members of the Directorate of Financial and Enterprise Affairs at the OECD in Paris for the G20 Workshop “The New Financial Landscape."

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Competition in derivative markets and financial stability

Today, the large banks that encompass the global derivatives business combine retail and commercial banking with investment bank activities. Product innovation utilising derivatives and gambling in high-risk trades has become a key driver of profitability within banks but this leaves them exposed to huge risks which in turn pose a threat to global financial stability. Policy makers urgently need to address this issue.

English

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