Competition and Stability in Banking

Abstract

The public as residual claimant and banking supervision 6.3 Corporate governance and the trade-off between stability and competition 6.3.1 Corporate governance and stability 6.3.2 Corporate governance and product market competition 6.3.3 Ownership arrangements and the market for corporate control 6.4 Policy implications 7 The Euro repo markets 7.1 Euro repo markets 7.2 Competition in Euro repo markets 7.2.1 A greater diversity of participants 7.2.2 A greater willingness to use repos 7.3 Instability in Euro repo markets 7.4 The trade-off between competition and stability 7.4.1 Competition increases trading volume 7.4.2 Competition increases the number of counterparties 7.4.3 Competition broadens the diversity of counterparties 7.4.4 Competition increases the range of securities posted as collateral 7.5 The impact of internationalisation on the trade-off

Is the German system of corporate governance converging towards the Anglo-American model?

“…In fact, according to Becht and Boehmer (2003) about 80% of direct equity stakes in firms listed on the official market belong to other firms (industrial firms, holding companies, investment firms and financial firms). These large industrial shareholders may obtain substantial private benefits at the expense of other shareholders or stakeholders (Grossman and Hart 1988) and cross-holdings may have an important negative impact on competition (Canoy et al 2001). Moreover, there is evidence that German firms controlled by other companies tend to have higher levels of productivity (Januszewski et al 2002) and are less likely to be acquired if they are public corporations (Köke 2002).…”

“…Only 5.8% of the large voting stakes of 5% or more are held (directly as well as indirectly) by banks, resulting in an average of 1.2% of the overall votes. One reason for this may be the avoidance of potential conflicts of interest (Canoy et al 2001;Goergen and Renneboog 2001). However, from what we have said above, it is clear that the influence of banks is understated if one merely looks at their direct and indirect stakes and ignores their proxy votes.…”

Concentration and foreign penetration in Latin American banking sectors: Impact on competition and risk

“…According to this view, the promise of extraordinary profits 2 Regulatory tightening tended to affect proportionally smaller (and more specialized) institutions. 3 Surveys of the analytical literature can be found in Kroszner (1998), Carletti, Hartmann and Spagnolo (2002), Yanelle (1997), Scholtens (2000) and Canoy, van Dijk, Lemmen et al (2001). 4 See Matutes and Vives (2000) and Cordella and Levy Yeyati (2002) for an analytical discussion along these lines.…”

Recent developments in German corporate governance

“…22 Table 5 shows that German holding companies and industrial companies control an average stake of 21 per cent in other German listed firms, which is largely corroborated by Emmons and Schmid (1998) and Gorton and Schmid (2000b). 23 These large industrial shareholders may obtain substantial private benefits at the expense of other shareholders or stakeholders (Grossman and Hart 1988) and cross-holdings may have an important negative impact on competition (Canoy et al 2001). Table 5 also shows that individuals or families are one of the main shareholder categories in Continental Europe (see also La Porta et al (1999)).…”

“…28 Empirical evidence from the firms listed on the German official market (Amtlicher Handel) shows that whereas 20 insurance companies hold shares representing around 17% of the market capitalization, the rest of the institutional investors (excluding banks) barely reach 0.5% (Wöjcik 2002). Given the close links between insurance firms and banks in Germany, the importance of the former further reinforces the role of banks as controlling shareholders (Goldman Sachs 2000, Canoy et al 2001). …”