همجوم بانکی لکه‌ی خورشیدی در سیستم‌ بانکداری رقابتی در مقایسه با سیستم بانکداری انحصاری

This paper extends the Diamond and Dybvig (1983) model to compare two banking economies: one with a competitive banking system and another with a monopolistic one. It is shown that a competitive banking system is more fragile than a monopolistic one in the sense that the parameter set stipulating that a bank run equilibrium exists in the competitive banking system dominates the set in the monopolistic one.

The relationship between competition in banking and financial fragility is a serious concern for both policymakers and academic researchers. A large body of literature concludes that an increase in bank competition erodes banks’ rents and reduces their incentives to behave prudently. In these models, banking crises are triggered by low asset returns resulting from the gambling strategies adopted by banks. However, recent studies show that the relationship between bank competition and stability is complex, both theoretically and empirically. That is, competition in banking sometimes leads to better financial stability (see Allen and Gale (2004), and Boyd and De Nicolo (2005)). The purpose of this paper is to study the different conditions for the existence of a bank run equilibrium under two banking systems: competitive and monopolistic. This paper focuses on bank competition in the deposit market. In the model, there are no risky assets, and bank runs are caused by a wave of agents’ pessimistic beliefs as in Diamond and Dybvig (1983). It is shown that the parameter set stipulating that a bank run equilibrium exists in the competitive banking system dominates the set in the monopolistic one. This result suggests that the competitive banking system is more fragile than the monopolistic one. In a similar paper, Boyd et al. (2004) construct an overlapping generations model with random relocation and analyze banking crises in competitive and monopolistic banking systems. They show that a monopolistic banking system faces a higher probability of crises when the inflation rate is below some threshold, while a competitive system is more fragile otherwise. However, crises in the Boyd et al. model are indicated by banks’ illiquidity, not insolvency, while my model assumes the converse case. The rest of the paper is organized as follows. Section 2 presents the model and compares the bank run equilibrium conditions under both banking systems. Section 3 presents the conclusion of the study.

Recent studies show that the relationship between banking competition and stability is complex. This paper focuses on imperfect competition in the deposit market and on sunspot bank runs and shows the fragility of the competitive banking system without considering the agency problems. The model of this paper contributes to showing the trade-off between competition and financial stability. The model could be extended to address additional issues about the optimal regulation of banking competition. Introducing a sunspot into the model allows us to compare the probability of a run and the welfare of the two different economies. I leave these important issues to future research.