Bank market power, economic growth and financial stability: Evidence from Asian banks

► The paper examines the link between market power in banking and financial stability from a sample of commercial banks from 12 Asian countries over the 2001-2007 period. ► We employ the non-structural measure of bank competition in order to assess the degree of market power in the banking market. ► We highlight that although banks in less competitive market hold higher capital ratios, these levels are insufficient to offset higher risk taking and hence, bank insolvency risk remains higher. ► Furthermore, we highlight the importance of economic growth to overcome bank risk taking and insolvency risk.