Bank competition and stability in the CIS markets

This paper investigates the impact of bank competition on financial stability in the transition markets of the Commonwealth of Independent States (CIS) in the context of the competing competition-stability/competition-fragility hypotheses found in the literature. Our results verify the competition-stability hypothesis and show that competition contributes to financial stability in these countries. We also find that besides competition, legal rights of borrowers and lenders and the supervisory power of the regulator have a significant, positive impact on CIS bank stability. These results are robust with respect to a range of instrumental variables, model specification, subsample testing, and alternative measures of competition.