<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>Bank stability is an important aspect of financial stability, especially in bank-centric systems like that of Montenegro. Hence, it is important to analyse risks affecting stability of both the banking and financial system as a whole. Rising competition among banks could pose a challenge and possibly change the level of credit risk, especially if the banks are small in size. This can affect both credit risk and financial stability. Small-sized banks could be the ones to react less nimbly to a changing market structure than bigger banks with stable market shares. This study tries to answer whether competition affects credit risk in Montenegro and whether banks differing in size react differently. Panel data techniques were applied to eleven banks which account for over 90 percent of the banking sector. The results indicate that market concentration could be particularly harmful when it comes to credit risk of small-sized banks, while large-sized banks are less affected. Overall, the increasing competition may positively affect credit risk in Montenegro.</p>
</abstract>

Bank stability is an important aspect of financial stability, especially in bank-centric systems like that of Montenegro. Hence, it is important to analyse risks affecting stability of both the banking and financial system as a whole. Rising competition among banks could pose a challenge and possibly change the level of credit risk, especially if the banks are small in size. This can affect both credit risk and financial stability. Small-sized banks could be the ones to react less nimbly to a changing market structure than bigger banks with stable market shares. This study tries to answer whether competition affects credit risk in Montenegro and whether banks differing in size react differently. Panel data techniques were applied to eleven banks which account for over 90 percent of the banking sector. The results indicate that market concentration could be particularly harmful when it comes to credit risk of small-sized banks, while large-sized banks are less affected. Overall, the increasing competition may positively affect credit risk in Montenegro.

Does market competition affect all banks equally? Empirical evidence on Montenegro

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution 4.0 International License.

Bank stability is an important aspect of financial stability, especially in bank-centric systems like that of Montenegro. Hence, it is important to analyse...

Does market competition affect all banks equally? Empirical evidence on Montenegro

Published Online: May 12, 2021

Page range: 87 - 107

Received: Oct 17, 2019

Accepted: Apr 25, 2020

DOI: https://doi.org/10.2478/jcbtp-2021-0015

Keywords
credit risk, bank competition, financial stability

© 2021 Nina Vujanović et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Does market competition affect all banks equally? Empirical evidence on Montenegro

Published Online: May 12, 2021

Page range: 87 - 107

Received: Oct 17, 2019

Accepted: Apr 25, 2020

DOI: https://doi.org/10.2478/jcbtp-2021-0015

Keywordscredit risk, bank competition, financial stability

© 2021 Nina Vujanović et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
credit risk, bank competition, financial stability