Competition and the banking sector: friend or foe?

During times of financial crisis, the long-term efficiency goals pursued by competition policy are often subordinated to more immediate concerns about the stability of financial markets. During the most recent financial crisis, bank mergers that arguably lessened competition were cleared in the name of stability. Now that financial markets are becoming more stable, policymakers are turning their minds to ways in which competition can be introduced into banking markets. This article considers the relationship between competition and stability with a view to assessing whether the push by various governments around the world to increase the level of competition in the banking sector is a sensible one.