Correlation between the risks of portfolios of different commercial banks leads to too much risk taking from a social …

Correlation between the risks of portfolios of different commercial banks leads to too much risk taking from a social …

In a dynamic framework banks compete for customers by setting lending conditions for the loans they supply, taking into … lead commercial banks to set more stringent loan conditions to their customers, and we show that increased competition in … the banking in- dustry leads banks to behave more risky. In this model we also look at risk-adjusted capital requirements …