We assess the influence of competition and capital regulation on the stability of the banking system. We particularly ask two questions: i) how does capital regulation affect (endogenous) entry; and ii) how do (exogenous) changes in the competitive environment affect bank monitoring choices and...

This paper advocates a shift in regulatory design in light of the increasingly competitive and dynamic environment of banking. Intrusive, control-oriented direct and indirect approaches to regulation have become increasingly costly. We advocate regulation that focuses on setting minimum...