Competition among banks Business & Marketing Essay (Essay Sample)

COMPETITION AMONG BANKS
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Concentration and competition measures in banking
Banks are financial institutions that accept deposits from the public and creates credit to the public. Lending from banks can be done either directly or indirectly through capital markets. Banks have a huge importance in the financial stability of any country and they are therefore highly regulated.
Concentration in banking industry refers to the market shares of each bank in the sector. Higher concentration leads to higher prices in the market, lower outputs and smaller consumers typically, concentration is not a desirable quality in any market. High concentration has its three principle benefits in the banking industry, large banks are easily diversified and are therefore able to adjust in other market sectors, High concentration levels increases for dominant banks in the industry and larger banks can be easily monitored than smaller banks.
Competition on the other hand refers to the struggle for consumers who need banking services and creating conditions for such other participants which do not allow them to have any influence upon the market. Competition can be between state and non-state banks, banks and non-banking credit institutions, and banks and non –financial organizations.