4. The Impact of Bank Regulation and Supervision on Competition

The chapter examines the influence of bank regulation and supervision on competitive conditions in the banking systems of 23 emerging economies between 1996 and 2016. Using the Panzar-Rosse model and other empirical methods, the study finds that banking systems with higher concentration and fewer activity restrictions are more competitive. Greater capital strictness and official supervisory power enhance competition, while activity restrictions and entry barriers reduce it. During bank crises, the relationship between these factors and competition changes significantly. The study also finds that foreign banks are more sensitive to official supervisory power and private monitoring than domestic banks. These findings have important implications for financial regulators and policymakers in emerging economies.