Beschreibung:
We find that the increased use of securitization activity in the banking sector prior to the 2007- 2009 crisis augmented the effect of competition on realized bank risk (i.e. more intense competition and greater use of securitization is correlated with higher levels of realized risk) during the crisis. In contrast, higher levels of capital did not buffer the impact of competition on realized risk. It follows that cooperation between supervisory and competition authorities is warranted to account for the stability implications of financial innovation and capital regulation.