Literature speaks of limited equilibrium modelling. General equilibrium, according to researchers depends on various market conditions. Further, level of equilibrium in banking industry depends on competition and financial stability, which depends further on banks’ risk-taking initiatives. Literature review discusses the opinions of various authors on the banking products as trade off between competition and financial stability on different risk choices. Various risk-transferring models are discussed. Role played by bank supervising technologies forms part of various models. New models of bank risk-taking, named partial equilibrium models are analysed. The UK banking sector is statistically reviewed through the Panzar and Rosse model. Literature review attempts various views on banking competition and financial weaknesses through various models to know if any relationship between equilibrium and competition can be established or not.
As stated by Allen and Gale (2004a), the relationship between banking competition and financial health has been majorly discussed in the discourse of limited equilibrium modelling. There are not many general equilibrium models in literature. ...Show more