One of the most relevant discussions on bank regulation is the dichotomy between liberalization, with higher competition, and financial stability. To investigate this problem, the article examines competitive conditions and risk taking in Brazilian banks, and investigates their interrelationship. Competition is measured using Panzar & Rosse model and risk taking by Basel Brazilian Index. Given the relevance of the discussion between Allen & Gale, Grochulski & Kareken and Kahn a measure of concentration was used as a proxy for competition. It is shown that Brazilian banks operate in monopolist competition and that competition increases risk taking. However, competition is not significance to explain credit offer.
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