Impact of concentration on banking stability in Albania

Abstract

The article examines the empirical nature of relationship between bank concentration and banking stability using unique datasets of Albanian banking sector. Test of banking stability is attaining through linear and probit models to reflect the effect of banking concentration. Empirical results prove the trade – off between concentration and non – performing loans and the probability of bank crisis. These results support the concentration – banking stability view and the significance of structural features of banking sector to determine its stability. Albanian empirical results rely on several theoretical and empirical results which they showed that the banking crises would occur probably in a weak macroeconomic environment characterized by slow GDP growth.