IntroductionThe banking and financial sector and the need for regulation have attracted attention and focus in both academic and policy discussions. The question of how competition affects the stability of the system and the effectiveness of regulation is not yet well defined. The attractiveness of competition in the banking sector has been a subject of discussion for a long time. After the crises of the 1930s, antagonism was kept at low levels to safeguard the stability of the system. Over the past few decades, there has been a wave of deregulation that has lifted many restrictions on competition, and as a result, banks have been able to extend their investments into riskier stocks and into new locations. Subsequently, a new wave of collapses and bankruptcies was observed in the 1980s and 1990s. The growth of competition following the wave of deregulation was seen as the main cause of the instability of this new system. A first idea of ​​a negative relationship between system stability and competition has therefore spread since the 1990s, but more recent approaches show that the relationship is more complex. How does the competition mechanism work in the banking sector? Are there any advantages? It's difficult to answer. The main pro-competition argument related to cost minimization and efficient distribution of resources applies to the banking sector. On the other hand, however, a series of market failures complicates the performance of competition and makes competitive examples unsuitable for the banking sector. Simply stating that banks compete on both sides of the balance sheet can lead to an exit from the competitive outcome. . When banks compete for loans and deposits, they may want to monopolize one market in an attempt to gain a monopoly on the other according to...... middle of paper ......bad financial regulation?, A Study for the official investigation of the Government on the Competitiveness of the Swedish Financial Sector, The Wharton School, University of Pennsylvania. Frederic S. Mishkin, Stanley G. Eakins, (1998), Financial Markets and Institutions, 2nd edition, chapter 2, 12, 16. Daniel K. Tarullo, (2008), Banking on Base1 - The Future of International Financial Regulation, Peterson Institute for International Economics, Washington, DCDowd Kevin, (2001), Free Banking, prepared for Mullineux AW and Murinde V., Handbook of International Banking, Cheltenham, Edward Elgar.Douglas W. Diamond, Philip H. Dybvig, (1983) , Bank runs, deposit insurance and liquidity, Journal of Political Economy, vol.91, no. 3.Shane F. Whelan, Actuarial Risk Management, Part 1, School of Mathematical, Statistical and Actuarial Sciences, University College Dublin