Exploring the link between competition and bank risk is an important issue for financial stability and for the economy as a whole. We have used bank level data to empirically test the relationship between bank risk and competition in Albania during the 2004-2014 period. Our results confirm the “competition-fragility” view for the total (and foreign) credit risk, where higher market power is associatedwith lower risk. Furthermore, we have revealed some aspects of the “competition- stability” relationship concerning nonperforming loans in local currency. We are providing evidence that, after the crisis, the relationship between total (plus foreign) credit risk and competition is nonlinear.
