Cooperation and competition among financial institutions The second topic I want to address today is the impact on financial stability of simultaneous competition and cooperation among large financial institutions. The IO literature gives us examples in which limited cooperation between otherwise competing firms can increase social welfare.
This would be the case, for example, if a sharp increase in real estate prices led to an excessive rise in lending and a loosening of credit standards. Prices are continuing to rise dynamically. Bundesbank estimates indicate that house prices in German towns and cities were overvalued by between 15% and 30% in 2017.