Simplifying, the theoretical consideration can be quickly set forth. By their nature or in response to the urgings of supervisors, banks are risk-averse. They are in equilibrium if lower returns correspond to lower risk. Competition erodes quasi-rents, the extra profits of oligopoly. Other things being equal, therefore, competition does not induce banks to take on greater risk.
BIS central bankers’ speeches  1  Confidence in Treasury markets helps to support demand for Treasury securities and keep our government’s financing costs low. Households and firms and even foreign governments hold Treasury securities as a key form of savings in no small part because of their trust in their safety and liquidity. Financial firms have particular reasons to care about these markets.