Bank Stability and Market Concentration in the Emerging Capital Markets of Southeast Asia

Sound macroeconomic fundamentals, financial system resilience, and bank stability characterize emerging capital markets in Southeast Asia’s upper and low-middle-income countries. For a region that is vulnerable to external shocks, the interdependence of the overall health of the capital markets and the banking sector has fostered a remarkably resilient and stable financial system. This study focuses on the idea that higher market concentration brings about higher capitalization and, therefore, stability in the banking industry of lower-to-middle-income countries in Southeast Asia. One can therefore observe that despite their vulnerability to global headwinds the banking industries of this region’s developing countries, which vary in size and market concentration, display pre-pandemic stability and have remained resilient even at the height of the pandemic in 2020–2021.