This paper explores the effects of relationship lending on bank stability under perfect bank competition. Relationship lending generates profitable old lending relationships, which ease the stress to search and monitor new borrowers and create great charter values for banks even under perfect bank competition. These everlasting charter values mitigate risk-taking incentives improving financial stability. We find the maximal growth speed for banks so that they will avoid risk taking, and discover the optimal equity capital requirement: new banks and rapidly growing banks needs to have more equity capital.