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1 – 10 of over 12000
Article
Publication date: 9 February 2015

Luisa Ana Unda and Julie Margret

The aim of this study is to analyse the transformation of the Ecuadorian financial system using the regulatory dialectic approach (Kane, 1977). This research examines the initial…

Abstract

Purpose

The aim of this study is to analyse the transformation of the Ecuadorian financial system using the regulatory dialectic approach (Kane, 1977). This research examines the initial conditions and motivating factors of the reform process, as well as the interplay between government and bankers during the period 2007-2012.

Design/methodology/approach

Kane’s regulatory dialectic suggests that regulation of financial institutions is a series of cyclical interactions between opposing political and economic forces. Three main stages are identified: thesis (measures and regulatory actions), antithesis (avoidance/lobby against those reforms) and synthesis (adaptive reregulation resulting from the interaction between interest groups).

Findings

Since 2007, the government focused on regulating interest rates, developing a liquidity fund for banking emergencies, increasing taxation and restricting international capital flows. These government initiatives took place against a background of conflicting interests. Private bankers opposed the majority regarding them as burdensome new rules, rather than enlightened reforms. Publicly, these reforms as intended by the government were seemingly supported. Finally through the political process, they were approved. To date, these reforms have strengthened the financial system, produced encouraging social policy results and placed the financial sector to serve the government’s development strategy.

Originality/value

Using Kane’s notion of regulatory dialectic, we explain the process of financial reform in Ecuador as part of a cyclical interaction between opposing forces. Drawing on this framework enabled insight into the nature of government intervention. Hence, we show how that intervention affected the growth, development and structure of the banking system.

Details

Journal of Financial Regulation and Compliance, vol. 23 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Book part
Publication date: 9 July 2010

John L. Campbell

Social scientists have long been interested in how political institutions affect economic performance. Nowhere are these effects more apparent today than in the current U.S…

Abstract

Social scientists have long been interested in how political institutions affect economic performance. Nowhere are these effects more apparent today than in the current U.S. financial meltdown. This article offers an analysis of the meltdown by showing how government regulation among other things helped cause it. Specifically, the article shows how regulatory reforms closely associated with neoliberalism created perverse incentives that contributed significantly to the increased lending in the mortgage market and increased speculation in other financial markets even as such behavior was becoming increasingly risky. The result was the failure of mortgage firms, banks, a major insurance company, and eventually the market for short-term business loans, which triggered a general liquidity crisis thereby thrusting the entire economy into a severe recession. Implications for future research are explored. The article also offers a few policy prescriptions and an assessment of their political viability going forward.

Details

Markets on Trial: The Economic Sociology of the U.S. Financial Crisis: Part B
Type: Book
ISBN: 978-0-85724-208-2

Article
Publication date: 26 January 2023

Ibrahim Alley, Halima Hassan, Ahmad Wali and Fauziyah Suleiman

This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced prudential performance of the banking industry and financial system stability in Nigeria.

Abstract

Purpose

This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced prudential performance of the banking industry and financial system stability in Nigeria.

Design/methodology/approach

This study uses regression analysis with regime shift to confirm results from tests of two means and variances model to examine the effectiveness of banking sector reforms in Nigeria.

Findings

Evidence from the regression model agrees with findings from the test of means model (not controlling for trend effects) that capital to assets ratio rose while non-performing loan ratio declined after the reforms, and that capital to earning assets ratio rose when trend effects were accounted for. Both the regression model and the tests of means model controlling for trend effects show that return on asset, return on equity and return on earning assets ratios declined after the reforms.

Research limitations/implications

This paper evaluated the effectiveness of banking sector reforms in Nigeria using models that avoid weaknesses that besieged many previous studies. It however used data covering 1983–2020 period, due to data availability. A larger scope of data may improve the results, and future research may re-examine this theme as more data become available. Furthermore, banking stability issues could be examined using specialised techniques such as the generalised autoregressive conditional heteroscedasticity model and related family.

Practical implications

These results suggest that the reforms led to improvement in the sector’s resilience (risks-absorbing capacity) and asset quality, and that profitability had not been the primary focus of the reforms.

Social implications

The authors recommend that regulatory and supervisory authorities in Nigeria continue to implement and improve on banking sector reforms for a more resilient and functional banking system. As a contribution to social research, this study shows that studies on policy evaluation should be located within appropriate theoretical framework: the theory of change. It shows that an appropriate use of attribution analysis and contribution analysis within this theoretical framework engenders robust analysis and results. Otherwise, the analytical findings would be erroneous and policy advice misguided.

Originality/value

The statistical significance of our findings establishes that the banking sector reforms in Nigeria have been effective in promoting financial system stability in Nigeria. By deploying both the test of means with and without trend effects (an attribution analysis) and the multivariate regression analysis with regulatory shift (a contribution analysis), and relying more on the later for its superiority, this study contributes to the body of knowledge in that, it not only determined the true effects of banking sector reforms in Nigeria for appropriate policy guidance but also demonstrated that, in research, an inappropriate methodology produces results that may diverge from the more accurate ones that were derived from the correct methodology.

Details

Journal of Financial Regulation and Compliance, vol. 31 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 4 December 2019

Mohamad Hassan

This study aims to examine the impact of regulation and other micro- and macro-economic factors on banks’ productivity growth. It investigates the impact of different regulatory

Abstract

Purpose

This study aims to examine the impact of regulation and other micro- and macro-economic factors on banks’ productivity growth. It investigates the impact of different regulatory reforms on banks’ performance of total factor productivity (TFP) and its component efficiencies, along with their association with bank-specific variables of profitability and equity, and with macro-level variables of economy and freedom. That is, through analysing the influence of regulatory and supervisory policies related to Basel accords pillars of capital and market discipline through private monitoring; restrictions on bank activities; and economic and financial freedoms on TFP growth and year-end performance in banking.

Design/methodology/approach

The authors examine TFP for commercial banks in response to regulatory reforms on an international scale. To estimate the TFP, the authors use a non-parametric frontier technique by calculating the Malmquist output-oriented index, following Delis et al. (2011) and Worthington (1999). The components of the Malmquist index are ratios of distance functions making its estimation a straightforward technique using activity analysis or data envelopment analysis methods. This allows controlling for efficiency changes depending on the reallocation of production frontiers signalling the technical change and the technical efficiency at once.

Findings

Results show that high capital requirements enhance productivity growth in North and Latin American banks, but not in European African or Asian banks. Supervisory powers drive bank productivity growth in all regions except Europe and Central Asia. Restrictions on real estate, insurance and securities activities impede productivity change in all income level groups but not in high-income economies. The results also show that market volatility and Z-score drive technological change and scale efficiency growth, but negatively impact pure technical efficiency.

Originality/value

This paper contributes to the literature by examining the relationship between the implementation of regulatory standards and the performance of the banking sector following a structural model of the banking firm and the concept of optimisation. An additional contribution of this study is that it examines economies with different levels of income based on the gross national income per capita. The study summarises bank-specific data used to synthesise the banks’ productivity (inputs and outputs) and country-specific economic and regulatory compliance data over 19 years (1999-2017). The extent of this data set coverage makes it most recent and most conclusive of variables to provide a significant contribution to the literature on bank regulation and efficiency effect.

Article
Publication date: 13 July 2015

Mika Veli-Pekka Viljanen

– The purpose of this paper is to aid understanding of the changes in Basel Committee on Banking Supervision (BCBS) regulatory strategies after the global financial crisis.

Abstract

Purpose

The purpose of this paper is to aid understanding of the changes in Basel Committee on Banking Supervision (BCBS) regulatory strategies after the global financial crisis.

Design/methodology/approach

The author uses the credit valuation adjustment (CVA) charge reform as a test case for inquiring whether BCBS has departed from its pre-crisis facilitative regulatory strategy path. The regulatory strategy of the CVA charge is discussed.

Findings

The charge exhibits a new regulatory strategy that BCBS has adopted. It seeks to manipulate market structures by imposing risk-insensitive capital charge methodologies.

Originality/value

The paper offers a new heuristic to analyse regulatory initiatives and their significance. The CVA charge has not been subject to a regulatory theory-based analysis in prior literature.

Details

Journal of Financial Regulation and Compliance, vol. 23 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 12 September 2008

Michael Strug

This paper aims to broadly discuss the consequences of EU enlargement on the Polish banking sector and the issues arising from it.

588

Abstract

Purpose

This paper aims to broadly discuss the consequences of EU enlargement on the Polish banking sector and the issues arising from it.

Design/methodology/approach

There are two broad objectives of the paper – first, to discuss the scope and evolution of banking and regulatory reforms since Poland's accession to the EU and second, to examine some of the specific legal and regulatory issues that have arisen from the implementation of third capital adequacy directive (CAD3) in the Polish banking sector.

Findings

Implications of CAD3 implementation in Poland include: Poland's capability of co‐operating within the EU financial sphere; making the Polish financial sector internationally competitive; opportunity for growth for the Polish banking sector; and a major overhaul of capital adequacy laws and institutions. A proposed mode of CAD3 implementation as an example of integrating Poland into the EU include: understanding the historical transformation process that the state underwent; using international experiences in regulating the corresponding sector; and taking into account factors specific to emerging economies where the integration takes place. Examples include: social banking and the need to create a regulatory body first then implementing and enforcing regulations.

Originality/value

This paper explores the integration of Poland with the European Union on the example of banking regulatory reforms and CAD3 implementation. It makes a case for the implementation of the CAD3 rather than looking at the methods, modes and rules governing the implementation of CAD3.

Details

International Journal of Law and Management, vol. 50 no. 5
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 7 October 2014

James C. Brau, Drew Dahl, Hongjing Zhang and Mingming Zhou

The purpose of this paper is to examine the effect of regulatory reform on the asset allocation and capitalization of Chinese banks from 2002 to 2007, a period following China's…

Abstract

Purpose

The purpose of this paper is to examine the effect of regulatory reform on the asset allocation and capitalization of Chinese banks from 2002 to 2007, a period following China's entry into the World Trade Organization (WTO).

Design/methodology/approach

The evidence rejects a hypothesis that the four categories of banks operating in China – the Big Four, Majority State, Majority Private, and Majority Foreign banks have converged toward common targets. Supplemental analysis indicates that domestic banks, but not foreign banks, adjust equally to their targets.

Findings

The paper concludes that, although Chinese banking remained segmented during this unique transitional period, a more uniform pattern has emerged for those Chinese banks that are domestically owned.

Originality/value

The authors employ a methodology that is explicitly designed to determine if banks have converged toward common approaches to asset allocation and capitalization, which has not been studies previously.

Details

Managerial Finance, vol. 40 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 24 July 2007

Allison C. Rattray

The aim of this paper was to trace the development of the banking sector from post independence (1962) Jamaica to 2002 when the last major revisions were made to banking

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Abstract

Purpose

The aim of this paper was to trace the development of the banking sector from post independence (1962) Jamaica to 2002 when the last major revisions were made to banking legislation.

Design/methodology/approach

The paper focuses mainly on the banking crisis that the financial sector suffered from 1992 to 1997. It examines the legislative and regulatory framework that existed during that period and the shortcomings that the financial crisis revealed. The impact of the financial crisis on the development of the legislative and regulatory framework and the resultant changes are also examined. The paper provides a comprehensive analysis of the regulatory and legislative framework existing in the banking sector in Jamaica. Investigative research was done through interviews, newspaper articles and reviewing papers written on this area in conjunction with the analysis of the banking legislation during this period.

Findings

The present banking and regulatory framework in Jamaica developed in response to the financial crisis and not in a structured and planned way. This conclusion is drawn from the fact that there were three amendments to the banking legislation in five years crisis primarily to close the loopholes and weaknesses the financial crisis revealed that the regulators did not have the legislative power to remedy.

Originality/value

While papers have been written examining the financial crisis from an economic perspective this paper provides a comprehensive legal analysis of the banking and regulatory framework in Jamaica. This paper will be of interest to regulators and the legal community.

Details

Journal of Financial Crime, vol. 14 no. 3
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 11 November 2013

Sebastian Schich

The purpose of this article is to support current efforts by policymakers to limit the value of implicit bank debt guarantees that they are perceived as providing. It does so by…

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Abstract

Purpose

The purpose of this article is to support current efforts by policymakers to limit the value of implicit bank debt guarantees that they are perceived as providing. It does so by analyzing the determinants of the value of such guarantees and by proposing a framework for categorizing and analyzing the host of different financial regulatory reform measures recently adopted and proposed.

Design/methodology/approach

The starting point is the observation that public authorities have provided the guarantor-of-last-resort function in more explicit form as part of the financial safety net. This choice has inadvertently further entrenched the perception that bank debt benefits from an implicit guarantee and, in the meantime, policymakers have decided to limit the value of such guarantees. To support these efforts, the present articles use a valuation framework based on concepts of contingent claims analysis to model the value of insurance of risky bank debt when the sovereign providing the guarantee can itself be risky. This framework allows one to monitor any progress made in reducing the value of these guarantees. It is applied here to a measure of implicit external (mostly from the sovereign) support for the debt of a panel of 184 large worldwide banks headquartered in 23 countries for the period from 2007 to 2012.

Findings

Consistent with the implications of the conceptual model, the empirical evidence suggests that implicit bank debt support is higher, the lower the bank's stand-alone creditworthiness and the higher the sovereign's creditworthiness. The result is consistent with previous work that showed that the decline in the value of implicit bank debt guarantees most recently observed owes much to reduced strength of the sovereigns seen as providing the guarantees. Obviously, a more desirable way to limit the value of implicit bank debt guarantees is to foster the intrinsic strength of banks. Alternative categories of policy measures aim at withdrawing the guarantee function or charging for its use.

Originality/value

The author is not aware of any similar work using a rigid theoretical and empirical framework to structuring the policy discussion on bank regulatory reform.

Details

Journal of Financial Regulation and Compliance, vol. 21 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

Book part
Publication date: 28 August 2015

Ian Tsung-yen Chen

This paper proposes that if a political system is more like to facilitate a unified government, to establish a strong executive body and to respond to the needs of the majority…

Abstract

This paper proposes that if a political system is more like to facilitate a unified government, to establish a strong executive body and to respond to the needs of the majority, financial reforms are more likely to emerge from the policymaking process and produce positive results. On the contrary, political systems that discourage those governing features are less likely to produce reforms. This chapter compares financial reform processes in China, Taiwan and New Zealand. All of them performed low level of financial reforms in the early 1980s but resulted in different situations later. In the mid-2000s, New Zealand heralded the most efficient and stable financial system; while Taiwan lagged behind and China performed the worst. Evidence showed that China’s authoritarian system may be the most superior in forming a unified government with a strong executive, but the policy priority often responds more to the interests of a small group of power elites; therefore the result of financial reform can be limited. Taiwan’s presidential system can produce greater financial reform when the ruling party controls both executive and legislative bodies, but legislative obstructions may occur under a divided government. New Zealand's Westminster system produces the most effective and efficient financial reform due to its unified government and a strong executive branch with consistent and stable supports from the New Zealand Parliament.

Details

Asian Leadership in Policy and Governance
Type: Book
ISBN: 978-1-78441-883-0

Keywords

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