Does institutional quality enhance or weaken the effect of bank regulations and supervision on bank stability? We use a sample of around 1,050 commercial banks from 69 emerging and developing economies over the 2004-2013 period and show that the answer to this question depends on the type of institutional quality and on the type of bank regulation. Political stability strengthens the positive effect of capital regulation and activities restrictions on bank stability as measured by the z-score. Control of corruption also enhances the positive effect of activities restrictions on stability. On the other hand, the positive effect of capital regulation and private monitoring on stability subdues when good quality institutions that induce loan repayment, such as strong creditor rights and the rule of law, are present. Finally, we do not find strong evidence that the negative effect of supervisory power on bank stability is conditioned by institutional quality. In further analysis, we disaggregate the z-score measure and find that institutional quality conditions the effect of bank regulations on stability more by affecting profit stability and profitability rather than by influencing capitalisation. These findings could be useful for bank regulators in emerging and developing economies in the light of the implementation of the Basel III accord.

This paper assesses the role of the political environment in the timing of financial crises over a sample of 85 countries during the period 1975-2017. We consider systemic banking, currency and sovereign debt crises in addition to twin and triple crises. Using a fixed-effects logit model, this study shows that banking and currency crises are more likely to occur within 1 year after elections. There is also evidence that the probability of currency crises increases when right-wing parties are in office.Moreover, time in office of incumbent chief executives reduces the likelihood of any type of financial crises. The incidence of twin and triple crises is lower when majority governments are in office. This study contributes to the literature by calling attention to the importance of some political factors for different types of financial crises.

No abstract

No abstract

No abstract