Depositor Behaviour and Market Discipline in Turkey

Ungan, Ayse Ece; Caner, Selçuk; Ozyildirõm, Suheyla

doi:10.2139/ssrn.495122

Cited by 9 publications

(4 citation statements)

References 11 publications

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“…This result supports the fact that explicit deposit insurance weakens market disciplinary forces. Amongst the limited studies testing the significance of market discipline in Turkey, Ungan and Caner (2003) argue that contrary to the international evidence, market participants' monitoring was relaxed after the 2001 crisis implying more dependence on the governmental supervisory and regulatory structures. They argue that the presence of state's blanket guarantee prevents market forces from monitoring and controlling bank risk after the 2001 financial crisis.…”

Section: Market Discipline In Emerging Markets and Turkeymentioning

confidence: 90%

Market Discipline in Turkey Before and After the 2001 Financial Crisis

Bulut¹,

Nal²

2009

Review of Middle East Economics and Finance

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This paper compares the effectiveness of market discipline mechanisms in the banking sector before and after the 2001 financial crisis in Turkey. It employs an empirical model that incorporates the contemporaneous feedback effects between deposits growth rate and the implicit interest rate. Using 3SLS procedure, the results show that market disciplinary forces in Turkey have been effective both before and after the 2001 financial crisis. The findings show that the effect of the implicit interest rate on deposits becomes more sensitive to bank risk fundamentals after the 2001 financial crisis. Depositors, on the other hand, do not change their behavior in the aftermath of the crisis which can be explained by an implicit "too-big-to-fail'' protection at work.

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Section: Market Discipline In Emerging Markets and Turkeymentioning

confidence: 90%

Market Discipline in Turkey Before and After the 2001 Financial Crisis

Bulut¹,

Nal²

2009

Review of Middle East Economics and Finance

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“…Further, opacity of operations, insufficient supervision and recurring crises are amongst the factors that warrant close monitoring of banks by depositors, creditors and shareholders. Ungan and Caner (2004) have found that depositors closely monitor risk indicators in banks’ financial data, to impose market discipline where it is needed. Research has found that depositors react to banks’ risk taking, captured in financial statements and market measures of risk (Baer and Brewer, 1986; Cook and Spellman, 1994; Ellis and Flannery, 1992).…”

Section: Literature Reviewmentioning

confidence: 99%

Do depositors discipline the banking sector? Evidence from an emerging economy

Afzal

Mirza

Firdousi

2023

RAF

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Purpose Market discipline is an important part of financial regulation, under Basel II and III. This paper aims to provide evidence on market discipline in Pakistan. Specifically, the authors have analyzed the impact of CAMEL variables on costs of funds and deposit switching. Design/methodology/approach This study has used panel data related to different banking and macroeconomic variables. The sample period is 2004–2017 so it has covered the changing regulations that became binding for banks under Basel II and III. Quarterly data has been collected from the financial disclosure of publicly listed banks. The total number of banks in the sample is 26. Among these, 24 are publicly listed. Foreign banks have not been included because their activities in Pakistan are quite limited. Findings It has been found that efficiency, liquidity, asset quality and capital adequacy are negatively related to costs of funds for banks. Capital adequacy, liquidity and profitability are negatively related to deposit switching. Research limitations/implications These results indicate the presence of market discipline and have generated valuable implications for bank managers and regulators. Originality/value In this study, the case of Pakistan is interesting. The country has experienced financial liberalization that sought to avoid government intervention and encourage a more “market-based” approach. This change in the system was made more pronounced by the privatization of nationalized banks, improvement in the market structure, reduction in barriers to entry and consolidation of smaller banks. As a result, the banking system has emerged as an important source of financing and it provides us motivation to look deeper into depositor discipline in banking sector.

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“…Case studies dedicated to identifying the presence of market discipline in different countries have proliferated in recent times. The existence of market discipline was substantiated for developed countries like Switzerland (Birchler, Maechler (2001)), New Zealand (Wilson, Rose, Pinfold (2004)) and Japan (Murata, Hori (2006), Hoshi (2006)), as well as for some developing countries: Argentine, Chile, Mexico (Martinez Peria, Schmuckler (2001)), Bolivia (Ioannidou, de Dreu (2006)), Colombia (Barajas, Steiner (2000)), India (Chipalkatti, Ramesha, Rishi (2007)), Turkey (Ungan, Caner (2004)) and Uruguay (Goday, Gruss, Ponce (2005)). In particular, they show that market discipline exists even in the market for small insured deposits.…”

Section: Market Discipline Measurementmentioning

confidence: 99%

Are Banks Peer Disciplined? Evidence from Post-Crisis Russia

Semenova

Irina

2012

SSRN Journal

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Market discipline is usually studied in the retail or the corporate deposit markets, while the interbank loan market is disregarded. Banks' abilities to exert market discipline are taken for granted, as they are expected to have the expertise to assess correctly the riskiness of other banks. However, the "crises of trust" (as one in 2004 in Russia) create some doubts as to whether efficient peer monitoring and peer discipline exist: the interbank loan market may be frozen in response to external information which is unrelated to the banks' current reliability. This seems to be one of the reasons for the interbank loan markets being extremely fragile during periods of financial instability, undermining the smooth functioning of the whole banking system, as banks are tightly interconnected. We provide some evidence for market discipline in the Russian interbank market. We show that the only disciplinary mechanism that functions is a price-based one: more reliable banks enjoy lower interest rates. The quantitative discipline functions only for the largest borrowers. In general, decisions on credit limits are based not on changes in another bank's riskiness but on other information like reputation, soft information or public announcements that may be even unrelated to a particular bank.

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Depositor Behaviour and Market Discipline in Turkey

Cited by 9 publications

References 11 publications

Market Discipline in Turkey Before and After the 2001 Financial Crisis

Market Discipline in Turkey Before and After the 2001 Financial Crisis

Do depositors discipline the banking sector? Evidence from an emerging economy

Are Banks Peer Disciplined? Evidence from Post-Crisis Russia

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