Does bank regulation matter on the relationship between competition and financial stability? Evidence from Southeast Asian countries

Noman, Abu Hanifa Md.; Chan, Sok Gee; Isa, Che Ruhana

doi:10.1016/j.pacfin.2018.02.001

Cited by 74 publications

(44 citation statements)

References 62 publications

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“…For proxy of risk, we follow previous studies (Laeven and Levine, 2009;Demirgüç-Kunt and Detragiache, 2011). For the standard deviation of ROA (SD_ROA), we follow Pennathur et al 2012, Soedarmono et al (2013), and Noman et al, (2018), and calculate the standard deviation of ROA, SD_ROA, with a three-year rolling window (instead of the full sample period). This measure shows the number of standard deviations by which a bank's ROA must remain below its predictable value before equity is exhausted and the bank is no longer solvent.…”

Section: B Variable Definitions and Empirical Modelmentioning

confidence: 99%

Income Structure and Performance: An Empirical Analysis of Islamic and Conventional Banks in Indonesia

Ali¹,

Khattak²,

BiS³

2020

BEMP

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Banks have tried to compensate for the decline in their profits due to increasedcompetition by shifting their focus toward non-intermediation activities. This paperassesses the impact of these non-intermediation activities on the profitability and riskof Islamic and conventional banks in Indonesia. We use a system generalized methodof moments estimator to control for the simultaneity for all the banks in our samplefor the period from 2007 to 2017. Our results suggest that non-intermediation incomehas a positive impact on bank performance. We find no difference between Islamicand conventional banks in terms of the link between non-intermediation income andperformance.

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Section: B Variable Definitions and Empirical Modelmentioning

confidence: 99%

Income Structure and Performance: An Empirical Analysis of Islamic and Conventional Banks in Indonesia

Ali¹,

Khattak²,

BiS³

2020

BEMP

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“…While some highlight the adverse effects of capital regulation that increase incentives for risk‐taking in banks (e.g. Shrieves and Dahl, 1992; Blum, 1999), others claim that well‐capitalised banks are less inclined to increase risk‐taking or improve financial stability (Furlong and Keeley, 1989; Keeley and Furlong, 1990; Noman et al , 2018). Although the latter has been the orthodox view, post‐GFC, there is a significant growth in literature that discusses the negative effects of capital regulation on incentives for risk‐taking (Laeven and Levine, 2009; Mohsni and Otchere, 2018).…”

Section: Introductionmentioning

confidence: 99%

Capital regulation and bank risk‐taking – new global evidence

Dias

2020

Accounting & Finance

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This study investigates the link between capital regulation and bank risk‐taking. Using a sample of over 1,800 banks in 135 countries, I find that the relationship between capital regulation and bank risk‐taking (measured by z‐score) is an inverse ‘U’ shape. That is, as capital ratios increase, a bank will take less risk initially, then more risk. These results are robust to numerous additional tests, including estimation methods. I also find that more stringent regulations mitigate the effect of higher capital on lowering bank risk‐taking. Increased capital requirements, even when risk‐based, induce risk‐taking at higher levels, irrespective of whether banks are well‐ or under‐capitalised.

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“…This positively significant finding could explain the fact that larger Islamic bank assets will increase lending rates and reduce deposit rates, thereby reducing bank margins. However, the finding contradicts several studies (Chortareas et al, 2012;Noman et al, 2018;Ibrahim, 2019). According to Ibrahim and Rizvi (2017), larger banks will not depend on deposit rates as sources of funds, because of their alternative sources of funds.…”

Section: Robustness Testmentioning

confidence: 73%

Islamic Regulations and Islamic Banks Margins: an Empirical Investigation Into Asean Countries

Khan

Malim

Masron

2021

JIMF

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This paper examines the impact of Islamic regulations on Islamic bank margins in ASEAN countries, utilising the fixed-effect method. The sample consists of 27 Islamic banks in Malaysia, Indonesia, Singapore and Thailand covering the period 2009 to 2017. The results suggest that Islamic regulations, such as the Islamic regulatory framework and Shari’ah supervisory board, are negatively associated with Islamic bank margins. These results have important policy implications for regulators, indicating that they should impose a separate regulatory framework for Islamic banks and bank managers to increase the number of Shari’ah scholars on the Shari’ah board in lowering Islamic bank margins. Overall, the findings suggest that Islamic banks should adopt regulations that should follow Shari’ah requirements, as they help to lower the cost of financial intermediation. As for the other control variables, only the Lerner index has a positive and significant impact on ASEAN Islamic bank's margin. Therefore, appropriate policies are necessary to foster competition in Islamic banks.

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Does bank regulation matter on the relationship between competition and financial stability? Evidence from Southeast Asian countries

Cited by 74 publications

References 62 publications

Income Structure and Performance: An Empirical Analysis of Islamic and Conventional Banks in Indonesia

Income Structure and Performance: An Empirical Analysis of Islamic and Conventional Banks in Indonesia

Capital regulation and bank risk‐taking – new global evidence

Islamic Regulations and Islamic Banks Margins: an Empirical Investigation Into Asean Countries

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