Estimating the Costs of Financial Regulation

Santos, Andre; Elliott, Douglas J.

doi:10.5089/9781475510089.006

Cited by 22 publications

(23 citation statements)

References 7 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A decrease in risk-weighted assets which are also considered interest earning assets would jeopardize banks' earning capacity. While on the other hand, stringent capital regulation may encourage banks to be efficient by reducing operating costs, restructuring business activities, monitoring bank loans and rationing poor credit quality loans [9]. Further, banks may maintain higher capital levels to signal future better earnings prospects [10].…”

Section: Introductionmentioning

confidence: 99%

Capital Regulation, the Cost of Financial Intermediation and Bank Profitability: Evidence from Bangladesh

Zheng

Rahman

Begum

et al. 2017

JRFM

View full text Add to dashboard Cite

Abstract:In response to the recent global financial crisis, the regulatory authorities in many countries have imposed stringent capital requirements in the form of the BASEL III Accord to ensure financial stability. On the other hand, bankers have criticized new regulation on the ground that it would enhance the cost of funds for bank borrowers and deteriorate the bank profitability. In this study, we examine the impact of capital requirements on the cost of financial intermediation and bank profitability using a panel dataset of 32 Bangladeshi banks over the period from 2000 to 2015. By employing a dynamic panel generalized method of moments (GMM) estimator, we find robust evidence that higher bank regulatory capital ratios reduce the cost of financial intermediation and increase bank profitability. The results hold when we use equity to total assets ratio as an alternative measure of bank capital. We also observe that switching from BASEL I to BASEL II has no measurable impact on the cost of financial intermediation and bank profitability in Bangladesh. In the empirical analysis, we further observe that higher bank management and cost efficiencies are associated with the lower cost of financial intermediation and higher bank profitability. These results have important implications for bank regulators, academicians, and bankers.

show abstract

Section: Introductionmentioning

confidence: 99%

Capital Regulation, the Cost of Financial Intermediation and Bank Profitability: Evidence from Bangladesh

Zheng

Rahman

Begum

et al. 2017

JRFM

View full text Add to dashboard Cite

show abstract

“…However, it appears that the IIF results are an outlier, and almost certainly exaggerate the likely impact. This conclusion is also reached in Santos and Elliott (2012), who note that the IIF study assumes that all costs are passed through into higher lending rates without any other adjustments. The other two studies showing relatively large impacts are Roger and Vlcek (2011) and Bernabe and Jaffar (2013), while the remaining studies show relatively small impacts.…”

mentioning

confidence: 63%

An Asian Perspective on Global Financial Reforms

Morgan

Pontines

2013

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, the ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org © 2013 Asian Development Bank Institute ADBI Working Paper 433 Morgan and Pontines AbstractThe purpose of this study is to better understand the likely impact on Asian economies and financial institutions of various recent global financial reforms, including Basel III capital adequacy and liquidity rules. Part one reviews the lessons of the global financial crisis (GFC) of 2007-09 and their relevance for Asian economies. Part two describes the major regulatory reforms that have been announced and possible concerns about their impacts on emerging economies. Part three reviews the literature aimed at quantifying the impacts of Basel III capital adequacy rules. Part four develops our methodology and analysis of the quantitative impact of Basel III capital adequacy rules on a panel of Southeast Asian financial institutions with emphasis on the effect on economic growth. Finally, the study concludes with a discussion on the policy implications of the results obtained from the previous section for Asian financial sectors and economies. Overall, we find that the Basel III capital adequacy rules are likely to have limited impacts on economic growth in Asia, but other financial regulations, including liquidity standards and rules for over-the-counter (OTC) derivatives, could have stunting effects on financial development in the region.

show abstract

“…All this can have undesirable side-effects -rise in the prices of financial services which are paid ultimately by customers. For example Santos and Elliott [7] have shown in their study that reforming the regulation of financial institutions should provide large benefits to society, but financial reforms will likely result in modest increase in banking lending rates. On some occasions these regulations implementations costs can be absorbed by lowering returns to shareholders, reducing expenses or restructuring the business, but usually it will lead to increase to financial institutions operating costs, than in turn affects directly bank customers, employees and investors.…”

Section: International Journal Of Trade Economics and Finance Vol mentioning

confidence: 99%

The Changing Landscape of the Financial Services

Hõbe¹

2015

IJTEF

View full text Add to dashboard Cite

Abstract-The last global crisis, the worst economic and financial crisis since the 1930s that erupted in 2007-2008, was a groundbreaking time for the financial services sector. Banking continues to go through tremendous changes influenced by the aftermath of the economic crisis, the development of new regulations and the challenges and opportunities resulting from advances in technology. The financial crisis also had an impact on the behaviour of customers. Customers demand complex solutions through more understandable and secure products and services that match their individual needs. Their profitability is decreasing as they distribute their assets across multiple banks and even punish financial institutions through their lethargic passivity.This article reviews the current challenges in financial services to financial institutions. The purposes of this article are twofold. The first purpose is to provide a theoretical discussion of the most influencing changes. And, secondly, to review the main practical impacts on banks and their customers. The article highlights a number of important areas that should be kept in mind to achieve effective and efficient organisation for facing these challenges.

show abstract

Estimating the Costs of Financial Regulation

Cited by 22 publications

References 7 publications

Capital Regulation, the Cost of Financial Intermediation and Bank Profitability: Evidence from Bangladesh

Capital Regulation, the Cost of Financial Intermediation and Bank Profitability: Evidence from Bangladesh

An Asian Perspective on Global Financial Reforms

The Changing Landscape of the Financial Services

Contact Info

Product

Resources

About