An Assessment of the Long-Term Economic Impact of the New Regulatory Reform on Hong Kong

Wong, T. C.; Fong, Tom; Li, Ka-Fai; Choi, Henry Sze Hang

doi:10.2139/ssrn.1768642

Cited by 10 publications

(15 citation statements)

References 1 publication

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“…For example, the Institute of International Finance [4] representing over 400 financial institutions across the world, predicted that the price of credit in the United States would be almost 5 percentage points higher as a result of the regulatory changes proposed by Basel III, while the GDP in the major economies would be about 3 percent smaller than they would be without the effects of comprehensive financial reforms. Similarly, Wong, Fong, Li and Choi [5] found that, for Hong Kong, a 1% increase in capital will reduce output by 4.2 basis points in the long run. In this context, Miles et al [7] identify that the changes in capital may affect economic activity through their effect on the cost of financial intermediation.…”

Section: Introductionmentioning

confidence: 89%

“…In the specification of the inputs and outputs, we follow the intermediation approach and specify input prices (p) as the price of labor (PL), the price of fixed asset (PF), and the price of funds (PF) 5 . The outputs (Y) are defined as total loans (TN) and other earning assets (OEA) [15].…”

Section: Empirical Methodologymentioning

confidence: 99%

“…The opponents (i.e., bankers and some academicians) of the regulation argue that holding higher capital would jeopardize the banks'ability to lend and would adversely affect the economic output [4][5][6]. For example, the Institute of International Finance [4] representing over 400 financial institutions across the world, predicted that the price of credit in the United States would be almost 5 percentage points higher as a result of the regulatory changes proposed by Basel III, while the GDP in the major economies would be about 3 percent smaller than they would be without the effects of comprehensive financial reforms.…”

Section: Introductionmentioning

confidence: 99%

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

Zheng

Rahman

Begum

et al. 2017

JRFM

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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.

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Section: Introductionmentioning

confidence: 89%

Section: Empirical Methodologymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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

Zheng

Rahman

Begum

et al. 2017

JRFM

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“…Despite this stated objective of financial stability, some scholars criticize stringent capital requirements for their negative effects. For instance, one strand of the extant literature argues that holding higher capital is 'too expensive' and would jeopardize the banks' ability to lend, increase the bank lending rates, and, consequently, would adversely affect the economic output (IIF 2011;Wong et al 2010;Slovik and Cournède 2011).…”

Section: Introductionmentioning

confidence: 99%

Impact of Cost Efficiency on Bank Capital and the Cost of Financial Intermediation: Evidence from BRICS Countries

Rahman

Ashraf

Zheng

et al. 2017

IJFS

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Over last two decades, emerging and developing nations have desperately endeavored for efficient banking sectors. In this study, we argue that bank efficiency generates incentives that can impact banks' capital holdings and the cost of financial intermediation. Analyzing a panel dataset of 1190 banks from BRICS (Brazil, Russia, India, China, South Africa) countries over the period 2007-2015, we find robust evidence that more efficient banks hold higher capital and charge lower financial intermediation costs. In an extended sample over the period 2000-2015, we observe that cost efficiency had a marginal positive impact on bank capital during the global financial crisis of [2007][2008][2009]. We also observe that on average, banks increased the cost of financial intermediation during the crisis, however, greater efficiency helped banks to not charge higher intermediation costs. Our results imply the beneficial impact of bank efficiency for bank stability and real economy.

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“…As a result, increasing external funding in Turkish banking could worsen funding profile in the sector. On the other hand, Wong et al (2010) estimate that a one percentage-point increase in NSFR roughly corresponds to a decrease of 46 basis points in the Loans-to-Deposits ratio on average, with the assumption that there is a linear relationship between the two ratios. If we accommodate this for Turkish banking, It seems that a decreasing trend in assets sizes and lower profitability may be expected.…”

Section: 2-quantitative Findingsmentioning

confidence: 99%

Basel III Liquidity Regulation And Forthcoming Issues: Assessing Ovelall Picture Of The Liquidity Indicators In Turkish Banking

Tasçi¹

2015

JFBM

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Despite having adequate capital levels, many banks experienced difficulties during the early liquidity phase of the recent financial crisis since they did not manage their liquidity in a prudent manner. In response, the Basel Committee on Banking Supervision in 2008 published Basel III regulatory framework to offer detailed guidance on the risk management and supervision of funding liquidity risk. This study firstly reviews the Basel III liquidity requirements and the existing literature to assess the forthcoming potential issues, challenges and impacts during the transition perod of implementing new rules. Studies show relevant evidence that the actions mandated by the Basel III liquidity rules to create an eligible balance sheet structure can lead banks to low-level profitability. Specifically, our second focus will be on the overall picture of liquidity performance of Turkish banking. The figures reveal that growing credit volume in recent years increased depenendency on external funding resources providing appropriate conditions for liquidity risk and financial instability. The results tend to bring pressing need for timely policy measures and strategic actions in the following periods to recover arising liquidity problems.

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An Assessment of the Long-Term Economic Impact of the New Regulatory Reform on Hong Kong

Cited by 10 publications

References 1 publication

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

Impact of Cost Efficiency on Bank Capital and the Cost of Financial Intermediation: Evidence from BRICS Countries

Basel III Liquidity Regulation And Forthcoming Issues: Assessing Ovelall Picture Of The Liquidity Indicators In Turkish Banking

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