Bank Regulation and Market Discipline around the World

執筆者 HOSONO Kaoru/IWAKI Hiroko/TSURU Kotaro  (Senior Fellow)
発行日/NO. 2004年10月  04-E-031
ダウンロード/関連リンク

概要

This paper investigates the effectiveness of depositor discipline and its relationship with various bank regulations and supervisions using a panel of about 17,000 bank-year data during 1992-2002 around 60 countries. We first theoretically show that deposit interest rate and its sensitivity to bank risk depend on the bank insolvency risk and the fraction of deposit protection, among others. Then we find evidence that strict regulations on bank activities and powerful supervisory authorities tend to reduce deposit interest rate and its sensitivity to bank risk. We interpret our results as suggesting that strict regulations on bank activities are likely to be associated with generous bailout of an insolvent bank, resulting in weak market discipline and a fragile banking system.