Banking Systems Of Countries Research Articles

Islamic Banking by Judiciary: The ‘Backdoor’ for Islamism in Pakistan?

The most likely route for Islamisation in Pakistan is not Islamist political parties, or military officers, but its Supreme Court enforcing the Islamic provisions of the country's Constitution. In 1999, at the culmination of two decades of increasing Islamisation, the Pakistani Supreme Court ruled the country's entire banking system, officially Islamic since 1985, to be insufficiently so. It ordered its complete restructuring. Now direct equity participation by banks was the sole permissible financing mode. This happened mainly due to the constitutionally-mandated roles for sharia and the ulema in the legal system. Yet upon final appeal, the Court reversed its ruling and remanded the issue to a lower court for further study, thereby granting the banking system a reprieve. How permanent is this reprieve likely to be?

Deposit Insurance, Risk-Taking and Banking Crises: Is there a Risk-Minimizing Level of Deposit Insurance Coverage?

Explicit deposit insurance is a two-edged sword with respect to risk taking. High explicit coverage creates incentives to shift risk to a deposit insurance fund or taxpayers; low explicit coverage may be associated with strong implicit insurance reflecting lack of credibility of non-insurance. Institutions that allow banks to fail without serious contagion effects enhance this credibility. Alternative measures of banks' risk taking are used to test the hypothesis expressed as a U-shaped relationship between explicit coverage and risk taking. The hypothesis is strongly supported when the occurrence of banking crises and non-performing loans are proxies for risk-taking in a country's banking system. Institutional characteristics affect the relation between explicit coverage and risk-taking.

Do improvements in government quality necessarily reduce the incidence of costly sudden stops?

Sudden stops have been linked to a number of financial crises in emerging market countries. While a large literature has developed emphasizing the importance of institutions and governance in reducing economic volatility, this paper finds that the effect of government quality on the incidence of sudden stops is non-linear. Initial improvements in governance actually increase the incidence of costly sudden stops. A possible explanation is that improved governance encourages capital inflows that can overwhelm banking systems in countries with weak institutions. What is striking is that this result holds for a large number of countries including those with average levels of institutional quality that already receive considerable inflows. Eventually, however, improving institutions does reduce the frequency of sudden stops, allowing countries to enjoy the benefits of financial globalization with fewer risks.

EXPERT POLITICAL RISK OPINIONS AND BANKING SYSTEM RETURNS EXPERT POLITICAL RISK OPINIONS AND BANKING SYSTEM RETURNS

Human behavior in banking and financial systems is in part made up of a complex mix of political, social and cultural factors. These factors are reflected in expert opinion based political risk scores. Market inefficiency is largely a result of anomalies in human behavior causing information asymmetries. A basic systemic market model is re-specified into a model for international banking systems, which controls for pure political risk. Samples of developed and developing banking systems are examined. Political risk factors and world banking returns are exogenous in models of countrybanking system returns. New political information assists in explaining banking system stock returns. The findings should be of interest to investors in banking stocks. Banking regulators may be assisted in decisions on appropriate levels of regulatory capital as a benchmark for banking systems. The model could help to anticipate financial crises.

Prolegomenon to Neoliberalism: The Political Economy of Populist Argentina, 1943—1976

Recent research in economic history recasts the debate on economic policy in postwar Argentina. It demonstrates that the highly partisan writings on recent economic history and neoliberal prescriptions for economic reform have relied on an incomplete and therefore distorted understanding of the policies undertaken in the decades before the neoliberal reforms. An analysis of the inner workings of the country's banking system in these years provides a new historical precision to debates on the relationship between economic variables and political instability in the postwar years.

Contingency planning: A practitioner's guide drawing from lessons learned from dealing with bank failures

A key responsibility for a depositor protection organisation is to be in a position, as soon as it begins operating, to reimburse depositors when a bank fails. A basic requirement is for the deposit insurer to know when a bank failure is going to happen. But not all deposit protection agencies know when that is going to happen given the nature of their mandates, roles and responsibilities. If, for example, the agency is a pay-box, then it might be told by the bank supervisor that a pay out is required without any advance warning. Depositor protection organisations with broader mandates might have more advance warning and even play a key role in determining whether a troubled bank that accepts deposits might be closed. In these latter circumstances, more time can be given for advance preparations. When a bank fails it is often regarded as a crisis and indeed, banking problems can lead to very expensive overhauls of a country banking system. The purpose of this paper is to set out some practical considerations regarding the advance planning that deposit protection agencies should consider doing in order to fulfil their mandates — particularly with respect to reimbursing depositor claims in a timely fashion after a bank failure.

Enhancing the development impact of migrant remittances and diaspora: the case of Viet Nam

In a traditional viewpoint, migrants are both pushed by lack of opportunities at home and pulled by the hope of economic gain. A search for a better life is often underlying the movements. Development processes affect and are affected by migration flows. Migration can help to achieve this by associating people more closely with available economic opportunities, employment and services. This thesis remains relevant today. Both internal and international migration is on the whole contributing to development and poverty reduction (IOM, 2003). The monies sent back by migrants contribute more to national and local economies than trade in several countries. Registered remittances to the countries of origin were estimated at US$100 billion in 2004. It represents roughly one and a half times official development assistance (Newland, 2004). In addition, a large, unknown amount is transferred through informal channels or to countries that do not report statistics on remittances. A major reason to transfer money through informal channels is the still inadequately developed banking systems in countries of origin. The effects of remittances on development are often complex and contradictory, but seen in a positive light by a majority of researchers.

Expert Political Risk Opinions and Banking System Returns: A Revised International Banking Market Model

This paper posits that human behaviour in banking and financial systems is made up of a complex mix of political, social and cultural factors reflected in expert opinion based political risk scores. Market inefficiency is partly a result of anomalies in human behaviour causing information asymmetries, where prices do not instantaneously reflect all available public and private information. The feasibility of re-specification of a basic systemic international banking market model is proposed, using the examples of developed and developing banking systems, on the basis that political risk factors and world banking returns are exogenous in country-banking system returns models. If political risk scores are exogenous in such models, the ratings will provide new information, which will be incorporated into and assist in explaining banking system stock returns for investors and banking regulators. For example, the model would help explain whether political risk ratings lead or lag financial crises.

USA and International Banking System Interaction: Have the Effects of 9/11 Dissipated?

The 9/11 terrorist attacks in the USA saw a tragic loss of lives and property. This paper provides evidence that there were also substantial effects on the USA banking system and spillover effects to other country banking systems. Regression and vector autoregressive analysis of political risk modified international banking market models is undertaken using country banking stock price index returns and pure political risk ratings data. Samples of developed and developing country banking systems interacting with the USA and the world banking systems are investigated. Structural breaks in the data, due to the terrorist attacks, are found. Over the full period of the study, the USA banking variable, in combination with the world banking variable, is shown to be exogenous in all of the sampled country banking systems when country political risk probabilities of default combined with country banking returns are taken into account. The interaction of these variables is found greater in magnitude after the terrorist attacks than before. There are implications in these findings for investors in international banking stocks deciding on portfolio diversification and for banking regulators deciding on appropriate levels of economic capital for banks within country banking systems. In essence, the paper suggests that political risk factors and extreme political acts need to be taken into account in analysis of bank stock returns.

Benchmarking of Economic and Regulatory Capital for International Banking Systems: A Theoretical Discussion

There is no suggestion in the title of this paper that the Bank for International Settlements or any other international body starts formally regulating entire country-banking systems. However, the idea behind this paper is that by benchmarking economic and regulatory capital for international banking systems, regulators will be able to arrive at more realistic levels of capital adequacy for banks within these systems. The rationale behind the idea is that economic risk of countries is closely related to financial risk of their banking systems. This paper presents an alternative approach to dealing with these issues and constructs a model for analysing the performance of different country-banking systems. The paper proposes the use solely of stock market-generated data for the implementation of the model.

European Banking Distress and EMU: Institutional and Macroeconomic Risks

Financial stability in Europe has received renewed attention with the advent of EMU. This paper examines whether EU country banking systems are particularly vulnerable to systemic risk. Our approach is to explore episodes of banking sector distress for a large sample of countries, highlighting the experience of the EU. We estimate multivariate probit models linking the likelihood of banking problems to a set of macroeconomic variables and institutional characteristics such as aspects of bank supervision and regulation, restrictions on bank portfolios, and development of the banking system. Given these characteristics, the model predicts a low probability of banking sector distress in EMU countries. JEL classification: G21; E44; F41

The Regulation and Supervision of Banks around the World: A New Database

Brookings-Wharton Papers on Financial Services 2001 (2001) 183-240 [Access article in PDF] The Regulation and Supervision of Banks around the World: A New Database James R. Barth, Gerard Caprio Jr., and Ross Levine [Comment and Discussion] [Tables] NOTWITHSTANDING ALL the accomplishments in the fields of finance and financial economics in the past two decades, if a survey were taken of all the international consultants on appropriate bank regulation and supervision for developing countries, what would be the best way to predict the advice they would offer? Anecdotal evidence accumulated over the years suggests that an astonishingly high degree of accuracy could be obtained merely by knowing each consultant's country of origin: experts almost always view their own regulatory and supervisory framework as an appropriate model for developing countries. Beyond some inevitable home bias, what would explain such a good fit? The answer is that, until now, there was no systematically assembled database on the way in which countries regulate and supervise their banking systems and thus no comprehensive analysis of which regulations and supervisory practices are [End Page 183] most appropriate. This ignorance provides fertile ground for reforms based on bias instead of facts. To contribute to a better understanding of bank regulatory and supervisory regimes, this paper presents and discusses a new and comprehensive database based on a survey sent to national bank regulatory and supervisory authorities. These data are available to researchers on the World Wide Web. 1 For the first time, the data enable researchers to identify the existing regulation and supervision of banks (and selective features of bank structure and deposit insurance schemes) in 107 countries at all levels of income and in all parts of the world. 2 With this database, it is possible to determine more fully the stylized facts for banking on a global basis. Most important, we compiled these data to lower the marginal cost of doing empirical research on bank regulation and supervision. We expect these data and the ensuing research to provide a much firmer foundation on which authorities around the world can implement reforms. In a companion paper, we use these data to identify those regulatory and supervisory practices associated most closely with better bank performance and more stability. 3 This effort is clearly a beginning, not an end, of work based on our database. The remainder of the paper proceeds as follows. The next section describes the data and how they were obtained. It also draws on our new and comprehensive database to provide a selective overview of some of the important ways in which banking systems differ across countries. The third section discusses and examines ways to group and aggregate variables from this data set to provide a potentially more meaningful characterization of a country's banking system. It also discusses ways in which these variables may be quantified, if they are not already, to better assess the degree to which countries differ. 4 The fourth section describes differences in the variables when countries are aggregated by income level or [End Page 184] region and also presents some correlations among key variables. The final section concludes with some early and illustrative findings using this database. 5 Survey and Data In 1998 we designed and implemented a two-year survey funded by the World Bank to collect detailed and comprehensive information on the regulation and supervision of banks in as many countries as possible. 6 We also requested information on certain aspects of bank structure and deposit insurance schemes. The formulation and completion of the survey entailed a number of interrelated steps. The Basel Committee on Banking Supervision provided us with contact information on bank supervisory personnel in countries around the world so that we could contact appropriate individuals at national regulatory and supervisory agencies. Furthermore, since the World Bank routinely conducts seminars for bank supervisors from emerging-market countries, participants at these sessions were asked to complete the survey. In some cases, World Bank staff personally delivered the survey to the appropriate officials. Despite these efforts...

Rating of Indian commercial banks: A DEA approach

Significant changes have been taking place in the Indian banking scenario under the financial sector reform initiatives of the Government of India and the Reserve Bank of India since the early 1990s. As the country's banking system, which is still dominated by the Public Sector Banks, is on the threshold of the new millennium, efficiency issues are gradually emerging as the touchstone of success. There is an emergent need for a comprehensive framework for measuring efficiency of Indian banks both from the point of view of the investors as also the regulators. The present paper, based on empirical analysis, suggests that Data Envelopment Analysis (DEA) could be a suitable approach towards measuring the relative efficiency of banks in the Indian context.

European Banking Distress and EMU: Institutional and Macroeconomic Risks

Financial stability in Europe has received renewed attention with the advent of a common currency, wave of mergers and acquisitions among financial institutions, and greater market competition (e.g. ECB, 1999; IMF, 1999; OECD, 1999). This paper examines whether EU country banking systems are particularly vulnerable to systemic risk at present. Our approach is to examine episodes of banking sector distress for a large sample of countries, highlighting the experience of the EU. We estimate multivariate probit models linking the likelihood of banking problems to a set of macroeconomic variables and institutional characteristics. Institutional characteristics, made available by a new data set on corporate governance in the financial sector not previously used in this type of analysis, include aspects of bank supervision and regulation, restrictions on bank portfolios, and development of the banking system. Given these characteristics, the model predicts a low probability of banking sector distress in EMU countries.

When the Euro Falls Apart

This paper recounts some well-known problems confronting European monetary union (EMU), such as withstanding asymmetric shocks and maintaining domestic political support. It then examines how a speculative attack could damage a target country's banking system, and how the basic structure of EMU could facilitate its break-up. On the basis of this analysis, one might reasonably conclude that there is a significant chance – over one in ten – that EMU may break up in whole or in part. The paper then focuses primarily on two significant problems related to a break-up. First, a country seeking to leave EMU, particularly after the transition period, may have difficulty re-establishing its national currency unilaterally, as its economy is likely to have become thoroughly ‘euroized’. Second, any break-up accompanied by re-denomination of existing euro obligations, including government bonds, will create great legal uncertainty and costly litigation. There are no continuity of contract rules for exiting EMU equivalent to those for entering. Both problems require cooperative and deliberative solutions and will be difficult and costly to solve. If such problems are properly taken into account, which has not previously been the case, a euro break-up in the foreseeable future, particularly after transition, is considerably less likely than the above estimate of one in ten.

Political implications of stagnant agricultural productivity in Cambodia

Chad Raymond(FN*) Political Implications of Stagnant Agricultural Productivity in Cambodia Journal of Contemporary Asia v26 no3 p366-79 1996 The magazine publisher is the copyright holder of this article and it is reproduced with permission. Further reproduction of this article in violation of the copyright is prohibited. When Cambodia gained independence from France in late 1953, the country's economy was overwhelmingly agricultural. By 1962, eighty-one percent of the productive population was still engaged in agriculture, and sixty-five percent of the productive population were rice cultivators.(FN1) Mechanization was almost nonexistent and fertilizers were expensive. Cambodian peasants utilized a variety of methods to overcome a scarcity of labor in the production process, including cooperative, reciprocal labor arrangements. Though Khmer peasants utilized reciprocal labor arrangements to overcome scarcity in the means of production, these arrangements were temporary agreements between households rather than permanent social structures. The agricultural economy was based on the family unit, which was the only clearly defined social grouping in rural Cambodia. Khmer villages had no formal associations, such as religious cults. The only social networks in the community other than blood and affective kin networks were cooperative work teams organized primarily for agricultural labor at certain stages of the rice cultivation cycle when the household alone could not supply enough manpower.(FN2) Peasants with financial needs sought out private moneylenders or rice brokers and either borrowed rice (if they had a deficit caused by a small harvest), borrowed money, or occasionally sold property. Bank credit was unavailable in rural Cambodia in the 1950s and 1960s. Nearly all short-term credit given by private banks went to commercial enterprises, instead of agricultural or industrial production. The 1963 nationalization of the country's banking system by Cambodia's ruler, Prince Sihanouk, did not alleviate peasants' need for credit, and the state's Royal Cooperative Office (OROC), designed to provide low-interest loans to cooperative farmers, was inefficient, if not blatantly corrupt.(FN3) Because fellow villagers usually did not produce enough of a surplus to extend loans in kinds, peasants commonly borrowed money to purchase rice for food or inputs needed for next year's harvest. Loans were repaid in rice. Peasants usually required loans prior to the harvest, when the purchase price of rice was high, and were forced to repay the loan after the harvest, when market prices for rice were relatively low. Interest averaged ten percent per month, and land was used as collateral. The lender usually designated which parcel was mortgaged, and normally selected the borrower's most productive land.(FN4) Though debt was common, complete loss of land was infrequent. Peasants normally paid off their debt after one year, but often borrowed again to compensate for shortages caused by repayment of the previous loan or a bad harvest. This process resulted in an endless cycle of debt for many peasants, which pushed them closer toward the limits of subsistence. Delvert found that in different provinces indebted farmers ranged from ten to seventy-eight percent of the peasant population in 1956.(FN5) A colonial survey conducted in 1952 reported that nationwide, seventy-five percent of Cambodian peasants were significantly indebted.(FN6) Widespread debt during the 1950s and 1960s did not create a large rural landless population

Competitive conditions in european banking

In this paper we utilise the Rosse-Panzar statistic to assess competitive conditions in major EC banking markets between 1986 and 1989. Although EC banking legislation has established relatively free access to member country banking systems in recent years, our results indicate no change in market conduct of banks between 1986 and 1989. The results suggest that banks in Germany, the United Kingdom, France and Spain earned revenues as if under conditions of monopolistic competition in the period. In the case of Italy, they are consistent with banks having earned revenues as if under monopoly or conjectural variations short-run oligopoly conditions. We interpret the results as indicative of a lack of integration in EC banking markets and they thus underline the importance of the Second Banking Directive, the associated supervisory arrangements, and the elimination of capital controls as to achieving full integration.