Bank regulation and financial fragility in developing countries: Does bank structure matter?

Jeroen Klomp*, Jakob de Haan

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

26 Citations (Scopus)

Abstract

Using data for 1238 banks located in 94 developing and emerging countries, we explore whether the impact of bank regulation and supervision on banking risk (measured by the banks' Z-scores) depends on bank structure. Our findings suggest that stricter regulation and supervision increases the banks' Z-scores. Notably capital requirements and supervisory control diminish banking risk. However, the effectiveness of other dimensions of regulation and supervision depends on the organizational structure of banks. Notably activity restrictions reduce risk of large and foreign owned banks, while liquidity restrictions have most effect on the Z-scores of unlisted and commercial banks.

Original languageEnglish
Pages (from-to)82-90
JournalReview of Development Finance
Volume5
Issue number2
DOIs
Publication statusPublished - 2015

Keywords

  • Bank regulation and supervision
  • Bank structure
  • Developing countries
  • Financial risk

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