Bank Regulation, the Quality of Institutions, and Banking Risk in Emerging and Developing Countries: An Empirical Analysis

Jeroen Klomp*, Jakob De Haan

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

56 Citations (Scopus)

Abstract

Using data for 371 banks from nonindustrial countries for the period 2002-8, we examine the effect of bank regulation and supervision on banking risk. Our main findings suggest that stricter regulation and supervision reduces banking risk. Notably, capital regulations and supervisory control reduce bank riskiness. Liquidity regulation and activities restrictions also restrain banking risk but only when there is a high level of institutional quality. Finally, we find that the effect of regulation and supervision also depends on the level of development.

Original languageEnglish
Pages (from-to)19-40
Number of pages22
JournalEmerging Markets Finance and Trade
Volume50
Issue number6
DOIs
Publication statusPublished - 1 Nov 2014

Keywords

  • bank regulation
  • banking risk
  • institutional quality
  • supervision

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