Risk and Regulation for the Soundest
Banking Systems in the World Cover Image

Risk and Regulation for the Soundest Banking Systems in the World
Risk and Regulation for the Soundest Banking Systems in the World

Author(s): Tafara Sani Nasa, Danny Mokatsanyane, Zandri Dickason-Koekemoer
Subject(s): Financial Markets
Published by: Editura Universitară Danubius
Keywords: bank risk indicators; sound financial systems; global financial crisis;

Summary/Abstract: Objectives The objectives of this paper were to analyse the different risk measures to determine the best measure of bank risk to use in the quantile regression between risk and regulation; determine the best proxies for bank regulation from the World Bank survey on banking regulation and evaluate the nature of the relationship between bank risk and bank regulation variables this study built on the work done in 2012 by Klomp and De Haan and added a new focus study to their methodological approach A factor analysis was used to explain variability amongst the variables in the risk indicators of the different countries. After that, a principal component analysis was performed with the regulation data of the sample. Finally, a multilevel quantile regression function was used to determine the relationship between strict regulation and risks for the identified banks in different countries. The results indicated that bank regulation and supervision mainly affect high-risk bank swhich are in the 0.75 and 0.95 quantiles. This finding was also similar to what de Haan and Klomp discovered in their results. The study highlighted the lack of literature for African studies in the bank risk and regulation topic post the 2008 global financial crisis. The paper indicated that more bank risk that focuses on capital regulatory requirements need to be implemented to assist in the reduction of possible banks risk.

  • Issue Year: 16/2020
  • Issue No: 5
  • Page Range: 203-219
  • Page Count: 17
  • Language: English