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Monetary and prudential regulation and its impact on commercial bank performance: The Carribean case.

Williams, Marion V. (1995) Monetary and prudential regulation and its impact on commercial bank performance: The Carribean case. Doctoral thesis, University of Surrey (United Kingdom)..

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Structuralist models of development still persist in the 1990s, and many developing countries continue to target macroeconomic stability through aggressive monetary controls based on structuralist assumptions. Simultaneously, prudential criteria, principally capital controls take effect through the commercial banking system. It is the central hypothesis of this thesis that monetary controls impact adversely on commercial bank performance and on banks' market share, and that the simultaneous implementation of monetary and prudential regulation can undermine the objectives of monetary stability and the growth of the banking system. This study argues that those monetary measures most frequently applied to protect the balance of payments; primary and secondary reserve requirements, credit controls, and interest rate controls, force cost adjustments and non-optimal portfolio realignments which stymie commercial bank performance. These arguments are illustrated from the cases of Barbados, Jamaica and Trinidad and Tobago for the period 1973-1992. The study discusses the rationale for regulation, analyses commercial bank performance in the Caribbean and formulates a model which includes regulatory variables for testing the impact of monetary and prudential regulation on bank performance. The model also defines the determinants of bank performance and provides the basis for deriving regulation and performance indices with global application. Results disclose that most regulatory variables are negatively associated with commercial bank performance and tentative causality is established running from regulation to bank performance. Where cost-axiomatic interest rate-setting is practised the adverse impact on bank performance is alleviated, but unevenness of monetary and prudential regulations adversely influence the performance of commercial banks, contributing to loss of market share relative to non-banks. Regulation assists in achieving macroeconomic objectives, but greater liberalisation appears desirable for the development of commercial banking. However, new monetary theories are needed to identify alternative vehicles, other than commercial banks, if macroeconomic objectives are to be achieved in increasingly liberalised environments.

Item Type: Thesis (Doctoral)
Divisions : Theses
Authors :
Williams, Marion V.
Date : 1995
Contributors :
Depositing User : EPrints Services
Date Deposited : 09 Nov 2017 12:18
Last Modified : 20 Jun 2018 11:50

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