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Banks, policy, and risks: how emerging markets differ

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  • Ashima Goyal

Abstract

Emerging market (EM) banks differ from advanced country banks. They may be weaker in some respects but are stronger in others. Neither of these is well understood leading to inappropriate policy. Scale and cross-border exposures for banks in emerging economies are lower compared to advanced economies. The path of market development and regulatory evolution has helped reduce structural risks but some of the distinctive broad-pattern regulation used creates good incentives that could fill gaps in global regulatory reforms if more widely applied. Since markets remain thin, and interest rate spreads are high, EM banks are vulnerable to large fluctuations in policy rates. Cyclical risks can be contained as long as policy makers moderate the rates. Global regulatory reform can also reduce risks. The argument is illustrated with the Indian case.

Suggested Citation

  • Ashima Goyal, 2014. "Banks, policy, and risks: how emerging markets differ," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 10(1/2/3), pages 4-26.
    • Handle: RePEc:ids:ijpubp:v:10:y:2014:i:1/2/3:p:4-26
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    Citations

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    Cited by:

    1. Jugnu Ansari & Ashima Goyal, 2014. "Bank Competition, Managerial Efficiency and the Interest Rate Pass-Through in India," Contemporary Studies in Economic and Financial Analysis, in: Risk Management Post Financial Crisis: A Period of Monetary Easing, volume 96, pages 317-339, Emerald Group Publishing Limited.
    2. Ashima Goyal & Akhilesh Verma, 2018. "Slowdown in Bank Credit Growth: Aggregate Demand or Bank Non-performing Assets?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(3), pages 257-275, August.
    3. Ashima Goyal, 2023. "Lessons from outperformance in the Indian financial sector," Global Policy, London School of Economics and Political Science, vol. 14(5), pages 805-817, November.
    4. Ashima Goyal, 2018. "Indian Banks and the Prevention of Corruption Act: Freedom and Discipline," Working Papers id:12944, eSocialSciences.
    5. Ashima Goyal, 2013. "Assessing Changes in the Global Financial Architecture from an Emerging Market Perspective," Foreign Trade Review, , vol. 48(4), pages 461-480, November.

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