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Impact of Bank Regulations on Growth

In: Monetary Policies, Banking Systems, Regulatory Convergence, Efficiency and Growth in the Mediterranean

Author

Listed:
  • Rym Ayadi

    (Centre for European Policy Studies)

  • Sami Mouley

    (University of Tunis)

Abstract

The key justification for introducing financial regulations is based on the idea that financial markets are imperfect and that regulations can effectively correct these shortcomings. The various areas of regulations considered in this chapter have all sprung into existence due to these considerations. Since customers often have asymmetric information regarding the operations of the banks, licensing and disclosure requirements are put forward to restrict the possibility of improper activities while providing the investors with adequate information. Capital requirements are an attempt to contain the risk-taking incentives of the owners of banks. The powers granted to the supervisors ensure that they have access to adequate information on the financial intermediaries and can act in a timely and efficient manner when troubles arise. Deposit insurance schemes are put forward to mitigate the likelihood that imperfectly informed depositors lead to a bank run. Credit information availability is crucial to overcome credit rationing, which arises when the financial intermediaries have limited information on borrowers.

Suggested Citation

  • Rym Ayadi & Sami Mouley, 2014. "Impact of Bank Regulations on Growth," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Monetary Policies, Banking Systems, Regulatory Convergence, Efficiency and Growth in the Mediterranean, chapter 6, pages 200-215, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-1-137-00348-5_7
    DOI: 10.1057/9781137003485_7
    as

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