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Financial Turmoil in the Banking Sector and the Asian Lamfalussy Process : The Case of Four Economies

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  • Chen-Min Hsu

    (Asian Development Bank Institute)

  • Chih-Feng Liao
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    Abstract

    This paper investigates the prevailing financial regulatory structures and impact of the current financial turmoil on banking performance in four Asian economies : the People's Republic of China (PRC); Hong Kong, China; Singapore; and Taipei,China. Both the PRC and Hong Kong, China operate under a fragmented financial regulatory structure, while Singapore and Taipei,China have integrated structures. We examine the role of an integrated financial regulatory structure in helping financial institutions mitigate the impact of the financial crisis, using financial indicators of banks capital structure and operating performance in these four economies between 2003 and 2008. Our analysis of the indicators reveals that banking performance under a fragmented financial regulatory structure is not worse than under integrated regulation. This implies that financial regulatory structure is not the main reason why Asian financial institutions suffered only limited losses from the current global financial crisis. However, given the growing complexity of the global financial system, and the relative weakness of current financial regulatory structures in Asia, this paper suggests that East Asian governments should refer to the Lamfalussy Process in the European Union and set up an Asia Financial Stability Dialogue to facilitate policy coordination for regional financial sector stability and development.

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    File URL: http://www.eaber.org/node/22755
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    Bibliographic Info

    Paper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number 22755.

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    Date of creation: Jan 2010
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    Handle: RePEc:eab:financ:22755

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    Related research

    Keywords: China; Hong Kong; Singapore; Taiwan; financial regulatory structures; Banking; finance; Asia Financial Stability Dialogue;

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    1. Masciandaro, Donato, 2009. "Politicians and financial supervision unification outside the central bank: Why do they do it?," Journal of Financial Stability, Elsevier, Elsevier, vol. 5(2), pages 124-146, June.
    2. Zdenek Kudrna, 2009. "The EU Financial Market Policy: Evolution, Innovation and Research Outlook," Working Papers of the Vienna Institute for European integration research (EIF), Institute for European integration research (EIF) 4, Institute for European integration research (EIF).
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