Effects of bank consolidation promotion policy: Evaluating the Bank Law in 1927 Japan
AbstractIn recent years, there has been a wave of bank consolidations that has spread across the world, and bank consolidation has been one of the major issues of the research on banking and finance. This paper explores the role of government in bank consolidations, using the data on prewar Japan. The data on prewar Japan are useful, because not only there were numerous bank consolidations, but also we can identify consolidations promoted by the government policy. The Bank Law of 1927 set the minimum capital criterion for banks, which came to be a powerful measure for the government to promote consolidations. In this paper, we identified policy-promoted consolidations referring to the minimum capital of the bank, and examined the effects of policy-promoted consolidations in comparison with other consolidations. It was confirmed that policy-promoted consolidations mitigated the financial crisis by enhancing the ability of the bank to collect deposits, under the condition that the financial system was exposed to serious negative shocks. On the other hand, policy-promoted consolidations had negative aspects. They were accompanied by large organizational costs, and decreased bank profitability.
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Bibliographic InfoPaper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 04004.
Length: 23 pages
Date of creation: Jan 2004
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- Michiru Sawada & Tetsuji Okazaki, 2004. "Effects of Bank Consolidation Promotion Policy: Evaluating the Bank Law in 1927 Japan," CIRJE F-Series CIRJE-F-307, CIRJE, Faculty of Economics, University of Tokyo.
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- Kris James Mitchener & Mari Ohnuki, 2007. "Capital Market Integration in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 25(2), pages 129-154, November.
- Ahmad Bello, Dogarawa, 2006. "Challenges of Bank Consolidation to the Central Bank of Nigeria: A Descriptive Analysis," MPRA Paper 23198, University Library of Munich, Germany.
- Kris James Mitchener & nd Mari Ohnuki, 2007. "Capital Market Integration In Japan," IMES Discussion Paper Series 07-E-17, Institute for Monetary and Economic Studies, Bank of Japan.
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