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Banking Deregulation and Financial Stability : is it Time to re-regulate in Canada ?

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  • Christian Calmès

    ()
    (Département des sciences administratives, Université du Québec (Outaouais), et LRSP)

  • Raymond Théoret

    ()
    (Département de stratégie des affaires, Université du Québec (Montréal), et Chaire d'information financière et organisationnelle)

Abstract

We provide new evidence of a worsening of the risk-return trade-off in Canadian banking. Surging OBS activities have led to increasingly volatile net operating revenues, and might have reduced well-known measures of bank profitability, like return on assets and return on equity. In this context, a natural question arises: should we re-regulate? On this matter, we confirm Calmès(2003) prediction: a maturation process took place after 1997. Using a new approach based on ARCH-M estimation, we find that an additional risk premium has emerged. In this sense, there is no need to re-regulate.

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File URL: http://www.repad.org/ca/qc/uq/uqam/Cahier_200809cls_tht.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Département des sciences administratives, UQO in its series RePAd Working Paper Series with number UQO-DSA-wp042008.

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Length: 36 pages
Date of creation: 20 Oct 2008
Date of revision:
Handle: RePEc:pqs:wpaper:042008

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Keywords: ARCH-M Models; risk premium; financial stability;

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