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

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Author Info
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)

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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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Publisher 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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Related research
Keywords: ARCH-M Models; risk premium; financial stability;

Find related papers by JEL classification:
G20 - Financial Economics - - Financial Institutions and Services - - - General
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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