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

Author

Listed:
  • 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.

Suggested Citation

  • Christian Calmès & Raymond Théoret, 2008. "Banking Deregulation and Financial Stability : is it Time to re-regulate in Canada ?," RePAd Working Paper Series UQO-DSA-wp042008, Département des sciences administratives, UQO.
    • Handle: RePEc:pqs:wpaper:042008
    as

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    File URL: http://www.repad.org/ca/qc/uq/uqam/Cahier_200809cls_tht.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    ARCH-M Models; risk premium; financial stability;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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