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Testing for effective market supervision of New Zealand banks

Author

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  • McIntyre, M.L.
  • Tripe, David
  • Zhuang, Xiaojie (Jeff)

Abstract

There is a considerable amount of research that seeks to determine the extent to which retail market participants exert market discipline on banks either through the price approach (the correlation of price to risk), or the quantity approach (the movement of funds in response to changes in risk). In this paper we propose and implement a third approach: the retail market conditions approach. We seek to determine if the prerequisites for the exertion of effective market discipline by stakeholder monitors, as set out in Llewellyn and Mayes (2003. The role of market discipline in handling problem banks. Bank of Finland Discussion Papers. (retrieved 13.04.04)), prevail by directly examining conditions that prevail among retail market participants. We find little evidence to support the proposition that they are being met among New Zealand retail depositors.

Suggested Citation

  • McIntyre, M.L. & Tripe, David & Zhuang, Xiaojie (Jeff), 2009. "Testing for effective market supervision of New Zealand banks," Journal of Financial Stability, Elsevier, vol. 5(1), pages 25-34, January.
    • Handle: RePEc:eee:finsta:v:5:y:2009:i:1:p:25-34
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    References listed on IDEAS

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    1. Urs Birchler & Andréa M. Maechler, 2001. "Do Depositors Discipline Swiss Banks?," Working Papers 01.06, Swiss National Bank, Study Center Gerzensee.
    2. Goldberg, Lawrence G. & Hudgins, Sylvia C., 1996. "Response of uninsured depositors to impending S&L failures: Evidence of depositor discipline," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(3), pages 311-325.
    3. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    4. John S. Jordan, 2000. "Depositor discipline at failing banks," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 15-28.
    5. Cook, Douglas O. & Spellman, Lewis J., 1996. "Firm and Guarantor Risk, Risk Contagion, and the Interfirm Spread among Insured Deposits," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(2), pages 265-281, June.
    6. Mathias Dewatripont & Jean Tirole, 1994. "The prudential regulation of banks," ULB Institutional Repository 2013/9539, ULB -- Universite Libre de Bruxelles.
    7. Park, Sangkyun & Peristiani, Stavros, 1998. "Market Discipline by Thrift Depositors," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 347-364, August.
    8. repec:zbw:bofrdp:2003_021 is not listed on IDEAS
    9. Dr Donald Brash, 1997. "Banking soundness and the role of the market," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 60, March.
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    Cited by:

    1. Muhammad Rahat Abbas & Barkat Ullah, 2023. "The Impact of Credit and Liquidity Risk on Bank Performance," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(4), pages 205-218.
    2. David G. Mayes, 2009. "Banking Crisis Resolution Policy - Lessons from Recent Experience - which elements are needed for robust and efficient crisis resolution?," CESifo Working Paper Series 2823, CESifo.

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    Keywords

    Banking Market discipline;

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