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International banking standards in emerging markets: testing the adaptation thesis in the European Union

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Abstract

This paper compares the bank regulatory regimes in the enlarged European Union in order to test the thesis claiming that international banking standards need to be adapted to emerging market circumstances. On the basis of World Bank surveys, we compile structural indices for the 10 post-communist EU members (emerging markets) as well as 17 advanced EU economies and compare them using Bayesian statistical procedures. Our findings show that there were systematic and significant differences, two-thirds of which can be explained by 8 of the 52 structural characteristics. The new member states regulatory regimes are more rule-based and leave less discretion for authorities, which is consistent with the thesis that the emerging market regulatory regimes — including those within the EU — needed to compensate for limited regulatory resources and higher political and economic volatility. Hence, the new generation of international banking standards should recognize these limitations.

Suggested Citation

  • Zdenìk Kudrna & Juraj Medzihorsky, 2012. "International banking standards in emerging markets: testing the adaptation thesis in the European Union," Working Papers IES 2012/06, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Mar 2012.
  • Handle: RePEc:fau:wpaper:wp2012_06
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    File URL: http://ies.fsv.cuni.cz/default/file/download/id/19722
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    References listed on IDEAS

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    1. Barth,James R. & Caprio,Gerard & Levine,Ross, 2008. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, number 9780521709309, December.
    2. Ha-Joon Chang, 2005. "Globalization, Global Standards, and the Future of East Asia," Global Economic Review, Taylor & Francis Journals, pages 363-378.
    3. Laffont,Jean-Jacques, 2005. "Regulation and Development," Cambridge Books, Cambridge University Press, number 9780521840187, November.
    4. Berkowitz, Daniel & Pistor, Katharina & Richard, Jean-Francois, 2003. "Economic development, legality, and the transplant effect," European Economic Review, Elsevier, pages 165-195.
    5. Chang, Ha-Joon, 2006. "Understanding the Relationship between Institutions and Economic Development: Some Key Theoretical Issues," WIDER Working Paper Series DP2006/05, World Institute for Development Economic Research (UNU-WIDER).
    6. Erik Berglof & Patrick Bolton, 2002. "The Great Divide and Beyond: Financial Architecture in Transition," Journal of Economic Perspectives, American Economic Association, pages 77-100.
    7. Erik Berglof & Patrick Bolton, 2002. "The Great Divide and Beyond: Financial Architecture in Transition," Journal of Economic Perspectives, American Economic Association, pages 77-100.
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    Keywords

    banking; emerging markets; European Union; international standards; regulation;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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