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Financial Turmoil in the Banking Sector and the Asian Lamfalussy Process: The Case of Four Economies

Author

Listed:
  • Hsu, Chen-Min

    (Asian Development Bank Institute)

  • Liao, Chih-Feng

    (Asian Development Bank Institute)

Abstract

This paper investigates the prevailing financial regulatory structures and impact of the current financial turmoil on banking performance in four economies: the People's Republic of China (PRC); Hong Kong China; Singapore; and Taipei,China. Both the PRC and Hong Kong, China operate under a fragmented financial regulatory structure, while Singapore and Taipei,China have integrated structures. We examine the role of an integrated financial regulatory structure in helping financial institutions mitigate the impact of the financial crisis, using financial indicators of banks' capital structure and operating performance in these four economies between 2003 and 2008. Our analysis of the indicators reveals that banking performance under a fragmented financial regulatory structure is not worse than under integrated regulation. This implies that financial regulatory structure is not the main reason why Asian financial institutions suffered only limited losses from the current global financial crisis. However, given the growing complexity of the global financial system, and the relative weakness of current financial regulatory structures in Asia, this paper suggests that East Asian governments should refer to the Lamfalussy Process in the European Union and set up an Asia Financial Stability Dialogue to facilitate policy coordination for regional financial sector stability and development.

Suggested Citation

  • Hsu, Chen-Min & Liao, Chih-Feng, 2010. "Financial Turmoil in the Banking Sector and the Asian Lamfalussy Process: The Case of Four Economies," ADBI Working Papers 221, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:0221
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    References listed on IDEAS

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    1. Donato Masciandaro & Marc Quintyn (ed.), 2007. "Designing Financial Supervision Institutions," Books, Edward Elgar Publishing, number 12684.
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    Cited by:

    1. Morgan, Peter J. & Lamberte , Mario, 2012. "Strengthening Financial Infrastructure," ADBI Working Papers 345, Asian Development Bank Institute.
    2. David G. Mayes & Peter J. Morgan, 2012. "The Global Financial Crisis and its Implications for Financial Sector Reform and Regulation in Asia," Chapters, in: Masahiro Kawai & David G. Mayes & Peter Morgan (ed.), Implications of the Global Financial Crisis for Financial Reform and Regulation in Asia, chapter 1, Edward Elgar Publishing.

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    More about this item

    Keywords

    asian financial regulation; global financial crisis; asian banking; prc; asian financial institutions; asian financial sector;
    All these keywords.

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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