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

Chen-Min Hsu and Chih-Feng Liao
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Chen-Min Hsu: Asian Development Bank Institute
Chih-Feng Liao: Asian Development Bank Institute

No 221, ADBI Working Papers from 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.

Keywords: asian financial regulation; global financial crisis; asian banking; prc; asian financial institutions; asian financial sector (search for similar items in EconPapers)
JEL-codes: F42 G18 G21 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2010-06-28
New Economics Papers: this item is included in nep-ban, nep-reg, nep-sea and nep-tra
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Citations: View citations in EconPapers (2)

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