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

Christian Calmès () and Raymond Théoret ()
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Raymond Théoret: Département de stratégie des affaires, Université du Québec (Montréal), et Chaire d'information financière et organisationnelle

RePAd Working Paper Series from Département des sciences administratives, UQO

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.

Keywords: ARCH-M Models; risk premium; financial stability (search for similar items in EconPapers)
JEL-codes: G20 G21 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2008-10-20
New Economics Papers: this item is included in nep-ban, nep-bec, nep-reg and nep-rmg
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