Title

Structural Changes in Australian Bank Risk

Publication Title

Journal of International Financial Markets, Institutions and Money

Publication Date

2-2002

Document Type

Article

DOI

10.1016/S1042-4431(01)00050-6

Keywords

banking, deregulation, basle capital standards

Disciplines

Finance and Financial Management

Abstract

There have been substantial changes in banking industries throughout the world in the last two decades. While many of the effects of these changes in the US have been documented, the increasingly global nature of regulation in recent years makes understanding the effects of these changes in other countries imperative. This paper examines Australian bank returns during the period 1981–1993, employing a switching-regression methodology. We find that several structural changes have occurred, coinciding with (i) the release of deregulatory initiatives by the Australian government in the early 1980s, (ii) the flotation of the Australian dollar and the licensing of foreign banks, and (iii) the implementation of the Basle accord risk-based capital measures. Moreover, we report important differences in the relations between bank returns and both interest rates and exchange rates relative to those reported in US studies.

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