Author : Arnold C S. Cheng
Publisher :
ISBN 13 :
Total Pages : 16 pages
Book Rating : 4.:/5 (13 download)
Book Synopsis Interest Rate Deregulation and Banks' Off-Balance-Sheet Activities by : Arnold C S. Cheng
Download or read book Interest Rate Deregulation and Banks' Off-Balance-Sheet Activities written by Arnold C S. Cheng and published by . This book was released on 2016 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: Through the interest rate deregulation and banks' off-balance-sheet activities (OBSAs) in Hong Kong, this study investigates the debate over the impact of banking deregulation on banks' risk-taking behaviour. On one hand, the Arrow effect implies that increased competition caused by the interest rate deregulation motivates Hong Kong banks to speed up their development of OBSAs as an additional but riskier income source. On the other hand, the Schumpeterian effect implies that the deregulation may reduce the banks' financial capability in developing new products and thus downscale their OBSA adoption. Our findings show that, while the negative scale effect is statistically insignificant, the interest rate deregulation has a positive and significant impact on the adoption rate for all OBSA categories. We therefore conclude that the interest rate deregulation unambiguously leads to riskier bank behaviour in terms of higher OBSA adoption.