Banking Systems Around the Globe: Do Regulation and Ownership Affect Performance and Stability?

This paper seeks to explore the stages of development of different financial systems across the globe. This topic is of interest to policy makers because greater financial stability and development correlate with economic growth. This paper finds no statistical relationship between financial regulation and financial development, securities development or industrial competition. The paper also finds that the more stringent a country's regulatory framework, the more fragile its financial system. The authors also find no benefit from restricting the mixing of banking and commerce. In fact, the restricting of the mixing of banking and commerce likely causes financial fragility. Finally, the paper suggests that greater state ownership of banks tends to be associated with a more poorly developed financial system.