Referee Report Bank consolidation and stability: The Canadian Experience, 1867-1935 Table of Contents Table of Contents 2 Summary 3 Evaluation 5 Positives 5 Negatives 9 List the major shortcomings of the paper 10 Is the argument robust? 12 Is the methodology correct?…
It is noted that the systemic stability contributes to the risk reduction. This is achieved through geographic diversification and this is analysed by the two/three of the cross-province merger and acquisitions. The empirical findings have been derived by applying a probabilistic theoretical model. This has supported the efficiency hypothesis rather than the imminent failure hypothesis. Thus journal contributes value to the readers as it not only shed light on the debate in the literature but also has policy implications for the merger and acquisitions today. These policy implications hold great importance as the economists and policymakers need to have a good look at them and follow them in all the policies that design. Economists and policymakers’ grave concerns about megabank failures and their consequences on financial markets and the economy are reinforced by empirical evidence on the concentration-fragility hypothesis. It is noted that the consolidation and systemic risk are positively related, although other factors also contributed to the increased risk. Moreover, it is stated that banking crises are less likely in more concentrated banking systems among 70 countries over 1980-97. However, this is not a hard and fast rule and there is a probability of concentration- fragility hypothesis which need to be analysed as well. ...
New megabanks like the Citibank are also emerging. Thus, there is more concentration of banks thereby increasing the systemic banking risk. The importance of competitiveness is well known throughout the land but the Minister of Finance of the Canadian Government proposed bank mergers in 1998. However, there is a mixed result found after the mergers and acquisitions of the financial institutions have taken place. Moreover, the public policy implications are also very essential to be noted because they influence the allocation of the total amount of money available from the merged banks. This may involve conflicts of interests and the of objectives of the many stakeholders could be at stake. These regulations could be very different from commercial bankers’. They emphasize more on post-merger systemic risk than bankers. This is because of the costly banking crises; for example the financial tsunami of 2007. Thus these policies are given great importance by the economists and policymakers. There is a need to closely study the megabank failures, their consequences on financial markets and the economy and they must be supported by empirical evidence on the concentration. The scope of mergers and acquisitions has been manageable. The focus of this paper is on the relationship between banking consolidation and stability by examining the stability. The financial institutions under study are of the Canadian banking system. The time period under study is 1867-1935; from Confederation to the formation of the Bank of Canada. Hypothesis one says that these mergers and acquisitions are driven by market forces. They later become more efficient and stable banking system. The other hypothesis says that mergers and acquisitions have been ...
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(“Financial intermediation Essay Example | Topics and Well Written Essays - 3000 words”, n.d.)
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(Financial Intermediation Essay Example | Topics and Well Written Essays - 3000 Words)
“Financial Intermediation Essay Example | Topics and Well Written Essays - 3000 Words”, n.d. https://studentshare.net/finance-accounting/92279-financial-intermediation.
Student's Name & Course Number: Professor's Name: Money and Business (Financial Intermediation) 20 July 2011 What is Financial Intermediation - In its simplest definition, it means acting as sort of a bridge between people who have excess funds (savers, depositors and lenders) and those who do not have funds but need the funds (borrowers or debtors).
The author designed a probabilistic model to measure such relationship, including the measurement of stability and instability. The researcher explored the topic according to the assumption that firms that undertake mergers and acquisitions emerge stronger in the process.
Financial intermediation has a cost and that cost is reflected in bank rates and overhead expenditures incurred by banks. Bank rates, however, are not determined in isolation or only from the perspective of profit maximization by the banking sector. These rates are impacted by many other economic and statutory issues pertaining to a particular economy and such issues may vary widely from economy to economy depending upon the administrative attitude towards matters of equanimity in various sectors of the economy, especially the banking sector itself.
Pooling of funds is one of the better tools for management to use in order to maximize profits. The paragraphs below will explain what pooling of funds(Reilly, 1997) is all about and also what financial intermediaries like banks (Collins, 1992) do.
POOLING OF FUNDS.
The most fundamental contribution that any financial system makes is to channel resources from individuals and companies with surplus resources to those with resource deficits. The financial system not only satisfies savings needs of the economy but also facilitates the accumulation of investment capital that is critical to growth and development.
Fundamentally, we may differentiate these principles according to three arguments on the existence of financial intermediaries:
A. The argument on informational asymmetries - Market imperfections are generated because of the informational asymmetries like divergence from the neoclassical structure of financial system.
Basically, we may distinguish these principles in accordance to three arguments on the subsistence of financial intermediaries:
Market imperfections are produced because of the informational asymmetries like deviation from the neoclassical organization of financial system.
This works dwells on financial intermediaries, namely on commercial banks, and how they facilitate the work of corporations/customers. Special attention is given to a bank's balance sheet, various forms of bank's participation in financial markets, and the interest rate influence which demands banks to use special risk management techniques.