Cost-benefit analysis of bank regulation: Does size matter?

Arbeitspapier

This study investigates the trade-off between costs and benefits of bank regulation in Kenya. Using the Stochastic Frontier Analysis (SFA) and Annual data for the period 2003 - 2019, extracted from KBA Financial Database and KNBS macroeconomic data, the study models Industry-level and cluster level relationship between bank regulation and cost inefficiency of banks. The industry-level analysis indicates that stringent capital requirement has a positive and significant effect on the cost-efficiency of banks, while tighter liquidity requirements hurt cost efficiency. Further, the bank tier-level analysis established that the double-layered regulatory framework creates Cost inefficiencies amongst middle-tier banks. The key policy implication would be to consider reviewing, identifying, and amending the regulatory provisions that are creating inefficiencies among the listed middle-tier banks

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: KBA Centre for Research on Financial Markets and Policy Working Paper Series ; No. 51

Classification and Topics

• Classification: Wirtschaft ; Financial Institutions and Services: Government Policy and Regulation ; Allocative Efficiency; Cost-Benefit Analysis ; Single Equation Models; Single Variables: Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
• Subject: Bank Regulation ; Cost-Benefit Analysis ; Stochastic Frontier Analysis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mulindi, Hillary
• Event: Veröffentlichung
• (who): Kenya Bankers Association (KBA)
• (where): Nairobi
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/249552
• Last update: 10.03.2025, 11:45 AM CET