Sources of Bank Behaviour and Institutional Change: Interactions among Structures, Institutions and Agents

Abstract

Bank behaviour shapes the fate of national financial systems and national welfare. The global financial crisis (GFC) has reminded us that the nature of bank behaviour is crucial for systemic stability, national output, employment, economic growth and development in any economy. Specifically, financial system resilience and fragility are outcomes which are often the result of bank behaviour. This book offers a typological theory that distinguishes the conditions under which conservative and opportunistic types of bank behaviour may lead to these outcomes. Conservative behaviours favour prudent bank decisions and actions that increase the resilience of financial systems to weather domestic and/or international crises. Opportunistic behaviours refer to excessive risk-taking in bank decision and actions that reduce the resilience of financial systems to weather such crises. This book identifies minimal within-type variance and maximum between-type variations of these types of bank behaviour.