Salah U-Din, Mian Sajid Nazir and Aamer Shahzad
In the last few decades, the frequency and intensity of extreme weather events have increased in most parts of the world including Canada because of global warming. The global…
Abstract
Purpose
In the last few decades, the frequency and intensity of extreme weather events have increased in most parts of the world including Canada because of global warming. The global warming in Canada is about double the magnitude of global warming; therefore, policymakers are concerned about the potential significant impact of the weather catastrophes on the economy and financial sector. The purpose of this study is to explore the impact of weather catastrophes on the Canadian banking sector.
Design/methodology/approach
Using a sample of banking firms from Canada over the period 1988–2019, the present study estimates different econometric techniques to investigate the impact of weather catastrophes on the risk and performance of Canadian banks.
Findings
Analyses of the study do not find a significant impact of the weather catastrophes on the performance of the Canadian banks; however, it has helped banks to lower their risk level and improve stability due to proactive risk management. The findings of this study are not consistent with concerns of the policymakers about climate risk to the Canadian bank sector. More sector-specific research and policy initiatives are recommended to minimize the future financial risk of the increased frequency and intensity of natural disasters.
Originality/value
The study contributes to support the notion that the climate risk of banks is protected with insurance and reconstruction activities provide more banking opportunities.
Details
Keywords
The study aims to analyze the changes in banking market structure and their impact on the bank efficiency.
Abstract
Purpose
The study aims to analyze the changes in banking market structure and their impact on the bank efficiency.
Design/methodology/approach
This study uses a one-stage stochastic frontier analysis (SFA) to compare the impact of the market structure and the GFC on the economic efficiency of the major banks in both countries.
Findings
A significant negative impact of the GFC is observed on bank efficiency. Overall, Canadian banks posted better efficiency scores than their American counterparts. Additionally, cost-efficient banks are found to be more resilient to crises and more profit-efficient in the post-GFC period. The authors found that market power had a positive impact on the cost and profit efficiency of banks. Higher levels of equity, market power and concentration helped banks be more cost-efficient.
Research limitations/implications
Only large banks are selected for study although it represents the majority stake of both banking sectors.
Practical implications
Banking regulators should include more measures to assess the banking market structure and performance.
Originality/value
As per the best knowledge of the authors, it is the first study to assess the change in banking market structure and efficiency of the US and Canadian banking sectors in the post-GFC period.