Market Discipline of Commercial Banks: Reality in the US and Viet Nam

Document Type : Original Research

Author

Master of Accounting and Finance – Alumni ID: 1187297, University of Adelaide, Australia

Abstract

Market discipline is considered one of the three important pillars in order to remain the stability of banking system. The financial system will work efficiently when the effectiveness of market discipline and the role of market discipline in handling problem banks are controlled and monitored. This article will approach to the aspects of participants involved in the deposits and the loans that their actions have caused turmoil on financial markets. The first part of article will consider carefully the definition of the market discipline and those who will implement the necessary preconditions for effective operation. Then, the article will discuss the indiscipline in the United States during the financial crisis and the undisciplined movement of commercial banks in Vietnam for the period 2008 – 01/2016. Hence, the article will recommend some solutions to increase the discipline in the activities of commercial banks in Vietnam, such as strengthening the leading role of central banks in regulating the economy and the monetary policy to stabilize the general price levels; raising the importance of corporate governance in financial institutions; and finally, ensuring the transparency of information systems.

Keywords

References

Bank for International Settements. (2001). Working paper on Pillar 3 - Market Discipline. Basel Committee on Banking Supervision.
Basel Committee. (2003). The New Basel Capital Accord. Consultative Document, April 2003.
Berger, Allen N. (1991). Market Discipline in Banking. Proceedings of a conference on bank structure and competition. Federal Reserve Bank of Chicago.
Birchler, U.W. & Maechler, A.M. (2001). Do Depositors Discipline Swiss Banks?. Working Paper 01.06 Schweizerischen Nationalbank.
Eduardo Levy Y, Maria Soledad Martinez P & Sergio S. (2004). Market Discipline in Emerging Economies: Beyond Bank Fundamentals. Business School Working Papers marketdiscipline, Universidad Torcuato Di Tella.
Eric, J G. (1997). Shareholder Enforced Market Discipline: How Much Is Too Much?. Annual Review of Banking Law, Vol. 16, p. 311,1997
Goday, V, Gruss, B & Ponce, J. (2005). Depositors’ discipline in Uruguayan banks. 
Horne, J. (1988). Criteria of External Sustainability. IMF Working Paper WP/88/60 (July 1988).
Horne, J. (1991). Indicators of Fiscal Sustainability. IMF Working Paper WP/91/5 (January 1991).
Landskrner, Y. & Paroush, J. (2008). Bank management and market discipline. Journal of Economics and Business, 60, 395-414
Lane, T D. (1993). Market Discipline. IMF Staff Papers, 40 (March), 53–88
Llewellyn, D T. (2002a). “Comment” in Prompt Corrective Action: Ten Years Later. G.G. Kaufman, ed. Amsterdam: JAI, 321–333.
Satake, M & Uchida, H. (2009). Market discipline and bank efficiency. Journal of International Financial Markets, Institution & Money, 19, 792-802
Timothy, D L. (1992), Market discipline. International Monetary Fund

Files

Share

How to cite

Statistics