Assessment of compliance costs in the banking market
DOI:
https://doi.org/10.31558/2307-2318.2021.3.2Keywords:
banking market; deadweight loss; intervention costs; market regulation; compliance costsAbstract
In the field of the economics’ regulation researchers so far have built the conceptual framework showing how the deadweight loss of market failures decrease and costs of the government intervention increase with the increased level of the government intervention. To quantify relationships between the level of intervention, intervention costs and the deadweight loss with econometric models it is important to understand how to quantify the market participants’ compliance costs as a part of intervention costs. The objective of the research presented in this paper is to find the appropriate methodology for the quantification of the market participants’ compliance costs in the banking market.
Research presents bank compliance cost assessment methodology, showing that main components there are operational costs and appropriate parameter representing fraction of operational costs. Methodology’s validation shows that in general it works as expected, i.e., higher government intervention levels lead to higher bank compliance costs, at the same time this general rule has some adjustments: when the intervention becomes more intense the cost rise increases.
Research results will be used to assess all government intervention costs (other positions include regulation costs and other indirect costs) and finalize the quantification of the framework. Quantified framework could be used for more precise policy making regarding the regulation of the banking market.
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