Financial Regulation and Government Revenue
Financial Regulation and Government Revenue
Financial regulation affects government revenue whenever it imposes both the mandatory quantity and price of government bonds. This paper studies a banking regulation adopted by the National Bank of Ethiopia in April 2011, which forces all private banks to purchase a fixed negative-yield government bond in proportion to private sector lending. Having access to monthly bank balance sheets, a survey of branch costs and public finances documentation, the effect of the policy on government revenue can be tracked. This is compared to three plausible revenue-generating alternatives: raising funds at competitive rates on international markets; distorting the private lending of the state-owned bank; and raising new deposits through additional branches of the state-owned bank. Three main results emerge: the government revenue gain is moderate (1.5-2.6 percent of the tax revenue); banks comply with the policy and amass more safe assets; banks' profit growth slows without turning negative (from 10 percent to 2 percent).
- World Bank United States
RESERVE REQUIREMENTS, INVESTMENT, CAPITAL FLOWS, VALUATION, TAX, INFRASTRUCTURE, BANKING SYSTEM, BUDGET, GOVERNMENT DEBT, DEPOSIT, LIQUIDATION, INTERNATIONAL CAPITAL MARKETS, PRIVATE LENDING, EXTERNALITIES, INTERNATIONAL BONDS, GOVERNMENT INTERVENTION, PRIVATE SECTOR BANKS, PRIVATE COMMERCIAL BANKS, LENDING, MACROECONOMICS, CIT, DOMESTIC CURRENCY, INTERNATIONAL DEBT, STOCK, PERSONAL INCOME, INTEREST ARREARS, GOVERNMENTS, DEBT OVERHANGS, RETURNS, BANK BALANCE SHEETS, SOVEREIGN BONDS, BALANCE SHEETS, INVESTORS, GOVERNMENT BONDS, BONDS, DEBTOR, RESERVES, PUBLIC FINANCES, BANK, SOVEREIGN RATING, LOANS, CHECK, FINANCIAL DEEPENING, DOLLAR DEBT, 330, FINANCIAL MARKETS, INTEREST PAYMENT, HOLDING, SOVEREIGN DEBT, BORROWERS, DEPOSITS, INDUSTRY, MARKETS, FINANCIAL REGULATION, PROFIT, AUCTION, FINANCE, SYSTEMIC RISK, BANK DEPOSITS, INTERNATIONAL MARKETS, WAGES, OPEN ECONOMY, BANKING INDUSTRY, RESERVE RATIOS, BANKING, BRANCH INFRASTRUCTURE, LIABILITIES, LABOR MARKET, GOVERNMENT FINANCE, BALANCE SHEET, T-BILLS, BANK HOLDING, LIQUIDITY, SERVICES, DUMMY VARIABLE, INTEREST RATES, PUBLIC DEBT, DEBT, ARREARS, BANKING SECTOR, DEBT RESTRUCTURING, MARKET, INTEREST PAYMENTS, DEBT REDUCTION, GOVERNMENT POLICIES, DEBTS, AUCTIONS, ACCOUNT HOLDERS, ECONOMIC DEVELOPMENT, CENTRAL BANK, RETURN, RESERVE REQUIREMENT, DEPOSIT MOBILIZATION, NATIONAL BANK, PUBLIC DEBTS, DOMESTIC DEBT, DISBURSEMENTS, BANKING REGULATION, TREASURY BILLS, LIABILITY COMPOSITION, DEBT OUTSTANDING, RETURNS ON EQUITY, PRIVATE BANKS, POLITICAL ECONOMY, SOVEREIGN DEFAULT, INTERNATIONAL DEBT CRISIS, EXCHANGE, ACCOUNTING, TAXATION, FINANCES, INCOME TAX, COMMERCIAL BANK, BOND PRICE, VALUE, SECURITY, RISK, LIQUID CASH, CAPITAL MARKETS, DOMESTIC INTEREST RATES, ASSET HOLDING, VARIABLE COST, DEBTOR REPORTING SYSTEM, RESERVE, LIABILITY, EQUIPMENT, INSURANCE, REVENUE, CURRENCY, GOVERNMENT EXPENDITURE, TAXES, EQUITY, BOND, GOVERNMENT BOND, BANKS, TREASURY, GOVERNMENT SAVINGS, LAND, GOVERNMENT REVENUE, LOCAL BANKS, DEFAULT, PROFITS, LOAN, DEBT CRISIS, CREDIT, INTERNATIONAL BANK, COMMERCIAL BANKS, MONETARY FUND, BANK BEHAVIOR, LABOR, REVENUE SOURCES, DEVELOPMENT BANK, RETURN ON EQUITY, INTEREST, INTERNATIONAL FINANCIAL MARKETS, ALLOCATION OF CAPITAL, TRANSPORT, SAVINGS, LIQUID ASSETS, NET LOSS, INTEREST RATE, INTERNATIONAL CAPITAL, EXPENDITURE
RESERVE REQUIREMENTS, INVESTMENT, CAPITAL FLOWS, VALUATION, TAX, INFRASTRUCTURE, BANKING SYSTEM, BUDGET, GOVERNMENT DEBT, DEPOSIT, LIQUIDATION, INTERNATIONAL CAPITAL MARKETS, PRIVATE LENDING, EXTERNALITIES, INTERNATIONAL BONDS, GOVERNMENT INTERVENTION, PRIVATE SECTOR BANKS, PRIVATE COMMERCIAL BANKS, LENDING, MACROECONOMICS, CIT, DOMESTIC CURRENCY, INTERNATIONAL DEBT, STOCK, PERSONAL INCOME, INTEREST ARREARS, GOVERNMENTS, DEBT OVERHANGS, RETURNS, BANK BALANCE SHEETS, SOVEREIGN BONDS, BALANCE SHEETS, INVESTORS, GOVERNMENT BONDS, BONDS, DEBTOR, RESERVES, PUBLIC FINANCES, BANK, SOVEREIGN RATING, LOANS, CHECK, FINANCIAL DEEPENING, DOLLAR DEBT, 330, FINANCIAL MARKETS, INTEREST PAYMENT, HOLDING, SOVEREIGN DEBT, BORROWERS, DEPOSITS, INDUSTRY, MARKETS, FINANCIAL REGULATION, PROFIT, AUCTION, FINANCE, SYSTEMIC RISK, BANK DEPOSITS, INTERNATIONAL MARKETS, WAGES, OPEN ECONOMY, BANKING INDUSTRY, RESERVE RATIOS, BANKING, BRANCH INFRASTRUCTURE, LIABILITIES, LABOR MARKET, GOVERNMENT FINANCE, BALANCE SHEET, T-BILLS, BANK HOLDING, LIQUIDITY, SERVICES, DUMMY VARIABLE, INTEREST RATES, PUBLIC DEBT, DEBT, ARREARS, BANKING SECTOR, DEBT RESTRUCTURING, MARKET, INTEREST PAYMENTS, DEBT REDUCTION, GOVERNMENT POLICIES, DEBTS, AUCTIONS, ACCOUNT HOLDERS, ECONOMIC DEVELOPMENT, CENTRAL BANK, RETURN, RESERVE REQUIREMENT, DEPOSIT MOBILIZATION, NATIONAL BANK, PUBLIC DEBTS, DOMESTIC DEBT, DISBURSEMENTS, BANKING REGULATION, TREASURY BILLS, LIABILITY COMPOSITION, DEBT OUTSTANDING, RETURNS ON EQUITY, PRIVATE BANKS, POLITICAL ECONOMY, SOVEREIGN DEFAULT, INTERNATIONAL DEBT CRISIS, EXCHANGE, ACCOUNTING, TAXATION, FINANCES, INCOME TAX, COMMERCIAL BANK, BOND PRICE, VALUE, SECURITY, RISK, LIQUID CASH, CAPITAL MARKETS, DOMESTIC INTEREST RATES, ASSET HOLDING, VARIABLE COST, DEBTOR REPORTING SYSTEM, RESERVE, LIABILITY, EQUIPMENT, INSURANCE, REVENUE, CURRENCY, GOVERNMENT EXPENDITURE, TAXES, EQUITY, BOND, GOVERNMENT BOND, BANKS, TREASURY, GOVERNMENT SAVINGS, LAND, GOVERNMENT REVENUE, LOCAL BANKS, DEFAULT, PROFITS, LOAN, DEBT CRISIS, CREDIT, INTERNATIONAL BANK, COMMERCIAL BANKS, MONETARY FUND, BANK BEHAVIOR, LABOR, REVENUE SOURCES, DEVELOPMENT BANK, RETURN ON EQUITY, INTEREST, INTERNATIONAL FINANCIAL MARKETS, ALLOCATION OF CAPITAL, TRANSPORT, SAVINGS, LIQUID ASSETS, NET LOSS, INTEREST RATE, INTERNATIONAL CAPITAL, EXPENDITURE
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