ID :
188106
Mon, 06/13/2011 - 09:12
Auther :
Shortlink :
https://oananews.org//node/188106
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GOVT OWNERSHIP IN BANKS NEEDS TO BE REDUCED FOR LONG TERM GROWTH, SAYS ECONOMIST
By Tengku Noor Shamsiah Tengku Abdullah
SINGAPORE, June 13 (Bernama) -- Malaysia and other countries should consider reducing government ownership and intervention in banks as it will otherwise be detrimental to long term growth.
In making the call, Professor of Finance at the EDHEC Business School in the Accounting, Law and Finance Department in France, Prof Florencio Lopez de Silanes said countries that are able to restructure their financial system faster and increase transparency in the system, will benefit in the long run.
"You have to restructure. The government has to get out of the system with the right market regulations in place," he told Bernama in an interview.
Based in Nice, Lopez de Silanes has been one of the top three most cited researchers in the world in economics and business in the last 10 years, according to the Essential Science Indicators.
Before joining the EDHEC, he taught at the Amsterdam Business School, Harvard, Yale, and the Ecole Normale Supérieure in Paris.
Commenting on Malaysia, he said: "As a young country, it will be good for it to boost economic efficiency now."
He also said Malaysia did not have bad financial institutions or neither is it at the bottom of transparency. But it can do better with reform.
Lopez de Silanes was here recently to give a talk on, "What Makes Banks Weak? Banking and its Regulation", at the EDHEC Risk Institute, Singapore.
The EDHEC Business School has also a branch campus in London.
He pointed that government ownership in the banking system weakens the industry in the long term.
He said based on research carried out by him and his colleagues, it was found that it is practically impossible to point to the long term benefit of government ownership for banks.
"We have just gone through a financial crisis, and it did not turn out to be the big recession everybody had expected, as was the case in 1929.
"The core reason for this is partly because, there was massive and quick intervention by governments across the globe in all kind of areas.
"However, as a result, fiscal imbalances kept growing and more importantly over the long term," he added.
He said the world came out of the crisis faster but with a completely different financial system where governments, were very heavily involved.
Lopez de Silanes also said research showed that countries which had bigger government intervention, saw the financial system or economy grow slower by one per cent touch point less annually.
He said Malaysia will do a lot better, if the government started moving away from the financial sector and passed the partnership on to the private sector.
SINGAPORE, June 13 (Bernama) -- Malaysia and other countries should consider reducing government ownership and intervention in banks as it will otherwise be detrimental to long term growth.
In making the call, Professor of Finance at the EDHEC Business School in the Accounting, Law and Finance Department in France, Prof Florencio Lopez de Silanes said countries that are able to restructure their financial system faster and increase transparency in the system, will benefit in the long run.
"You have to restructure. The government has to get out of the system with the right market regulations in place," he told Bernama in an interview.
Based in Nice, Lopez de Silanes has been one of the top three most cited researchers in the world in economics and business in the last 10 years, according to the Essential Science Indicators.
Before joining the EDHEC, he taught at the Amsterdam Business School, Harvard, Yale, and the Ecole Normale Supérieure in Paris.
Commenting on Malaysia, he said: "As a young country, it will be good for it to boost economic efficiency now."
He also said Malaysia did not have bad financial institutions or neither is it at the bottom of transparency. But it can do better with reform.
Lopez de Silanes was here recently to give a talk on, "What Makes Banks Weak? Banking and its Regulation", at the EDHEC Risk Institute, Singapore.
The EDHEC Business School has also a branch campus in London.
He pointed that government ownership in the banking system weakens the industry in the long term.
He said based on research carried out by him and his colleagues, it was found that it is practically impossible to point to the long term benefit of government ownership for banks.
"We have just gone through a financial crisis, and it did not turn out to be the big recession everybody had expected, as was the case in 1929.
"The core reason for this is partly because, there was massive and quick intervention by governments across the globe in all kind of areas.
"However, as a result, fiscal imbalances kept growing and more importantly over the long term," he added.
He said the world came out of the crisis faster but with a completely different financial system where governments, were very heavily involved.
Lopez de Silanes also said research showed that countries which had bigger government intervention, saw the financial system or economy grow slower by one per cent touch point less annually.
He said Malaysia will do a lot better, if the government started moving away from the financial sector and passed the partnership on to the private sector.
