Monetary Economics Seminar of Kobe University
Jointly supported by RIEB Seminar
Meeting Room at RIEB (Annex, 2nd Floor)
The seminar is primarily for the workshop members. But non-members are also welcome to attend.
Copies of the paper will be available at the Office of Promoting Research Collaboration.
15:00 ～ 16:30 (3:00pm-4:30pm)
- Deposit Market Outcomes in a Dual Banking System: Exploring the Link Between City-Level Religiosity and Depositor Behaviour
- Huseyin OZTURK (Representative, Tokyo Office, Central Bank of the Republic of Turkey)
- Depositors do not only provide funding to the financial system, they also discipline their banks against excessive risk. The theory of depositor discipline predicts that when excessive risk taking occurs, depositors exert higher disciplining by asking higher returns on their deposits or withdraw their funds. Although it has been intensively claimed that depositor (market) discipline is at least accommodative in banking regulation, the empirical literature is surprisingly mute on the factors that affect depositor discipline. This paper examines the role of religiosity on the disciplining power of depositors in a dual banking system. By segregating the deposits across cities in Turkey, we examine how city-level religiosity affects the depositor discipline. We also identify whether this effect is running differently for Islamic and conventional banks. We find that religiosity has a weakening power on depositor discipline. We also find that Islamic banks are exposed to less depositor discipline, however the weaker disciplining on Islamic banks is found to be unrelated to the degree of religiosity. These results imply that religiosity is an integral part of depositor discipline which might raise the importance of financial inclusion as religious commitments hinder some potential depositors from the financial system due to limited product diversity.