This paper examines the effects of interest rate regulation, and subsequent deregulation, on the efficacy of monetary policy and rigidity of retail bank deposit rates in Hong Kong. Using an error-correction model, we find that interest rate deregulation increases the efficacy of monetary policy by improving the correlation between retail bank deposit rates and market interest rates and increasing the degree of long-term pass-through for retail bank deposit rates. Our study also shows that the adjustments in retail bank deposit rates are asymmetric and rigid upwards during the regulated period, but tend to be rigid downwards during the deregulated period. The spreads between retail bank deposit rates and market rates have also tightened sharply after the removal of interest rate controls.

Historically, the effect of interstate banking on the risk and profitability of commercial banks has been a controversial issue. Using capital market data and an event study methodology, the author tests the effects of interstate banking. The findings of this paper reject the hypothesis that interstate banking has no effect on banks' risk and profitability. The evidence supports the argument that interstate banking benefits commercial banks in terms of increased profitability, but the increase in profitability is also associated with significant increases in the banks' exposure to market risk.

This study examines the impact of forced bank mergers on the shareholders’ wealth of Malaysian banks. Forced bank mergers, which are the result of direct government intervention in the consolidation of the banking industry, are generally rare. Unlike the findings on voluntary mergers and acquisitions, our study shows that the forced merger scheme destroys economic value in aggregate and the acquiring banks tend to gain at the expense of the target banks. Further analysis shows that the contrasting forced merger finding is linked to cronyism.

This paper examines the dynamics of administered interest rate changes in response to changes in the benchmark money market rate in Singapore. Our results show that the administered rates’ adjustment speed differs across both financial institutions and financial products. The financial institutions’ administered (lending and deposit) rates, moreover, are more rigid when they are below their equilibrium level than when they are above. Our finding, hence, implies that the speed of monetary transmission is not uniform across all sectors of the economy and that a tightening monetary policy takes a longer time to impact the economy than an expansionary monetary policy.