Improving Banking Supervisory Mechanisms

In the OIC Member Countries

Table 8: Bank Activity Regulations

Source: World Bank, Bank Regulation and Supervision Survey

Another important area on the permissible activities is the ownership structure of banks.

National regulators may restrict or allow banks owning non-financial firms or non-financial

firms owning banks. In this regard, we compare ownership restrictions across countries which

exhibit significant differences which is an important issue from the perspective of the

regulator. In the light of the core principle on the consolidated supervision, a complex

ownership structure makes it necessary for the regulator to impose group-wise supervision of

institutions.

We focus on the degree of regulations which restricts banks own non-financial firms, non-

financial firms own banks and non-bank financial firms own banks. Furthermore, the average

degree of regulations on the ownership structure is evaluated. Similar to the activity

regulations, individual variables vary in 1-4 where higher values indicate more stringent

regulation. Overall degree of regulations is the sum of these three variables with a range of 3-

12.

With regard to the ownership structure, OIC countries possess more stringent regulations

compared to EU- 27 and less strict regulation scheme in a comparison to US. The most

stringent regulation on the ownership structure is in Indonesia and UAE and the least is in

Turkey which is below the selected OIC average of 8.2.

Bank Activity

Regulations

Survey OIC Average

OIC-High

Income

Average

OIC-Upper-Middle

Income Average

OIC-Lower-

Middle

Income

Average

OIC-Low

Income

Average

EU-27

Average

Secuirity Activities

2000

1,6

1,88

1,91

1,84

1,72

1,4

Range 1-4

2003

1,8

1,63

1,84

1,71

1,62

1,5

2007

1,9

1,62

1,84

1,76

1,66

1,4

2011

2,0

1,71

1,82

1,84

1,70

1,1

Insurance Activities

2000

3,2

2,37

2,36

2,44

2,4

Range 1-4

2003

3,1

2,63

2,74

2,70

2,73

2,5

2007

3,4

3,43

3,30

3,41

2,9

2011

2,7

3,10

2,81

2,82

3,02

2,5

Real Estate Activities

2000

3,3

3,00

2,88

2,81

2,2

Range 1-4

2003

2,5

2,21

2,55

2,51

2,32

2,3

2007

3,3

2,89

3,05

2,92

2,6

2011

3,2

3,64

3,46

3,42

3,51

2,4

Overall Restrictions

on Banking Activity

2000

8,0

8,05

7,61

7,77

5,9

Range-3-12

2003

7,4

6,48

7,14

6,92

6,68

6,3

2007

8,7

8,18

8,41

8,22

6,8

2011

7,9

8,40

7,88

7,97

8,14

6,0