Climatic risks and impacts in South Asia: extremes of water scarcity and excess

This paper reviews the current knowledge of climatic risks and impacts in South Asia associated with anthropogenic warming levels of 1.5°C to 4°C above pre-industrial values in the 21st century. It is based on the World Bank Report “Turn Down the Heat, Climate Extremes, Regional Impacts and the Case for Resilience” (2013). Many of the climate change impacts in the region, which appear quite severe even with relatively modest warming of 1.5–2°C, pose significant hazards to development. For example, increased monsoon variability and loss or glacial meltwater will likely confront populations with ongoing and multiple challenges. The result is a significant risk to stable and reliable water resources for the region, with increases in peak flows potentially causing floods and dry season flow reductions threatening agriculture. Irrespective of the anticipated economic development and growth, climate projections indicate that large parts of South Asia’s growing population and especially the poor are likely to remain highly vulnerable to climate change.

Post-crisis regulatory reforms and bank performance: lessons from Asia

Based on a large dataset from eight Asian economies, we test the impact of post-crisis regulatory reforms on the performance of depository institutions in countries at different levels of financial development. We allow for technological heterogeneity and estimate a set of country-level stochastic cost frontiers followed by a deterministic bootstrapped meta-frontier to evaluate cost efficiency and cost technology. Our results support the view that liberalization policies have a positive impact on bank performance, while the reverse is true for prudential regulation policies. The removal of activities restrictions, bank privatization and foreign bank entry have a positive and significant impact on technological progress and cost efficiency. In contrast, prudential policies, which aim to protect the banking sector from excessive risk-taking, tend to adversely affect banks cost efficiency but not cost technology.

The impact of deregulation and re-regulation on bank efficiency: evidence from Asia

Following the 1997 crisis, banking sector reforms in Asia have been characterised by the emphasis on prudential regulation, associated with increased financial liberalisation. Using a panel data set of commercial banks from eight major Asian economies over the period 2001-2010, this study explores how the coexistence of liberalisation and prudential regulation affects banks’ cost characteristics. Given the presence of heterogeneity of technologies across countries, we use a stochastic frontier approach followed by the estimation of a deterministic meta-frontier to provide ‘true’ estimates of bank cost efficiency measures. Our results show that the liberalization of bank interest rates and the increase in foreign banks' presence have had a positive and significant impact on technological progress and cost efficiency. On the other hand, we find that prudential regulation might adversely affect bank cost performance. When designing an optimal regulatory framework, policy makers should combine policies which aim to foster financial stability without hindering financial intermediation.