Financial, Regulatory and Monetary Restructuring of the Banking Sector and Financing of the Economy

Abstract

This paper aims to answer systematically a central question concerning the influence of the major factors of financial, regulatory and monetary restructuring on bank profitability in the context of its financing of the economy. Today, banks that neglect the importance of restructuring their adopted model may be more vulnerable to delicate financial and economic situations. It has therefore become imperative for the Central Bank to shift to a dual mandate that incorporates the constraints facing our economy. In this sense, it is clear that measuring the profitability of a bank that makes a major contribution to economic growth is of unquestionably crucial importance. Nevertheless, their contribution to financing the economy relies on two colossal sources: indirect financing (the bank) and direct financing (the financial market). As a result, the latter's intervention in the financial system calls into question bank profitability, which is impacted by a range of restructuring factors in three main categories: financial, regulatory and monetary. To explain the relation between these factors, we schematize the modes of financing within the financial system under the supervision of the Central Bank. Then, we propose a theoretical model of the influence of these factors on bank profitability, using the return on assets (ROA) indicator. The main theoretical conclusions of our paper are based on the colossal importance of the banking sector in financing the economy, in particular through the loans granted to (Households, Companies, State, etc.) under the supervision of the Central Bank, monetarily through the money supply and regulatory by focusing on the counter-cyclical buffer. They therefore represent a panoply of financial, regulatory and monetary restructuring factors that promote bank profitability, particularly in a turbulent environment.

Keywords : Financial Restructuring, Regulatory Restructuring, Monetary Restructuring, Bank Profitability, Return On Assets

JEL Classification : G21

Paper type : Theoretical Research