A Comparative Evaluation of the Performance of Commercial Banks in the United States and Singapore Through the Ratio Analyses of their Capital and Asset Structures

Chng, Seng
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University of Hawaii at Manoa
The existence of commercial banks is vital to an economy because of the role that banks perform in financial intermediation. Because of the risks involved with financial intermediation (and many other operations), the government of every country has appointed banking regulatory agency or agencies to monitor the operations of banks operating in their country, primarily to protect the funds of depositors. This is because the confidence of depositors sustains a healthy economy - after all, the savings of depositors form the first half of the process of financial intermediation. On the other hand, investors committing capital in a bank do so to make a profit. Many times, their profit making opportunities are restricted by the rules set down by the banking regulatory agencies. Different countries have different sets of regulations on the operations of banks in their country. In a market economy where investors have the choice of investing their money in alternative businesses, investors of banks will find various ways to earn a rate of return on their investment that is comparable to what they could obtain on alternative investments available in the market place. Otherwise, one would expect investments to move out of the banking business to more profitable enterprises. This study takes a look at the differences in banking regulations between the United States and Singapore, and their differential effects on the banks operating in the two countries. The effects of these regulations frequently get manifested in the way banks hold their capital and asset structures. This study attempts to evaluate the performance of banks in the United States and Singapore through their respective capital and asset structures, and attempts to find if the differences in banking regulations in both countries have any differential effects on the performance of United States and Singapore banks.
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