How are regulatory efficiency and financial development interlinked?

Purpose This article aims to analyze the impact of regulatory efficiency on the financial depth, financial access and financial efficiency of a set of 44 countries for the period from 2010 to 2019. Design/methodology/approach This article proposes an original measure of relative efficiency called regulatory efficiency, using data envelopment analysis that shows the optimal relationship between regulatory capital and credit in a group of countries. Furthermore, this article estimates through the S-GMM method the effects of regulatory efficiency on financial depth, financial access and financial efficiency. Findings The results indicate that countries whose financial system optimizes the capital-bank credit ratio have more financial depth, financial access and financial efficiency, which are very important for financial development and, therefore, are of interest to economic policies. Originality/value Faced with the dilemma of this trade-off, this article proposes an original measure of relative efficiency called regulatory efficiency that shows the optimal relationship between regulatory capital and credit, which are very important for financial development and, therefore, are of interest to economic policies.