Deregulation and Financial Fragility: A Case Study of the UK and Scandinavia

Adoption of technological innovations has enabled businesses operations to be undertaken more effectively and efficiently. The banking sector in Kenya has adopted these technological innovations in offering banking services to its customers. These innovations include use of Automated Teller Machines, Agency Banking, Electronic Funds Transfers, Real Time Gross Settlements and Mobile Banking. The objective of this study was to assess the effect of technological financial innovations on financial performance of commercial banks in Kenya. The study was anchored on Financial Intermediation theory, Innovation Diffusion theory and Silber Constraints theory of Financial Innovations. The study adopted a descriptive research design with a target population of all commercial banks in Kenya, where a sample of 15 commercial banks was reached for data collection. Secondary data for a period of 2012to 2016 was collected from respective commercial banks, banks annual reports, website and Central Bank of Kenya reports. Descriptive and inferential statistics was used to analyze data. The results indicate that, Agency Banking and use of Automated Teller Machines had positive effect on financial performance of banks. The control variable, credit risk had a negative and insignificant effect on financial performance of banks. Bank liquidity had a negative but significant effect on financial performance of banks. The study conclusion was that technological financial innovations had positive effect (R 2 of 0.681) on financial performance of commercial banks. Equally, the study recommended that it is important for commercial banks to establish robust risk identification, assessment and control measure and adhere to the liquidity guidelines that is issued by the Industry regulator- Central Bank of Kenya, in order to improve their financial wellness.

This study determined the effect of liquidity capacity on the financial performance of commercial banks in Kenya. Specific the study determined the effect of Net Stable Funding, Liquidity Coverage, Liquidity Gap and Provisioning for Non-Performing Loans on the financial performance of banks in Kenya. Bank competition variable was used to determine the moderating effect on the relationship between liquidity capacity and the financial performance of commercial banks in Kenya. The study was anchored on the positivism philosophy. The study used an explanatory research design. The study applied panel data models (random effects) based on the outcome of Hausman specification tests to determine the effect of liquidity capacity on the financial performance of commercial banks in Kenya. To test the moderating effect of bank competition variable on the relationship between liquidity capacity and the financial performance of commercial banks in Kenya, Keppel and Zedeck (1989) two-step procedure was used. The regression results revealed that Net Stable Funding and Liquidity Coverage have a significant positive effect on financial performance of commercial banks in Kenya. Provisioning for Non-Performing Loans Liquidity Gap and Provisioning for Non-Performing Loans had a significant negative effect on financial performance of commercial banks in Kenya. The study established that bank competition had a significant moderating effect on the relationship between liquidity capacity and the financial performance of commercial banks in Kenya. Based on these findings, the study recommends that commercial banks in Kenya need to have a good appreciation in terms of having full visibility of all cash flows on the positions of exposures across their operations. Further, they need to have a good insight in terms of the assumptions that drive the cash flows both from a liquidity point of view and from the valuation perspective to best address the terms of requirement from the regulatory standpoint. Additionally, they should empress the stress testing element into the overall equation of their operational activities as prescribed in the Basel III accords. Finally, the study recommends that all commercial banks in Kenya should incorporate liquidity costs, benefits, and risks in the performance measurement, pricing, and approval process for all significant business activities to ensure that the performance of commercial banks in Kenya is enhanced. This research was unable to identify all the possible variables with explanation power on commercial banks’ financial performance in Kenya. Hence, this formed a basis for further research.

Un système de provisionnement dynamique représente un des instruments à la disposition des régulateurs bancaires permettant d’introduire de la contra-cyclicité dans la réglementation prudentielle. Nous cherchons dans cet article à évaluer l’efficacité potentielle d’un tel instrument. Pour cela, nous estimons pour différents groupes de pays si les pratiques actuelles de provisionnement amplifient les fluctuations sur le marché du crédit. Nos résultats montrent que les pratiques de provisionnement ex post amplifient le cycle du crédit aussi bien dans les pays développés que dans les pays émergents. L’ampleur de cet effet est cependant plus prononcée dans les pays émergents. Classification JEL : G21.

The Banking sector acts as the life blood of modern trade and economic development. Commercial banks influence, facilitate and integrate the economic activities like resources mobilization, poverty elimination, production, and distribution of public finance. The financial performance of commercial banks has great implications in the financial sector and in the country at large, and will still remain an important subject of concern by all the stakeholders in the banking industry. In the last two decades, a lot of banking innovation has taken place in order to improve commercial banks financial performance. Branchless banking which involves the use of agency banking and electronic banking channels in the distribution of banking products and services is one such innovation. This study purpose was to evaluate the effect of branchless banking on the financial performance of commercial banks in Kenya. The specific objectives of the study were to analyze the individual effects of agency banking and electronic banking channels on the financial performance of commercial banks in Kenya and the combined effect of both agency and electronic banking on the financial performance of commercial banks in Kenya. The study adopted an exploratory research design. A survey of all the 42 licensed commercial banks in Kenya was done. Both primary and secondary data on branchless banking and financial performance of banks was obtained from the individual commercial banks, Central Bank of Kenya banking annual supervision reports respectively. Return on Assets (ROA) was used as the main indicator of commercial banks financial performance. The amount of investment in agency and electronic banking was used as indicator for agency and electronic banking. Data analysis was done using SPSS and STATA statistical softwares. Descriptive statistics, diagnostic tests and tests of hypothesis were done. Data was presented using tables and charts. Study findings indicated that when used in isolation; both agency and electronic banking had a significant negative effect on the financial performance of commercial banks at 5 percent significance level. However, when agency and electronic banking channels were used together as a multichannel strategy, they had a significant positive effect on bank’s financial performance at 5 percent significance level. The study recommends that for positive returns, commercial banks should invest in both agency and electronic banking as a multichannel strategy since these channels are complimentary to each other.

The paper focus on the effect of bank innovation on financial performance of commercial banks in Ethiopia. The study adopted an explanatory and descriptive research design with quantitative research approach. the study referenced to Ethiopian commercial banks on basis of data covers five years (2018-2022) period and the data was gotten from the reports of the regulatory body of the banks in Ethiopia i.e. the National Bank of Ethiopia (NBE), Central Statistical Authority, Ministry of Finance and Economic Cooperation and from others that are as secondary data sources from the seventeen commercial banks of Ethiopia. The Target population was all commercial banks that engage in commercial activities and registered by National Bank of Ethiopia to act. Consequently, seventeen commercial banks, out of the thirty one commercial banks, have purposively were selected for the study. The methods of analysis applied a panel least square regression using STATA vs 12 to test whether random effect or random effect regression. And the model were a random effect model selected. The finding were agent banking, Mobile banking users and Gross Domestic product were found positive effect on financial performance of commercial banks and statistically significant. Bank Liquidity negative effect on financial performance of commercial banks but statistically significant. ATM machine terminals, RTGS users, agent banking and Bank size were found positive effect on financial performance of commercial banks but statistically insignificant. Internet banking and Inflation negatively effect on financial performance of commercial banks and statistically insignificant.

Human resource management (HRM) practices are being increasingly considered as major contributory factors in financial performance of organizations. This research study effectively highlights the importance of HRM practices with impact on financial performance of banks (FPB) operating in Pakistan. The major objective of the study is to find out the relationship between ‘HRM Practices’ and the ‘Financial Performance of Banks’. As a sample, 46 scheduled banks were contacted, of which 38 responded. The HRM practices selected for the research study were selection, training, performance appraisal system, compensation system and employee participation. Empirical evidence was calculated through stepwise regression analysis, Pearson correlation and descriptive statistics to support theoretical models that link HRM practices with financial performance of banks. The study concluded that all tested variables have a positive relation and impact on financial performance of banks but the major contributory practices are selection, training, compensation and employee participation. Key words: HRM practices, selection system, training, job description, performance appraisal system, compensation system, career planning system, employees participation, financial performance of the banks, planning, development, rewards.

Microfinance is the provision of a comprehensive range of financial facilities such as loans, deposited, money transfers, payment services and insurance to low-income households and their micro enterprises, due to limited literature on evaluating the financial performance of microfinance banks. The objective of this paper to investigates the relationship between asset growth and equity multiplier on the financial performance of microfinance banks of Pakistan. Study considers two variables, which relate to the profitability (a dependent factor): ROA and ROE. The independent factor on the other hand, AG, and EM. For this purpose, total 9 microfinance banks of Pakistan are engaged with 10- year financial data from 2010-2019 that are comes under the supervisions of State bank of Pakistan. E-views software is used to revealed result by analysis different tests including the descriptive analysis, correlation analysis and panel square regression method with. Some authors suggest that asset growth and equity multiplier have positive impact on financial performance of banks, while some authors suggests that asset growth and equity multiplier have its negative impact on the financial performance of banks. This study suggest that asset growth has its significant positive relationship with return on asset and return on equity, while equity multiplier has its significant negative relationship with return on asset and return on equity, finally based on results we conducted that asset growth has its significant positive relationship on financial performance and equity multiplier has negative relationship on the financial performance of microfinance banks of Pakistan. The study is equally beneficial and useful for the future researchers and for the microfinance banks of Pakistan to improve their profitability by reducing the equity and increasing asset growth.

The willingness of commercial banks to provide loans is determined by various factors. In this regard, this paper provides empirical evidence on determinants of bank lending in Nigeria. The parsimonious model of this study investigates the impact of growth in loan-to-deposit ratio, growth in inflation, growth in broad money, and growth in bank capital on growth in bank lending using annual data from 1961 to 2016. This study adopts the autoregressive distributed lag (ARDL) bounds testing approach and Granger causality tests to investigate the relationship and direction of causality among the variables, respectively. The Granger causality tests show that growth in broad money Granger-causes growth in bank lending, while there is no causality from other explanatory variables to bank lending in Nigeria. Also, this study shows that growth in bank lending Granger-causes growth in loan-to-deposit ratio and growth in inflation in Nigeria. Thus, this paper argues that commercial banks in Nigeria exhibit stern concern for their liquidity and capital adequacy positions while acting as financial intermediaries. Additionally, this paper argues that the Central Bank of Nigeria (CBN) possesses “paper-based” independence.

Asset liability management and consistent improvement in financial performance are the responsibility of the Board of Directors of commercial banks, yet studies on the impact of asset liability management on the financial performance of commercial banks in Sub-Saharan Africa have excluded board characteristics variable from their statistical model. This study examines the moderating effect of board characteristics and asset liability management on the financial performance of commercial banks in Nigeria. Commercial banks. It was based on secondary data, obtained from annual reports of commercial banks in Nigeria, the study covered the period starting from 2012 to 2021 and it purposively selected eleven (11) commercial banks out of fourteen (14) commercial banks in Nigeria. The statistical analysis was done using LASSO (Least Absolute Shrinkage Selection Operator). The findings of the study revealed that the moderating effect of board characteristics and asset liability management had a statistically significant impact on the financial performance of commercial banks in Nigeria because the p-values (0.04;0.03,0.02,0.01, and 0.005) obtained using LASSO were less than the 5% statistical threshold used in this study. The study concluded that the board of directors of commercial banks in Nigeria should ensure that they appoint board members who have expertise and experience in the establishment of asset liability management since its interaction with board characteristics showed a statistically significant impact on the financial performance of the bank.

Performance of commercial banks has critical implications for economic growth of countries. The Kenyan banking sector remained resilient on the backdrop of turbulence, characterized by interest rate capping in 2015 and the prolonged electioneering period in 2017 which brought uncertainties in the banking sector. This study investigated the effect of management efficiency on financial performance of commercial banks in Kenya. Efficient market hypothesis and modern portfolio theory guided the study. The study adopted an explanatory research design. The study used 2009-2018 secondary consolidated panel data of 40 commercial banks from Central Bank of Kenya and International Monetary Fund. Time series econometric procedures of co-integration and Vector Error Correction model (VECM) were used so as to determine nature of the time series data and equilibrium relation between the variables. The VECM estimation results identified a significant short run and long run equilibrium relation between coefficient of management efficiency and financial performance of commercial banks in Kenya. The Coefficient of Management Efficiency was 0.2359, p=0.008 < 0.05. The coefficients of management efficiency were positive and significant at 5% level. This implied that for every unit increase in coefficient management efficiency would increase by 0.2359 units of financial performance of commercial banks in Kenya respectively in the long run. The findings indicated a significant co-integration relation between management efficiency and finance performance of commercial banks in Kenya. The VECM results also indicated that management efficiency and financial performance have a long run equilibrium during the study period. Managerial policies and strategies that are cost effective and productive efficient could raise the managerial efficiency and financial performance of banks. Based on the findings the study recommended that banks put a lot of focus on their own internal processes since management efficiency, had positive influence on their profitability policies.

Effects of loan loss provisions on growth in bank lending: Some international comparisons

A dynamic provisioning system is one of the instruments that regulators could use for introducing counter-cyclicality into prudential regulation. The potential effectiveness of such instrument depends on how far actual backward-looking provisioning practices exacerbate growth in bank lending. We therefore investigate whether backward-looking provisioning practices amplify growth in bank lending and, if such an effect exists, whether there are differences in its magnitude across countries. Our results show that backward backward-looking provisioning systems exacerbate banks' lending fluctuations in both developed and emerging countries, but with a stronger impact for emerging countries. These results support the idea that countercyclical tools based on capital buffers might not be sufficient to dampen the cyclicality of bank lending, especially in emerging countries, and the implementation of a forward-looking provisioning system might be an important mandate.

The main aim of this seminar paper is to investigate the impact of internal audit on financial performance of money deposit banks in Nigeria. The population of this study was 22 commercial license banks in Nigeria in which 16 money deposit banks were sampled using judgmental sampling technique and hypergeometric formula. Primary data with respect to questionnaires were used to collect data. 15 questionnaires were distributed to each sampled bank but in all the 360 questionnaires distributed, 334 questionnaires were correctly retrieved and found usable. The research tools used were Ordinary Linear Regression (OLS) with correlation, Adjusted R Square and Standard Error using IBM SPSS Statistics 20 software. The result(r=28.9%) showed that there was a relationship between internal audit and the profitability of money deposit banks in Nigeria. Also, internal audit reporting channels have a positive effect (r=25.5%) on financial performance of money deposit banks in Nigeria. The study concluded that there was a positive relationship between internal audit and the financial performance of money deposit banks in Nigeria. Likewise, internal audit reporting channels have an effect on financial performance of banks in Nigeria. The study recommended that money deposit banks in Nigeria should strengthen their internal audit and their internal auditing reporting channels as they were both important to their financial performance.

Commercial banks in Pakistan have a great potential to improve competitiveness and financial performance through fintech adoption. Therefore, this study aims to assess the impact of fintech adoption on financial performance of commercial banks while emphasizing the moderating role of social influence and mediating role of competitiveness in the banks in Pakistan. A cross-sectional survey was conducted with five largest and most reputed commercial banks in Pakistan. Bank employees, particularly bank managers, were chosen as the respondents. The sample size for the study was 367 bank managers selected randomly from the chosen commercial banks. A standardized and structured questionnaire was used to interview the selected respondents to collect primary data. The partial least square structural equation modelling was employed to analyze the data and process the findings of the study. The analysis revealed that 62% of the respondents were male, and nearly 47% were in the age of 40 years and above. The study found a positive and significant impact of fintech adoption on the financial performance of banks. It was also found that social influence had a significant impact on banks’ competitiveness. Moreover, the findings revealed that competitiveness had a significant mediation impact on the increase in fintech adoption and consequently on the financial performance of banks. AcknowledgmentThe authors are thankful to the respondents (i.e., the employees of the selected banks) to participate in the survey without any financial benefit.

In Nigeria, the banking industry has witnessed many upheavals over the years, which led to the collapse of quite a number of banks. Despite several effort by government to reposition the industry to improve its efficiency and achieve overall stability of the financial system in view of its strategic importance to the country’s economy, the financial performance of banks seems to be dwindling. This study assessed the moderating effect of industry concentration on the effect of CAMELS financial indicators on financial performance of Deposit Money Banks (DMBs) in Nigeria using secondary data extracted from the financial statements of 15 out of 22 licensed banks over the period of nine years (2010-2018). The study formulated thirteen hypotheses and applied multiple regression technique to assess the causal relationship between the dependent variable, Return on Assets (ROA) and the independent variables, CAMELS, which as a set of financial indicators stands for capital adequacy, assets quality, management efficiency, earnings ability, liquidity and sensitivity to market risk. The study also analyzed the moderating effect of the interaction between industry concentration and each of the CAMELS variables on financial performance of the banks. After subjecting the data to relevant tests of robustness, the result of the clustered robust random effects regression revealed that overall, the interaction between industry concentration and CAMELS financial indicators has significant effect on financial performance of DMBs in Nigeria. In terms of specific variables, asset quality, management efficiency, liquidity and sensitivity to market risk have significant effect on financial performance. With respect to the interaction variables, the interaction between industry concentration and each of asset quality, management efficiency and earnings ability have statistically significant effect on financial performance. The study therefore concluded that overall, CAMELS financial indicators have significant effect on financial performance of DMBs in Nigeria and its effect is significantly moderated by industry concentration. Based on the results, the study recommended among other things that CBN should continue to promote and encourage industry concentration strategy in the banking sector through policies that will make banks put more effort in deposit mobilization, costs cutting and providing better and efficient financial intermediation services in order to make high profit. The CBN should also carry out its risk-based and risk assets on-site examination function at least twice in a year as against the current practice of once in a year in order to increase its surveillance on banks and ensure that imprudent and unethical behavior that erode the quality of assets and capital adequacy are spotted not only in the beginning or end of a financial year but also in the middle of the year. Furthermore, management of DMBs should look into the quality of their assets by coming up with lending policies and applying loan recovery strategies that will help in increasing performing loans and decreasing non-performing loans.