Abstract
In the repercussions of the latest financial crisis that have occurred on the years 2008-2009, to fortify the stability of the banking systems, policy makers, and the Basel Committee on Banking Supervision—BCBS, together with national regulators have built up a few safety measures, and structures to guarantee that banks establishments keep up adequate capital levels through using risk management tools, in specific the Internal Capital Adequacy Assessment Processes (ICAAP). They all have called for thorough evaluations and assessments for the structure and components of risk management frameworks, tools, and practices whether by banks, regulators, analysts and risk management experts consistently, to ascertain the adequacy of the banking systems, policies, arrangements and techniques for overseeing risks, and guaranteeing the sufficiency of holding appropriate capital levels for confronting normal, as well as adverse and unexpected situations or emergencies. The main objectives of this research study are to shed the light on the ICAAP as one of the main keys of risk management programs, a process by which banks can use to ensure that they operate with an appropriate level of capital, forward looking processes for capital planning covering a broad range of risks across banks, activities beyond simple capital management, and bring together risk and capital management activities in a form that can be used to support business decisions. The research study shall evaluate the significant relationship between the Banking System Stability (dependent variable) and the Internal Capital Adequacy Assessment Process (ICAAP—independent variable) with evidence from the Egyptian Banking Sector.
Highlights
The previous decade has seen a standout amongst the most catastrophic financial crises
In the repercussions of the latest financial crisis that have occurred on the years 2008-2009, to fortify the stability of the banking systems, policy makers, and the Basel Committee on Banking Supervision—BCBS, together with national regulators have built up a few safety measures, and structures to guarantee that banks establishments keep up adequate capital levels through using risk management tools, in specific the Internal Capital Adequacy Assessment Processes (ICAAP)
Based on the presented Commercial International Bank (CIB) capital adequacy ratios model (CAR) analysis for the period ending on December 31st2016, it is quite clear that the CAR ratio has witnessed a considerable decrease from 16.06% on December 2015 to reach 10.74% on December 2016 with a dipping down percentage of 33%; which is very close to the minimum capital requirements set by Central Bank of Egypt (CBE) regulations (CBE, 2016d) of 10.6% in 2016, and falling short than January 2017 minimum capital requirements of 11.25%
Summary
The previous decade has seen a standout amongst the most catastrophic financial crises. The impacts of the latest financial crises were inescapable and hit mostly every segment of the worldwide organizations; the most influenced sector was the banking sector which represents a corner stone for the worldwide financial stability and achieving a solid economic growth. Disappearance of several well known financial organizations like Leman Brothers, it has likewise turned into a standard focus for harder directions, tougher regulations, open outrage, and academic criticism (Laeven & Valencia, 2010). Risk management has turned out to be such an essential and central indispensable instrument, from which banks have begun to completely use, not exclusively to accomplish the best possible authenticity levels towards the general public and regulators, yet in addition for adequately achieving banks objectives according to the set standards of risk appetite and thresholds
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