Abstract
Bank risk capital (capital at risk) is identified with the value of banks’ own funds maintaining to absorb potential losses and protect against insolvency. It is calculated for the capital adequacy ratios, recommended by the Basel Committee on Banking Supervision. On other words, it is a kind of banks’ capital that financing securing the negative effects of risk occurring. A comparative analysis of effectiveness of bank risk capital in the Visegrad Group countries, constituting the main objective of the study, results from the needs indicated in the already conducted preliminary research. In the article, statistical and econometric methods were used, based on linear regression models. The conducted research were aimed to verify the research hypothesis stating that in the analyzed banking sectors of the Visegrad Group countries there is a positive correlation between banks' profitability and a level of their bank risk capital. The study indicated that net profit of the analyzed banking sectors increases with a growth of total own funds, while profitability is diversified in individual countries. Declining operational efficiency results from the growing cost of obtaining and maintaining risk capital.
Highlights
The main research problem, undertaken in the study, is effectiveness of bank risk capital, which is recently the subject of particular interest, and the controversies of scientific communities, as well as policymakers and banking practitioners
Regulations – resulting from Basel III – change the attitude of banking supervision to the method of bank risk control, which is reflected directly in the demand for bank capital. This situation means that its active management forces growth of risk capital in banks, changes their business model or accelerates retention of bank risk through its transfer, justifying the purposefulness of the undertaken research on consequences of regulations implemented in the banking sectors
The obtained results of the conducted estimation of linear regression models of particular parameters in relation to the analyzed feature – i.e. value of own funds of banking sectors of the Visegrad Group countries are presented in Appendix 1
Summary
The main research problem, undertaken in the study, is effectiveness of bank risk capital, which is recently the subject of particular interest, and the controversies of scientific communities, as well as policymakers and banking practitioners. The direct effect of implementation of post-crisis Basel regulations is significant tightening of capital requirements for banks, regarding both new capital Journal of Business Economics and Management, 2019, 20(3): 424–445 buffers, as well as an increase of quality and transparency of equity, their greater adequacy to bank risk, or how banks measure and identify the value of risk capital This issue has often been the subject of wide interest in scientific research and numerous publications due to the consequences that has caused for the financial system and the real economy (Boyd & De Nicoló, 2005; Apostolik, Donohue, & Went, 2009; Bessis, 2015; Altunbas, Manganelli, & Marques-Ibanez, 2011; Županović, 2014; Iwanicz-Drozdowska, 2017; Jajuga, Karaś, Kuziak, & Szczepaniak, 2017; Marcinkowska, 2010; Moreno, 2006; Altunbas, Binici, & Gambacorta, 2017; Szustak, 2017; Czerwińska & Jajuga, 2016). This situation means that its active management forces growth of risk capital in banks, changes their business model or accelerates retention of bank risk through its transfer, justifying the purposefulness of the undertaken research on consequences of regulations implemented in the banking sectors
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