The impact of artificial intelligence on reducing financial risks

The commercial banks need to identify the sources of the several financial risks which emanates from financial innovations, as they may affect the banks’ stability. This study sought to determine the influence of financial innovations on level of risks in commercial banks in Kenya. The specific objectives were to determine the relationship between internet banking and financial risks in commercial banks in Kenya; to explore the relationship between mobile banking and financial risks in commercial banks in Kenya; to establish the relationship between agency banking and financial risks in commercial banks in Kenya; and to determine the relationship between electronic cards and financial risks in commercial banks in Kenya. The study adopted a descriptive research design. The target population was all the 42 commercial banks registered with CBK as at December 31st 2016. The unit of observation will be the risk management managers. This was a census study. The study collected both primary data and secondary data. Primary datawas collected from the respondents through a uestionnaire while secondary data was collected from the financial statements. Prior to the actual data collection, the questionnaire was tested for reliability and validity. The collected data was analyzed through descriptive statistics and inferential statistics through aid of SPSS software Version 21. The inferential statistics entailed use of a multivariate regression analysis to establish the relationship between the variables and test hypothesis. The analyzed data was presented using of tables, charts and graphs.

With China’s accession to the World Trade Organization (WTO), many foreign banks have started to enter into China while Chinese banking and insurance industries have been deepening and opening up. Commercial banks will pay more attention to profit and abandon appropriate liquidity in order to survive in fierce competition. Particularly in recent years, liquidity risk caused by the US sub-prime mortgage crisis has lead banks and many financial institutions to collapse and has also been bringing the devastating impact on the global economy. In 1978, Chinese government began to implement the reform and opening up, and in the meanwhile began to reform the banking sector, which interrupted the banking monopoly and led in competition system into banking sector. During the Asian financial crisis in 1997, China’s banking sector experienced liquidity crises due to over competition, leading to the bankruptcy of Hainan Development Bank because of exhausted liquidity. The bankruptcy of Hainan Development Bank resulted in the loss of nearly 4 billion yuan of People’s Bank of China, which had a graveness influence on China’s banking sector. In addition, China’s long-term trade surplus and a large inflow of foreign capital lead to the excess liquidity in the banking sector. In the pressure of such excess liquidity, banks will blindly decrease lending rates to get inter-bank rate lower than bank-deposit rate appearing interest rate inversion phenomenon to decrease bank returns. In the long term, this will probably accelerate the accumulation of non-performing loan of bank. When the economy changes, asset bubbles of bank will quickly be shattered, which will directly result in the systematic financial crisis in the banking sector. Meanwhile, China as a largest trading partner of South Korea has been a key factor on its economy. However, South Korea is lacking of understanding of potential various uncertainties and liquidity risk in China’s Economy, which bases on banking. In this case, South Korea will be significantly influenced due to its highly dependence on China’s Economy if Chinese commercial banks suffer from liquidity risk. Especially, Korean companies already invested in China and global financial companies constantly attempting to expand all over of China should be directly affected. Therefore, this paper is to analyze the determinants of the bank’s liquidity risk in Chinese commercial banks and what difference between large commercial banks and small-medium commercial banks. The banking data used in this paper were extracted from the database BankScope IBCA-Fitch, the People’s Bank of China and China Statistical Yearbook. We used panel data of 25 commercial banks over the period from 2004 to 2011 to estimate the determinants of liquidity risk by panel OLS, the fixed effects and random effects regression. The results of the empirical analysis are as follows: first, internal factors in banks did not affect the liquidity of the commercial banks in China, but it was affected by macro-economic factors negatively. It implies that the People’s Bank of China will be able to adjust liquidity and manage liquidity risk in commercial banks in China using monetary policy. Second, in terms of asset size of banks, both internal factors in banks and macro-economic factors have influence on the liquidity of large commercial banks in China, however, small-medium commercial banks have only been affected by non-performance loans ratio and macro-economic factors.

Banks are one of the essential pillars of the financial sector (Alzuod & Alqhaiwi, 2022), however, banking is a high-risk industry (de Andres & Vallelado, 2008). The aim of this paper is to investigate the impact of the board’s structure and ownership structure on the financial risks of Jordanian commercial banks. Data was gathered manually from the financial reports. Notably, the study addressed two types of financial risks: liquidity risk and credit risk. The study sample included commercial banks listed on the Amman Stock Exchange (ASE) to cover the period 2014–2019. To achieve the study’s objectives, multiple regression analysis was run to test the hypotheses. The results reveal a negative, statistically significant impact of the board size, institutional ownership, and bank size on liquidity risk. The results also demonstrated a negative effect of board independence, ownership concentration, bank size, and CEO duality on credit risk. In sum, the results support previous studies that found a statistically significant role of corporate governance mechanisms in reducing financial risks. The study recommended the need to enhance foreign investment and institutional ownership.

With the in-depth development of global economic integration, the competition in the financial industry at home and abroad has become more and more severe, and the innovation of financial products has gradually become a new development trend in the financial industry. For commercial banks, strengthening the innovation of financial products can attract more customers, thus reaping more substantial income and maintaining an advantageous position in the market competition. However, in the process of financial product innovation of commercial banks, the financial risks are also increasing, and how to achieve effective management of financial product innovation risks has become one of the hot topics of concern in the field of commercial banks. This paper takes the study of risk management of technological, financial product innovation of commercial banks as an example, based on methods of big data analysis algorithms, analysis of correlation, analysis of effects, analysis of Variance and analysis of regression, through questionnaires and research results, literature review, to explore Commercial Bank’s Risk Management Behavior on the innovation of its scientific and technological financial product(CBRMB) and its influencing factors. Regarding CBRMB, It mainly describes the degree of its risk influence through the following two aspects, including the number of inspectors and research budget, and among the influencing factors research Commercial bank's Risk management (CBRM), Commercial bank's Human Resource management (CBHRM), Commercial Bank's supervision ability on its Financial product innovation (CBSA), Commercial Bank's Internal control system (CBICS), and Commercial Bank's Development of scientific and technological financial products (CBD). According to the regression model operation results, commercial banks can refer to the research recommendations and optimize their scientific and technological innovation and risk management, improve the problems in the risk system, and enhance the operational efficiency of commercial banks to promote the healthy development of the financial market.

The study examines the impact of corporate governance on credit risk and liquidity risk of Nepalese commercial banks. Liquidity risk and non-performing loans are selected as the dependent variables. The independent variables are board size, number of board meetings, audit committee size, independent directors, gender diversity and bank size. The study is based on secondary data of 17 commercial banks with 102 observations for the period from 2016/17 to 2021/22. The data were collected from Banking and Financial Statistics published by Nepal Rastra Bank, publications and websites of Nepal Rastra Bank (NRB) and annual reports of the selected commercial banks. The correlation coefficients and regression models are estimated to test the significance and importance of corporate governance on the credit risk and liquidity risk of Nepalese commercial banks. The study showed that independent director has a negative impact on non-performing loan. It shows that increase in the number of independent directors leads to decrease in non performing loan. In addition, gender diversity has a positive impact on non-performing loan and liquidity risk. It shows that higher the number of female directors, higher would be the non-performing loans and liquidity risk. Likewise, bank size has a negative impact on non performing loans and liquidity risk. It indicates that larger the bank size, lower would be the non-performing loans and liquidity risk. Furthermore, number of board meeting has a negative impact on non-performing loans and liquidity risk. It shows that higher the number of board meetings, lower would be the non-performing loans and liquidity risk. Similarly, the results also showed that board size has a positive effect on liquidity risk. It means that increase in board size leads to increase in liquidity risk. However, audit committee size has a negative effect on liquidity risk. It means that increase in audit committee size leads to decrease in liquidity risk.

This article examines the impact of FinTech on systemic risk in commercial banks. It begins by explaining the basic concepts of FinTech and commercial banks, as well as existing academic research perspectives and their controversies. Drawing on a comprehensive literature review and a multi-path analysis framework, it further explores the transmission mechanisms of FinTech on systemic risk in commercial banks through three pathways: technological penetration (involving blockchain, artificial intelligence, and others), business innovation (including shadow banking and open banking interfaces), and market structure (covering data monopolies of FinTech giants and long-tail customers). Research shows that while FinTech improves efficiency, enhances financial inclusion and disperses risks, it also brings cybersecurity threats, regulatory challenges and systemic dependence on large technology platforms. Finally, this article summarizes the dual impact of FinTech on systemic risk in commercial banks and offers practical insights for ensuring the stable development of the financial and banking sectors in the digital age.

The liquidity risk of commercial banks has become an important driver of the major risks in the modern economic system. This paper synthesizes the off balance sheet items which are often ignored in traditional bank liquidity researches, and uses the method of tracking and comparative analysis in different window periods to explore the liquidity changes and possible risks of Chinese commercial banks before, during and after the financial crisis. It is found that traditional loan projects, committed loan projects and demand deposits are important drivers of liquidity risk; Although the liquidity level of China’s banks is high, due to the high demand deposit rate, low core capital ratio, rapid loan growth and high non-performing rate, and the lack of risk prevention awareness, liquidity risk is still a major risk that China’s commercial banks need to face.

In recent years, with the rapid development of technologies such as artificial intelligence, big data, and blockchain, FinTech has become the core driving force for the transformation of the global financial system. As the backbone of traditional finance, commercial banks face dual challenges of digital transformation and credit risk management. Based on this background, this article systematically explores the impact mechanism and response strategies of financial technology on commercial bank credit risk. Through literature review, this paper summarizes the domestic and international research trends on the relationship between financial technology and commercial bank credit risk, focusing on dimensions such as digital transformation, construction of financial technology subsidiaries, and third-party cooperation. Commercial banks have promoted the intelligence of business processes through large-scale technological investment, but the innovative practices of subsidiaries in areas such as green credit and rural finance have also exposed problems such as insufficient technological adaptability and regulatory coordination. Based on this, further analysis was conducted on the causes and impacts of credit risk in commercial banks under the background of financial technology. The risk characteristics include data security vulnerabilities, lack of model interpretability, and cross platform compliance risks. Therefore, this article proposes four-dimensional management strategies: firstly, accelerate digital transformation and build an open and collaborative technology ecosystem. The second is to improve the compliance framework, balance innovation incentives and risk prevention and control; The third is innovative regulatory technology, which utilizes sandbox testing and real-time monitoring to enhance regulatory efficiency. The fourth is to strengthen data governance and ensure information security through encryption technology and permission management. Financial technology is not only a tool innovation, but also a reconstruction of the financial ecosystem, providing theoretical support and practical reference for the sustainable development of the banking industry.

This study aims to determine the effect of Net Interest Margin (NIM), Non-Performing Loan (NPL), oil price, exchange rate, market power, and female BOD gender on bank risk in go public commercial banks listed on the IDX and KLSE (2009-2019). In this study, the sampling technique used was purposive sampling technique which resulted in 32 banks. The secondary data used is obtained from financial reports published on the official IDX and IDX websites. The data analysis method used in this research is panel data regression analysis. The results showed that the total assets variable affects NIM, NPL, Oil Prices, Exchange Rates, Market Power, and Female BOD Gender on Bank Risk in Go Public Commercial Banks listed on the IDX and KLSE. The regression test results can be concluded that the constant coefficient value of -0.770544 means that if the variable NIM (X1), NPL (X2), Exchange Rate (X3), Oil Price (X4), Market Power (X5), and Female BDO Gender (X6) is zero, then the amount of Bank Risk is -0.1770544. JEL classification numbers: C31, E51, G21, J16. Keywords: Bank, Profitability, Total Assets, Risk.

Purpose The stability of state-owned Chinese commercial banks, as global systemically important banks (G-SIBs), plays a crucial role in maintaining financial stability in developing economies. However, limited research has focused on these banks. This study examines the overseas branches of state-owned Chinese commercial banks, focusing on how political uncertainty in host countries affects their risk exposure and how bilateral political and trade relations influence this relationship. Design/methodology/approach The research is based on data from 47 overseas branches of six major state-owned banks across 22 countries from 2013 to 2022. Panel regression models are used to assess the impact of political uncertainty in host countries on bank risk as well as the moderating effects of bilateral political and trade relations. An instrumental variables approach combined with propensity score matching is applied to address potential endogeneity. Findings The results show that high levels of political uncertainty in host countries raise the risk faced by these banks, but strong bilateral political ties can help reduce this impact. In contrast, close bilateral trade ties tend to amplify the effect, driven by the client-following behaviour of Chinese banks. Research limitations/implications This paper offers a fresh perspective on risk management in multinational banking. It examines how bilateral political and trade relations affect bank risk levels, enhancing understanding of cross-border banking risks. By applying the “relative gains theory”, the study expands the view of how political uncertainty shapes international banking. However, limitations remain. First, limited financial disclosures restrict the scope of risk indicators, making it hard to capture diverse risks. Second, as most overseas branches are state-owned, the sample lacks ownership diversity, limiting comparisons under similar political uncertainty. Practical implications The findings of this paper provide valuable insights for Chinese state-owned commercial banks operating overseas. By understanding the moderating role of bilateral political and trade relations, these banks can enhance their risk management strategies in politically unstable regions. It also helps policymakers and financial institutions to better assess and mitigate the risks associated with political uncertainty in host countries, thereby promoting more stable and efficient international operations. Originality/value First, focusing on state-owned Chinese commercial banks, it explores the impact of political uncertainty in host countries on the risk of state-owned commercial banks, enriching the research on the impact of political uncertainty on the risk of commercial banks. Current research focuses on traditional commercial banks and special types of Islamic banks, while there is a lack of in-depth research on state-owned commercial banks. Second, from the perspective of multinational banks, we analyse the moderating role of bilateral relations between home and host countries in the impact of political uncertainty on bank risk and assess their moderating effects separately.

This paper selects quarterly data of 10 commercial banks in China (including 5 large state-owned commercial banks and 5 joint-stock commercial banks) for the 10 years from 2011 to 2020 for the study, and constructs a mixed cross-sectional regression model through multiple covariance test and heteroskedasticity test to empirically analyze the relationship between interest rate marketization and liquidity risk of commercial banks in China, and draws the following conclusions: First,interest rate First, the market-oriented reform will greatly increase the liquidity risk level of commercial banks. Second, the interest rate market reform gives heterogeneity to the liquidity risk of large state-owned commercial banks and joint-stock banks. Third, the effect of bank size on commercial banks' liquidity risk is not significant. Fourth, monetary and quasi-monetary growth rates move in the same direction as commercial banks' liquidity risk.

The study examines the bank-specific and external factors that affect the liquidity risk in commercial banks in Bangladesh. The study has been conducted using 23 banks data from 2005-2018, and panel data is used to conduct the regression analysis. Among the bank-specific factors, asset size has a negative relationship with liquidity risk. The larger the bank size, the better the liquidity position and the lower the liquidity risk. Return on equity and capital adequacy ratio has a positive but insignificant relationship with the liquidity risks. In the case of macroeconomic factors, inflation negatively affects the liquidity risks, whereas GDP and domestic credit positively affect. Private and public sector credits increase the investments, which in turn fuel GDP growth. Growth in domestic credit reduces liquidity and may create insolvency. The loan outstanding to asset ratio is positively related to the liquidity risk of the banks. Banks usually increase the loan/advance disbursement to increase profitability, which dries out liquidity and enhances liquidity risk. The study concludes that although several factors are found insignificant yet have positive/negative relation, the banks must carefully evaluate the factors to avoid a future liquidity crisis.

Finding the relationship between cybersecurity spending and cyber risks is the aim of the study. as well as determining how cyber threats mediate the link between commercial banks' performance and their investment on cyber security. In order to address the study questions, the investigator employed both the deductive and the inductive methods. The field study community, which consisted of bankers employed by Egyptian commercial banks, department managers, branch managers, and deputy managers, was surveyed by the researcher to gather data. From the study population, a random sample of 220 people was chosen, and 180 valid questionnaires—or 82% of all the questionnaires—were gathered.The field study's findings demonstrated that all independent variables—the amount spent on improving cybersecurity, preventing cybercrimes, and detecting them—had a favorable effect on lowering cyber risks in commercial banks. Reducing cyber risks also improved commercial banks' non-financial and financial performance. Among Egyptian commercial banks, the impact of spending on cybercrime prevention and detection ranked highest in terms of the degree to which cybersecurity spending affects cyber risks. With an average of (4.57), Egyptian commercial banks have reduced their cyber risks. The effect of investing on cybersecurity development in lowering cyber risks in Egyptian commercial banks was ranked second, with an average of (4.54).With an average of (4.88), the impact of cyber risks on financial performance in Egyptian commercial banks ranked highest in terms of the relative relevance of the degree of influence on both financial and non-financial performance. Next, with an average of (4.53), the effect of cyber threats on non-financial performance in Egyptian commercial banks ranked second. After doing the Kruskal-Wallis Test, it was discovered that there was no difference in the perspectives of the different research sample categories.

The article presents the results of the systematization of issues arising in connection with the transformation of the banks forecast assessment of expected credit losses during the monitoring and evaluation of credit risk in commercial banks. Based on the data obtained on the introduction of IFRS 9 "Financial instruments" into the banking sector, it is concluded that in banking practice there is uncertainty regarding the long-term impact of credit risk, and there are significant difficulties with the use of a large amount of additional information, which creates certain difficulties in calculating future credit losses of banks. It is noted that the current use of the model of predictive assessment of expected credit losses of customers in the monitoring and evaluation of credit risk in the bank should take into account the selected collective or individual basis of assessment. The article presents a comprehensive approach to the use of the impairment model of expected losses in banking as a basic tool for modeling expected credit losses in order to form provisions for impairment with the allocation. The modification of this model will depend on the specifics of the bank's credit activities and portfolio, the types of its financial instruments, the sources of available information, as well as the IT systems used. Validation of this model will reduce the expected credit losses, reduce the amount of estimated reserves, as well as improve the efficiency of the Bank as a whole.

In China’s bank-dominated financial system, liquidity risk has become a key threat to financial stability. In the wake of the 2008 global financial crisis, Basel III elevated liquidity regulation to the core agenda of the international banking regulatory system. Based on the risk absorption theory and the financial vulnerability theory, and adding the dimensions of equity and debt structure analysis, this paper takes 42 Chinese listed banks from 2020 to 2024 as samples to study the correlation between capital structure and liquidity risk by constructing a multiple regression model. The study shows that in China, an increase in capital adequacy ratio can significantly reduce liquidity risk for listed banks; an increase in the proportion of active debt will exacerbate liquidity risk, but the correlation between equity structure and liquidity risk is not large.; a decline in loan quality is an important inducement of liquidity risk. The research conclusions provide micro-evidence for achieving a balance between risk and return through capital structure adjustments, suggesting that regulatory authorities should strengthen capital constraint mechanisms, and commercial banks should optimize their debt structure and establish a comprehensive credit management system.