The Role of Human Factors in the Bank Capital Evaluation Framework

Abstract

JEL Classification Codes: F60, F63, 035, 044 1. Introduction Bank capital is defined in economic dictionary as a complex of monetary capitals raised in banks for applying in payments and other transactions i.e. bank funds. According to Raizberg B., Lozovsky L., Starodubtseva E. bank capital is a monetary capital rose in bank from multiple sources and used for bank transactions i.e. bank funds. So we can define bank capital as a monetary value of the total bank capital and divide into equity and debt. Bank capital is evaluated through the whole capital flow process. Bank capital's management includes two major stages: 1) Generating the bank capital; 2) Applying the bank capital. Both of the stages are connected with human which could have both positive and negative influence at generating and applying the bank capital. It's notably that there are a set of errors and advantages connected with the human factors. We can highlight errors such as low-skilled staff, non-flexible mind, inconsistent risk policy in decision-making, deficient analytical framework, lack of useful forecasting. Advantages of the human are: quality education, professional skills, professional development, and diplomatic, highly analytical and independent mind, stress tolerance (Sultanova and Chechina, 2016). Stakeholders always make financial decisions, define policy priorities, and define targets and goals. Entity's targets and goals defined because the set of methods and research tools of applying the policy based on the core concepts of financial management and banking and also with internal and external to be taken into account. All of these elements take place through the whole evaluation process namely during the generating as well as applying the bank capital stages (Akopova and Przhedetskaya, 2016; Allegret et al., 2016; Glavina, 2015). According to the evaluation framework, we should consider all the stakeholders' interests and hereafter the framework of the interests in order of importance and impact comes to life (Theriou et al., 2014). This framework depends on the person who arranges it. Therefore we emphasize on the essential role of the human factor. Bank capital evaluation policy should include the description of stakeholders' interests to be satisfied through the evaluation process. We can consider ROC (return on capital) rate, capital adequacy ratio, and others as target ratios to indicate the stakeholders' interests. Bank capital evaluation policy should take human into consideration to balance the stakeholders' interests and indicate and specify them in the evaluation policy and objectives. 2. Theoretical, Informational and Empirical, and Methodological Grounds of the Research The bank capital evaluation system should consider human and provide solving the set of objectives such as: 1) Methodical and regulatory support of applying the evaluation system i.e. analysis, planning and control; 2) Providing a legal board of directors' responsibility for the evaluation process; 3) A rule of methodical certainty; 4) A rule of confidential evaluation process' procedures; 5) Other rules dealing with applying the evaluation process' procedures and portfolio approach. Highlighting the following rules needs further study. The term of Human factors should include human capital because of its components. So, the human capital framework includes: 1) physiological capital i.e. longevity, health, disability; 2) intellectual capital i.e. skills, education; 3) Organizational capital i.e. management skills. We should stress the importance of skills, education, health, and management abilities when building the evaluation process' framework since any of these could easily affect the evaluation process and its accuracy. …