Australian Banks Research Articles

Five guidelines to improve context-aware process selection: an Australian banking perspective

PurposeSelecting which processes to improve plays a critical role in the first phase of the business process management lifecycle, but it is a step with known pitfalls. Decision-makers rely on subjective criteria and their knowledge of the alternative processes put forward for selection is often inconsistent. This leads to poor quality decision-making and wastes resources. The purpose of this paper is to examine the proposition that decision-makers armed with context-enriched criteria make more logical, better-quality decisions. The context in question is qualitative, sensitive to decision-making bias and politically charged.Design/methodology/approachWe applied a design-science approach, engaging 70 industry decision-makers through a combination of research methods to assess how different contextual configurations, in a hypothetical scenario adapted from the Australian banking industry, influenced and ultimately improved the quality of the process selection step.FindingsThe study highlights the impact of framing effects on context, and the need to adapt framing to decision-maker behavior and provides five guidelines to improve process selection effectiveness.Originality/valueProcess selection research to date has largely focused on quantitative evaluation techniques, with little attention paid to the role of context and the behavioral interplay of decision-making styles in practice.

Immigrants and innovators: financial inclusion and the ‘de-banking’ of the digital asset industry

ABSTRACT ‘De-banking’ refers to banks limiting or withdrawing banking services from perceived ‘high-risk’ clients. ‘High risk’ is not merely commercial risk relating to a client’s ability to pay. It also includes ‘non-commercial’ risks such as client dealings in illicit funds or activities. Debanking decisions might also be made on operational-cost grounds where continued servicing of a particular customer base becomes uneconomical. In Australia, the de-banking issue has impacted migrant communities. More recently, de-banking has impeded the ability of digital assets service providers. Under the guise of rigorous compliance legal standards, Australian banks have limited or even cut-off banking services to many Australian digital asset firms. As the financial gatekeepers to the Australian economy, Australian banks (already very protected from competitors) are undermining an industry that could potentially compete for market share. Examining strategies adopted in other jurisdictions, Australian policy makers should supplement the introduction of a licensing regime, as proposed by the Digital Assets (Market Regulation) Bill 2023 (Cth), with additional balanced measures in order to support innovation in the digital asset sector and maintain financial integrity.

Spotlight on a complex crisis spillover: A multi-organisational perspective on rebuilding trust and reducing distrust in the Australian banking industry

Recent crisis spillover research expands our understanding of the effects of crisis spillover on reputation, legitimacy, consumer attitudes and behaviours, as well as how organisations can respond to these types of crisis spillover events. However, there remains scant exploration of the impact of crisis spillover on trust and limited if any consideration of distrust as a separate and distinct concept from trust. In a crisis, trust is an important relationship outcome, and the present lack of empirical understanding of it in crisis spillover can limit future research and practice. Consequently, this study’s examination of message strategies that address both trust and distrust concerns, and in turn repair these key relational concepts, can address the current void in public relations theory. In addition, the research record provides limited insights into the strategies employed by multiple organisations with varied responsibility for crisis spillovers. To address these gaps in our understanding about complex crisis spillover, this study adopts associative network theory and extends its application via a case study approach focussing on the Australian banking industry. The findings contribute new knowledge to the crisis communication, trust repair and crisis spillover literature.

The double bottom line of savings banks and credit cooperatives – Insights into lived practice

Abstract Credit cooperatives and savings banks not only fulfill economic purposes, but also pursue social objectives. An orientation towards the common good as part of their hybrid target system leads to positive externalities of their business activities for society, such as the stabilization of the financial sector or the support of vulnerable groups. However, an analysis of current literature and a quantitative study on the lived practice of their social mission show that cooperative and savings banks so far only inadequately communicate the implementation of their values and principles to the public. The article thus offers an insight into the social commitment of Austrian banks and discusses potential obstacles to intensified double bottom line accountability.

Optimizing Ensemble Learning to Reduce Misclassification Costs in Credit Risk Scorecards

Credit risk scorecard models are utilized by lending institutions to optimize decisions on credit approvals. In recent years, ensemble learning has often been deployed to reduce misclassification costs in credit risk scorecards. In this paper, we compared the risk estimation of 26 widely used machine learning algorithms based on commonly used statistical metrics. The best-performing algorithms were then used for model selection in ensemble learning. For the first time, we proposed financial criteria that assess the impact of losses associated with both false positive and false negative predictions to identify optimal ensemble learning. The German Credit Dataset (GCD) is augmented with simulated financial information according to a hypothetical mortgage portfolio observed in UK, European and Australian banks to enable the assessment of losses arising from misclassification costs. The experimental results using the simulated GCD show that the best predictive individual algorithm with the accuracy of 0.87, Gini of 0.88 and Area Under the Receiver Operating Curve of 0.94 was the Generalized Additive Model (GAM). The ensemble learning method with the lowest misclassification cost was the combination of Random Forest (RF) and K-Nearest Neighbors (KNN), totaling USD 417 million in costs (USD 230 for default costs and USD 187 for opportunity costs) compared to the costs of the GAM (USD 487, USD 287 and USD 200). Implementing the proposed financial criteria has led to a significant USD 70 million reduction in misclassification costs derived from a small sample. Thus, the lending institutions’ profit would considerably rise as the number of submitted credit applications for approval increases.

Gender Disparities in Health Biomarkers, Lifestyle Patterns, and Nutritional Status among Bank Staff: A Cross-Sectional Study.

Background and Objectives: Despite the importance of nutritional status and a healthy lifestyle in shaping overall well-being, little is known about examining gender-specific differences and trends in health, lifestyle, and nutritional status. The present study aimed to evaluate blood levels of micronutrients, homocysteine, and CoQ10, as well as physical activity (PA) levels and sedentary behavior, among a cohort of Austrian bank staff, with a particular focus on identifying gender differences as well as gender-specific nutritional deficiencies compared to the reference ranges. Materials and Methods: Following a cross-sectional study design, 123 Austrian bank staff (mean age: 43 years; 51% females) participated in this study. Blood samples were collected to evaluate participants' micronutrient status and serum levels of homocysteine and CoQ10. Whole-blood values of macronutrients were compared to gender-specific reference ranges and categorized into three groups: below, within, or over the range. The WHO's Global Physical Activity Questionnaire was used to assess PA levels and sedentary behaviors. Results: No significant difference between males and females was found for diet types, PA levels, sedentary time, homocysteine levels, or CoQ10 values (p > 0.05). A high PA level was reported by 64% of males and 58% of females. 71% of females and 56% of males were found to have a vitamin D deficiency. 63-98% of females and 72-97% of males showed normal blood levels for the remaining micronutrients, including potassium, calcium, magnesium, copper, iron, zinc, selenium, manganese, molybdenum, B6, B9, and B12. Conclusions: The findings highlight the necessity of implementing tailored strategies to foster healthy lifestyle behaviors, thereby enhancing the overall state of health, particularly in the context of occupational health.

The Association of Physical Activity Level with Micronutrient and Health Status of Austrian Bank Employees

Background: Favorable health benefits of an active lifestyle have been clearly documented within the context of occupational health. However, a knowledge gap exists regarding the monitoring and comparison of micronutrient status across varying levels of physical activity (PA). This study aimed to investigate the association of PA level with micronutrient status and the associated health biomarkers among a cohort of Austrian bank employees. Methods: Using a cross-sectional design, this study involved the participation of bank employees (n = 123; average age: 43 years; 49% males) from the federal state of Tyrol, located in the western part of Austria. To assess PA levels and sedentary behavior, the Global Physical Activity Questionnaire (GPAQ; developed by the WHO) was administered. Accordingly, participants were categorized into three groups: low PA, moderate PA, and high PA. Participants’ blood samples were obtained to measure blood levels of micronutrients, homocysteine, and CoQ10. The values of vitamins and minerals in whole-blood were compared to sex-specific reference ranges and grouped into three categories: below, within, or exceeding the reference range. Results: The prevalence of a high PA level was 61%, while 18% of participants had a low PA level. Overweight/obesity was significantly less prevalent among participants with high PA levels (22%) compared to those with moderate (50%) and low (50%) PA levels (p = 0.045). No significant differences between PA levels were found for sex, age, diet type, homocysteine, or CoQ10 markers (p > 0.05). There was no significant PA-based difference in blood concentrations of most vitamins and minerals (p > 0.05), except for vitamin D (p = 0.001) among females, as well as selenium (p = 0.040) and vitamin B12 (p = 0.048) among males. Conclusion: The present findings offer initial insights into the link between PA behaviors, micronutrient status, and health, highlighting potential implications in occupational health and lifestyle, specifically in developing tailored approaches based on PA levels.

The value of reverse knowledge transfer: Case of Austrian Bank subsidiary in Slovakia

This research focuses on reverse knowledge transfer from Central Europe to Western Europe by analyzing the contribution of a specific Slovak subsidiary to MNC knowledge. It explores the first digital bank created in Slovakia, its origin, expectations, results, and expertise transmitted from the daughter company to the Austrian headquarters. The paper analyses the situation of Raiffeisen Bank International, headquartered in Vienna, and its digital daughter company ZUNO founded in Slovakia in 2010. It identifies the learnings transferred to the parent in digital banking, marketing, operational, HR, and strategic management. The authors also study subsidiary integration within MNC, alignment of its structure and processes with the parent and conclude that the new knowledge generation was especially valuable in digital banking, at work with new client segments, in implementing new forms of marketing, working with new technologies, creating new structures, and transferring them to the other foreign markets.

HISTORY OF AUSTRALIAN BANKING

This paper offers a detailed exploration of the intricate history of Australian banking, unraveling its inception, progression, and pivotal junctures that have sculpted the financial terrain of the nation. Originating as modest colonial endeavors, Australian banks have evolved into significant players in the global financial arena. This journey of Australian banking mirrors a captivating fusion of economic dynamics, political frameworks, and societal shifts. By meticulously scrutinizing critical junctures, regulatory shifts, technological innovations, and socio-economic determinants, this paper endeavors to furnish a nuanced comprehension of the trajectory of Australian banking across centuries. From the pioneering ventures of the colonial era to the contemporary complexities of a digitalized world, the narrative unfolds a narrative rich in resilience, adaptation, and evolution. Through this examination, we gain insight into the enduring legacy, challenges, and transformative potential of Australian banking, illuminating its integral role in shaping the economic landscape of the continent.

Bankruptcy and international intervention: The case of Addiko bank

AbstractIn 2014, the Austrian bank Hypo Group Alpe Adria was purchased by the American banking group Advent International, and the European Bank for Reconstruction and Development (EBRD) and re‐branded as Addiko bank. In this paper, I explore how this purchase of Addiko Bank by an international multilateral development bank (MDB) affected exporting firms in Croatia. Using a difference‐in‐differences specification to investigate whether there was a meaningful effect of this turnover on firm performance, I find that the turnover of Addiko bank led to a $160,000 decrease in loans taken out by firms. However, this effect seems to occur immediately after the turnover, and vanishes over time. This effect is seen among domestically‐owned firms and non‐manufacturing firms, but not multinational affiliates and manufacturing firms. Additionally, I find no effect of this turnover on firm revenues. These results indicate that after an initial period of turmoil, the intervention by EBRD and Advent International had no lasting negative effects on firms in Croatia. The intervention by a MDB can help reform a financial sector and will not necessarily lead to detrimental effects at the micro‐level.

Industry specialization and tax avoidance in the Australian banking industry

PurposeThe purpose of this study is to examine the impact of industry specialization of audit partners and audit committee members on the level of tax avoidance in Australian banks.Design/methodology/approachThis study uses a multivariate regression analysis based on hand-collected data consisting of 180 observations from Australian domestic banks between 2010 and 2018.FindingsThe primary results of the empirical analysis indicate that audit partner industry specialization is negatively associated with the level of tax avoidance in Australian banks. Regarding the audit committee, the proportion of industry specialists among audit committee members reduces the magnitude of tax avoidance. These results are robust, as they hold the same for alternative measures of tax avoidance and industry specialization of audit partner and audit committee members. Results from supplementary analysis reveal that the interactive effect of both audit firm and audit partner industry specialization strengthens the auditors’ effectiveness in reducing the level of tax avoidance.Practical implicationsAs this study highlights the importance of the industry specialization in decreasing tax avoidance, it can be beneficial for policymakers to assess the impact of good governance on the level of tax avoidance in the banking industry.Originality/valueEven though the existing studies examine the link between the governance actors’ industry specialization and tax avoidance in nonfinancial firms, this paper explores the banking industry that differs from nonfinancial firms in among others; accounting and fiscal regulations. This study further provides unique evidence indicating that industry specialization of the audit partner constitutes a significant determinant of minimizing the bank’s level of tax avoidance.

Building Multivariate Time-Varying Smooth Transition Correlation GARCH Models, with an Application to the Four Largest Australian Banks

This paper proposes a methodology for building Multivariate Time-Varying STCC–GARCH models. The novel contributions in this area are the specification tests related to the correlation component, the extension of the general model to allow for additional correlation regimes, and a detailed exposition of the systematic, improved modelling cycle required for such nonlinear models. There is an R-package that includes the steps in the modelling cycle. Simulations demonstrate the robustness of the recommended model building approach. The modelling cycle is illustrated using daily return series for Australia’s four largest banks.

Developments in Australian Bank’s Funding Costs and Lending Rates

This paper focuses on the funding costs and the lending rates of banks in Australia. As the world emerges from the COVID-19 pandemic, more and more countries need to change their financial policies to fit the new situation. In this trend, the central bank of Australia, which is the Reserve Bank of Australia, plans to increase its cash rate to stop or reduce the starting rate of inflation. Through analyzing the report from the Reserve Bank of Australia (RBA) and articles from related academic works of literature, this writer found some points to understand, evidence, and analyze. It also analyze the importance of the Australian central bank to change the cash rate. After analysis, the result shows that due to the change in the confidence of customers and the increase of the rate of inflation after the COVID-19 pandemic, the central bank had to increase the cash rate. Through tighter financial policies, the central bank planned to stabilize the economy of Australia. Meanwhile, the pressure of Australian banks grew as the funding cost increased and the requirement for home mortgage loans decreased. For future research on the cash rate, it is advised to evaluate that if the continuous increases in cash rate are overused in the future. This might need at least half a year or even longer time to wait for the impact of the policy and the effect on the market and the banks.

Aktuelle Fragen des Bankgeheimnisses

Current issues of Austrian Banking Secrecy. An article on the topic of information obligations of credit institutions, on the implementation of the Directive (EG) 2021/2167 on credit servicers and credit purchasers, and a food for thought on possible amendments to Section 38 Austrian Banking Act.

Development of Risk Culture in the Australian Banks and Insurance Companies

Development of Risk Culture in the Australian Banks and Insurance Companies

Designing a financial quantification model for cyber risk: A case study in a bank

Given banks’ role in global financial markets, there is growing concern about cyber incidents' impact on broader financial stability. Recent research has focused predominantly on the banking industry as a whole and investigated the aggregate impact of cyber incidents on deposit balances, capital ratios, and operational losses. Little is understood about how risk managers in banks assess the financial impact of a potential cyber incident. Even in banks that feature a high degree of cybersecurity process maturity, there is a continued perception that the impact of a cyber incident remains financially unquantifiable. This study explores how executives in banks currently manage their cyber risk exposure and how a financial quantification model can be designed to capture the impact of a cyber incident. An Australian bank formed the setting for our exploratory case study. Interviews revealed that bank managers consider maintaining customer trust and reputation a key priority following a cyber incident. We developed, tested and validated a conceptual model aimed to guide cybersecurity experts and risk managers in the financial quantification of the impact of a cyber incident in banks.

Board gender diversity and bank risks: Evidence from Australia

Recently, regulators and investors have shown an increasing interest in the promotion of diversity in the corporate boards of directors. In this paper, we employ data from the Australian bank boards to provide new insights on the diversity-risk nexus, based on a dataset of the Australian banks for the period of 2004 to 2019. We examine board gender diversity from two perspectives across the board and among board leaders. Our results support the context-dependent impact of gender diversity on the board of directors and highlight the beneficial impact on the risk of banks when considering gender diversity and the presence of a dominant gender group in the boardroom.

Are Banks Responsible for Animal Welfare and Climate Disruption? A Critical Review of Australian Banks’ Due Diligence Policies for Agribusiness Lending

AbstractThis article argues that banks should adopt animal welfare policies in the light of the growing acceptance of the need for ‘responsible banking’, which incorporates environmental, social, and governance analysis into credit risk and due diligence processes. The responsibility of banks for animal welfare is underscored by the drive towards greater investment in animal agribusiness, and the vicious cycle through which animal agribusiness can both contribute to, and be impacted by, climate disruption. The article evaluates, through a desktop review, how leading Australian retail banks and agribusiness lenders are addressing animal welfare and climate disruption in animal agribusiness lending. We find that although most banks have made a commitment to animal welfare and climate policies, these often amount to little more than greenwashing. We call for an ecosystem of industry, regulatory, and civil society action to address this danger.

Factors affecting the growth of small privately‐owned financial planning businesses

AbstractOver the past 10 years, there have been many financial scandals in the financial advice industry, which has caused substantial losses for investors. Large wealth institutions controlled by major Australian banks have significantly contributed to investor losses by promoting their products which were not always in the best interests of clients. The aim of this study was to explore the factors affecting the current and future growth of small privately‐owned financial planning businesses as a competitive marketplace provides better consumer outcomes. The study undertook a qualitative approach using an exploratory research design which involved the recruitment of 51 privately‐owned financial planning practice owners who were personally interviewed with semi‐structured interview questions. Using a theoretical framework based on Michael Porter's five competitive forces model, the study found that the main factors enhancing growth were differentiation of service, technology enhancement, target marketing and business and client referral arrangements. Factors that negatively affected growth included the affordability of providing advice due to regulatory changes and the negative public perception associated with various industry scandals. The results provide existing and new entrant adviser practices with valuable knowledge to make informed decisions in the areas of practice management and direction. Additionally, the study provides policymakers and regulators with further knowledge to better support the privately‐owned financial planning sector, thus enabling consumers to benefit from a more competitive marketplace.

Allowing early access to retirement savings: Lessons from Australia

In response to the COVID-19 pandemic, many governments around the world introduced policies aiming to provide citizens with financial relief through early access to their retirement savings. In Australia, the Early Release of Super (ERS) scheme allowed eligible citizens to withdraw up to A$20,000 in funds between April and December 2020. Using data provided by a large Australian bank, we examine the characteristics of the individuals who withdrew, how they used the withdrawn funds, and what impact this had on their financial wellbeing. We find that the scheme achieved its intended goal of providing immediate financial support to citizens in need. The scheme was primarily accessed by individuals in poorer financial circumstances, and helped withdrawers to pay down high-interest debts and avoid arrears. Based on our findings, we consider the implications for governments looking to implement similar policies in the future, as well as the opportunities to support individuals who have now withdrawn from their retirement savings.