Banks Face Research Articles

Bank efficiency in the digital age: The role of financial technology in Tanzanian banks

The global rise of financial technology offers opportunities and challenges for banking businesses, including Tanzanian banks. This study examines the influence of a bank's FinTech index on the efficiency of 30 Tanzanian commercial banks categorized as large, medium, and small from 2010–2021. Using panel data and a two-step Generalized Method of Moments (GMM) estimator, the study finds that the FinTech index measuring banks' financial technology development significantly enhances efficiency across all banks, with the largest impact on large banks due to their high financial technology development. However, medium and small banks face challenges in financial technology development, resulting in a negative relationship between the FinTech index and the efficiency of banks. The study emphasizes the need for regulatory frameworks supporting financial technology integration in the core banking systems, especially for smaller and medium banks. It highlights the importance of collaboration and risk management to enhance bank efficiency and financial stability.

A thematic analysis of the effect of climate change on the South African banking sector

Climate change and its severe economic effects have become a critical issue in South Africa and globally. Both public and private entities are now actively promoting a greener environment, urging individuals and organisations to transition towards a lower-carbon economy. As climate change affects business operations, organisations have begun to assess and disclose the associated risks and opportunities to their stakeholders. While much of the focus in the literature has been on sectors with high greenhouse gas (GHG) emissions, research has shown that many other sectors also contribute to and are affected by climate change. One such sector is banking. The banking sector is both influenced by climate change and contributes to it, particularly through the operations it supports by extending funding. Banks are viewed as key players in driving the shift towards a lower-carbon economy by committing more to sustainable finance. Despite this, there is a lack of literature specifically addressing climate change in the banking sector. This study aims to fill that gap by exploring climate change's impact on banks in an emerging economy – South Africa. Using thematic content analysis, the research draws on reports of six banks prepared using the Task Force on Climate-related Financial Disclosures (TCFD) framework, revealing that banks face multiple risks due to climate change and play a crucial role in promoting sustainability through financing and risk management strategies. This study contributed to the literature by highlighting the intricate relationship between climate change and the banking sector in South Africa. The study also highlights areas that banks should focus on in the future to mitigate climate-related risks.

Effects of inflation and macroprudential policies on bank risk: Evidence from emerging economies

This study explores the relationship between macroprudential policies, inflation, and bank risk in emerging economies. Several significant findings emerge based on panel data from approximately 1400 commercial banks across 32 emerging economies over the period 2000–2018. Firstly, a positive correlation is observed between inflation rates and bank risk, suggesting that inflation increases financial instability. Contrary to their intended purpose, stringent macroprudential policies actually intensify bank risk during periods of high inflation rather than stabilizing economies. Secondly, the analysis indicates that macroprudential tools designed to moderate credit cycles significantly enhance the risk banks face from inflation. Varied impacts are observed among different macroprudential instruments: capital-related, reserve requirement, and foreign exchange-related tools counterproductively heighten bank risk during periods of high inflation. Conversely, asset-based and liquidity-focused tools effectively reduce bank risk under similar inflationary conditions.

AI-DRIVEN CREDIT RISK MANAGEMENT: A LONGITUDINAL ANALYSIS OF BANKING SECTOR METRICS

The integration of Artificial Intelligence (AI) into financial systems has become a game-changer, particularly in the realm of credit risk management. As banks face increasing pressures to manage risks more effectively, AI technologies offer new avenues for enhancing decision-making processes and improving financial outcomes. This paper explores the transformative impact of AI on credit risk management practices. By analysing key financial metrics—Provision Coverage Ratio (PCR) and Capital Adequacy Ratio (CAR)—across 11 selected commercial banks over a 12-year period, this study provides empirical evidence on how AI adoption has influenced the financial stability and risk management capabilities of these institutions. Utilizing a paired t-test analysis, this research aims to quantify the benefits of AI in mitigating credit risks and enhancing the overall resilience of banks, offering valuable insights for both practitioners and scholars in the field of financial management.

The impact of agile methodologies on IT service management: A study of ITIL framework implementation in banking

This paper explores the impact of integrating Agile methodologies with the ITIL framework in IT Service Management (ITSM) within the banking sector. As banks face increasing pressure to innovate and respond swiftly to changing market conditions and regulatory requirements, Agile's flexibility and ITIL's structured approach offer a promising solution. The paper examines how Agile influences ITIL processes, leading to faster service delivery, improved collaboration, and enhanced customer satisfaction. The challenges of cultural resistance and balancing structure with flexibility are also discussed. The implications for ITSM in banking, including the potential for more dynamic and strategic service management, are also considered. The paper concludes with recommendations for future research on the long-term impact and best practices for Agile-ITIL integration in banking IT services. Keywords: Agile Methodologies, ITIL Framework, IT Service Management (ITSM), Banking Sector, Agile-ITIL Integration.

Research on Career Development Paths and Incentive Model Design for Middle Managers in Banks

With the rapid development of financial technology, middle managers in banks face both new challenges and opportunities. This paper conducts an in-depth analysis of the current state and issues surrounding the career development of middle managers in banks and explores effective incentive model designs and implementation strategies. Employing both quantitative and qualitative evaluation methods, the study assesses the practical impact of various incentive models. Through case analysis, targeted improvement suggestions are proposed. The findings reveal that a well-designed incentive mechanism significantly enhances middle managers’ job satisfaction and loyalty, which is essential for the sustained growth of banks.

The impact of ESG risks on bank stability in Indonesia

The influence of Environmental, Social, and Governance (ESG) risks on bank stability has become a critical area of study in the banking sector. This study examines the influence of ESG risks on bank stability using unbalanced panel data from 134 commercial banks in Indonesia from 2003 to 2022. Employing a fixed effects model, the findings reveal a significant negative effect of ESG risks on bank stability, where higher ESG risks significantly reduce bank stability. Specifically, government-owned banks face a greater stability decline than private banks due to their often higher exposure to regulatory and reputational pressures. Smaller banks are more adversely affected than larger ones because they lack the resources and diversification to effectively mitigate ESG risks. Additionally, non-listed banks experience a larger decrease in stability than listed banks, as the latter tend to have stricter governance structures and more robust risk management practices. These findings underscore the need for tailored risk management strategies to address ESG risks, particularly for government-owned, smaller, and non-listed banks.

INOVASI SOFTWARE UNTUK MEMPERKUAT SISTEM INFORMASI MANAJEMEN PADA BANK SYARIAH

This research aims to develop a management information system in Islamic banks through software innovation. In this article, this article discusses operating systems, applications and programming languages, as well as the role of strategic management in Islamic banks. In this research, qualitative methods were used. Qualitative methods use qualitative data and describe it descriptively to evaluate social events, phenomena or situations. Operating systems are grouped by user interface into CUI and GUI, with examples such as DOS, UNIX, and Windows. Application systems, which are designed to process data, include various types of software such as desktop and web applications. Programming languages are a means of communication between humans and machines, including algorithms that are the basis for program design. In addition, this article outlines the development of strategic management in Islamic banks, which focuses on the formulation, implementation and assessment of strategies to ensure compliance with sharia principles. In this context, information technology plays an important role in increasing financial efficiency and inclusion. The application of artificial intelligence at Bank Syariah Indonesia shows a positive impact on customer experience and operational efficiency. Sharia financial product innovations were also discussed, highlighting the importance of SWOT analysis and customer relationship management (CRM) strategies in facing competition. Finally, this article notes the challenges Islamic banks face in identifying profitable projects and adapting to developments in digital banking technology.

Challenges Facing Electronic Banking Supervision Comparative Legal Study

Objectives: The primary objective of this research is to examine the impact of the widespread adoption of electronic commerce, particularly in the banking sector, and to identify the advantages and challenges associated with this transition. As electronic banking continues to replace traditional banking methods, understanding the implications and potential issues becomes essential to support the growth and effectiveness of these systems. Methods: This study will analyze data on the adoption and growth of electronic banking, alongside identifying common issues that arise from its implementation. Through a comparative analysis of traditional and electronic banking, the study aims to highlight specific challenges that electronic banks face, especially in terms of regulatory supervision and customer security. Results: The research findings suggest that while electronic banking provides numerous benefits, including convenience and increased accessibility, it also introduces new challenges. These challenges often revolve around ensuring proper supervision and regulation to protect users and maintain trust in digital banking systems. Conclusion: In conclusion, the shift from traditional to electronic banking brings significant opportunities but also demands attention to emerging problems, particularly those concerning oversight. Addressing these issues through effective regulation and supervision will be crucial to ensure a secure and sustainable electronic banking future.

Study on the New Path of Chinese Commercial Banks' Globalization Development

The globalization process of Chinese commercial banks stands at a significant historical juncture. With the increasing integration of global financial markets, China's economic power is progressively infiltrating the international arena. As vital agents of economic development, commercial banks must adapt to this trend and accelerate their internationalization efforts. However, amid the wave of globalization, Chinese commercial banks face unprecedented challenges and opportunities. On one hand, the intensifying competition in global markets and the growing complexity and uncertainty of the international financial system necessitate higher-level strategic planning. On the other hand, the rapid advancement of technology and the rise of the digital economy offer new avenues for development. Identifying an appropriate strategic position globally and achieving sustainable business growth has become a pressing issue for Chinese commercial banks. This study focuses on exploring how Chinese commercial banks can navigate the globalization process through innovative strategies, regional differentiation approaches, and multinational collaboration to find new paths that adapt to the global market, thereby securing a competitive edge in the international arena.

The Impact of Inflation on Commercial Banks in China

Abstract: Inflation is an important issue that affects the profitability and operational stability of commercial banks. Conducting an in-depth analysis of these influences while putting forward effective countermeasures can be beneficial to ensuring the stable operation of commercial banks. This paper focuses on the period from 1937 to 1949 where the Second Sino-Japanese War and the Chinese Civil War, which had contributed to severe inflation and disrupted the banking sector, and the formation of the modern Chinese banking system. This study critically examines the main causes behind inflation, evaluates their implications on the functioning of commercial banks. It also assesses both the positive and negative impacts on commercial banks, pointing out the challenges commercial banks face during different periods. For example, the market turmoil and policy changes in the 1940s have made it difficult for commercial banks to retain normal operation; therefore are suffering from making profits and inflation has made the situation even worse. In addition, this paper provides short-run and long-run strategies for reducing the negative effects of inflation, with consideration of Chinas unique economic structure and historical context. By integrating insights from historical and contemporary perspectives, this analysis aims to offer valuable views on the micro and macro impacts inflation could bring.

Should banks face criminal prosecution for breaches of Money Laundering Regulations or are civil fines effective. Analysis of the significance of the first ever criminal conviction of a bank (NatWest) for breaches of the Money Laundering Regulations

This paper uses the rare opportunity of the first ever criminal conviction in the UK of a bank for breaches of AML Regulations (NatWest) to examine the AML framework. The article investigates whether the current framework and enforcement are working in addressing the breaches. The article considers the significance of this criminal prosecution in relation to cases where civil fines were imposed, such as in the case of HSBC in 2021. In doing so, the article considers the reasons why the civil fine approach has been a preferred choice for the regulator and examines the reluctance to criminally prosecute banks. This paper takes a distinctive approach to the AML discussion as it focuses on a discussion of the novel aspect of the first ever criminal conviction of a bank in the UK, for breaches of their AML obligations under the Regulations. Additionally, it considers the effectiveness of a criminal prosecution in these circumstances as well as the impact of a criminal conviction on a Bank, not only on its reputation but also on the Banks’ willingness to improve their AML compliance systems and procedures. Furthermore, this paper discusses the popular civil fine approach to breaches of AML onligations, which is in this paper demonstrated by a discussion of a record-breaking civil fine imposed on HSBC by the same regulator (FCA), in the same year as the conviction of NatWest has taken place.

Cost stickiness in the Italian Mutual Banks and comparison among Less Significant Banks

This study investigates cost stickiness in the Italian banking system, with a specific focus on Less Significant (LS) banks, including Mutual Banks (MBs), during the period 2006-2019. The research seeks to identify whether LS banks exhibit asymmetric cost behavior, particularly in response to income and credit risk level variations. Utilizing a unique dataset of 5,446 observations and applying econometric models adapted from the seminal work of Anderson et al. (2003), this study provides a novel analysis of cost stickiness within a banking context, an area that has been underexplored in the existing literature. The results reveal significant cost stickiness across all LS banks, with MBs demonstrating more pronounced stickiness than other LS banks. Additionally, the findings show that higher levels of credit risk exacerbate cost stickiness, while greater efficiency mitigates this effect. These insights underscore the importance of tailored cost management strategies in the banking sector, particularly for MBs, and contribute to understanding the unique challenges LS banks face in Italy. The research’s originality lies in its focused examination of cost behavior within a distinct subset of the Italian banking system, providing new perspectives on how smaller, regionally-focused banks manage financial pressures.

The merger of Slice and North East Small Finance Bank: a marriage made in heaven?

Learning outcomes After completion of the case study, the students will be able to explore the challenges involved in growing a business during its early stages inorganically, discuss the challenges faced by start-ups in their quest for growth in an emerging market, investigate the reasons behind the mergers and acquisitions, comprehend the issues in the merger of a start-up and a conventional bank, identify the various possible synergies out of the merger and examine the growth strategies that a troubled start-up such as Slice can follow to survive and expand its business operations. Case overview/synopsis The case study discusses the challenges that Slice, a modern fintech organization, and North East Small Finance Bank (NESFB) face due to the changing business and regulatory environment. After working tirelessly to earn the trust of India’s banking regulator, Slice got the approval for its merger with NESFB. While Slice and NESFB got a new lease of life after the approval of their merger, Rajan Bajaj, founder of Slice, needed to make the merger a success by leveraging on the strength of the combined entity and meeting all the lending and other regulatory requirements applicable to small finance banks. Complexity academic level This case study is suitable for MBA/MS/BBA/BS students. Supplementary materials Teaching notes are available for educators only. Subject code CSS 11: Strategy.

Artificial Intelligence in the Saudi Arabian Banking Sector: Role in Customer Satisfaction and Its Implementation Challenges

The study aimed to examine the impact of artificial intelligence on customer satisfaction and the challenges Saudi Arabian banks face in implementing this cross-cutting technology. The study used a survey design and collected responses from 100 participants, mainly bank customers and bank officials. The result revealed that artificial intelligence (AI) is positively and significantly correlated with customer satisfaction (CS). This suggests that customer satisfaction tends to rise in tandem with the application of AI in banking. The mediation analysis result showed that Ease of Use only mediates 9.82% of the relationship between AI and CS, and it is not statistically significant (β=0.0607 (95% Cl: -.0246, .146), z=1.39, p=0.163. The study provides practical insights for Saudi Arabian banks, highlighting the need to enhance the adoption of AI to promote customer satisfaction. It also outlines frameworks for minimizing challenges and barriers against the implementation of AI, including promoting data security and customer privacy.

Is There Gap between Operating Performance of Systemically Important and Non-Systemically Important Banks in China?--Empirical Study based on Public Panel Data after Release of List

On September 22, 2023, the People’s Bank of China (PBOC) and the State Administration for Financial Regulation (SAFS) released the latest list of China Systemically Important Banks (D-SIBs). This study aims to analyze whether there is a gap in operational performance between (D-SIBs) and (D-SIBs) under additional regulation. The research method uses independent sample t-tests in statistics and the AHP_DEA model for financial bank operational performance. The research results indicate that there are differences in the operational performance of systemically important banks and non-systemically important banks in certain indicators. systemically important banks have a larger share in the entire banking system, and systemically important banks face more regulatory constraints than non-systemically important banks. This makes the cost of capital restructuring for systemically important banks higher, thereby reducing the speed of capital restructuring. However, further analysis indicates that there is no significant difference in operational performance and risk control between banks with systemic importance and nonsystemic influence. In view of this, systemically important banks must invest in technology and innovation to improve operational efficiency.

Group lending as a mechanism for self-insuring default risk

AbstractWe show that banks can provide loans at low costs to high-risk borrowers in the form of a group lending contract in which all members are jointly liable for their loans. By providing such contracts borrowers self-insure against some of the default risk the bank faces. We determine the optimal group size in a competitive banking system and find that it is reasonably small and borrowers internalize an increasing fraction of the risk the higher their risks are.

Meeting Targets in Competitive Product Markets

ABSTRACTWe show that public banks face negative stock return jumps after missing their earnings per share (EPS) targets, and theoretically and quantitatively link these jumps to bunching behavior in the EPS surprise distribution. Bunching banks cut deposit rates to meet their targets, but do so at the expense of deposit outflows and franchise value losses. Local competitors, including private banks unexposed to capital market pressure, increase deposit rates, compensating depositors for switching. Our results provide new evidence that performance targeting incentives can affect consumer product prices, and suggest that competition may provide a check on public firms' targeting efforts.

Bank Systemic Risk in Indonesia

Banks are the primary participants and play a crucial role in the financial systems of most economies, including Indonesia. Banks face systemic risk because of their dynamic structure and the complex economic environment in which they operate. This study aims to measure the systemic risk in the Indonesian banking industry. This study employs quarterly data from 2010 to 2022 for 39 banks listed on the Indonesian stock exchange. In order to obtain the systemic risk index, this study uses the approach of conditional value at risk (CoVar) as well as marginal expected shortfall (MES).

A bankszabályozás lehetőségei és korlátai az endogén pénzelmélet keretében

The article questions whether the current system of bank regulation can guarantee that banks are subject to a hard budget constraint. We use the framework of post-­Keynesian endogenous money theory. Banks deposit loans in companies’ bank accounts, and no external source is needed for the transaction, so banks can in principle create an unlimited amount of money if there is a demand for credit. However, banks’ ability to create money is limited by a number of factors. Using János Kornai’s concept of a soft budget constraint we analyze the factors that cause inherently soft budget constraints for banks. We point out that neither monetary policy, nor the profit goals of banks, nor the banks’ internal risk management practices would guarantee that banks face a hard budget constraint. This must be imposed on them by an external factor, the banking regulation. However, the current system of banking regulation is not well suited to do this, so the soft budget constraint is inherent to banking. This contributes to the fact that banking crises are natural part of the financial system.