Banking Crisis Research Articles

TOPLIČKA PRIVREDNA BANKA ‒ PROKUPLjE

The lack of capital for crediting the economy and the population in the Kingdom og SHS in 1923 led to the establishment of new financial institutions during the following year. Among them was the Commercial bank of Toplica in Prokuplje. The main founders of this institution were People’s deputies of the Radical Party. Even before the Great War, ther were a lot of banks in Serbia whose founders and main shareholders were from the world of politics. It was known which political party belonged to which bank, and they were places used by the parties to win over voters.In the period from its foundation to 1930, Commercial bank of Toplica operated successfully and brought regular dividends to its sharegolders. At the end of the third decade of the 20th century, there was a noticeable decline in the volume of bussiness, and with the outbreak of the banking crisis in the Kingdom of Yugoslavija in 1931, the bussiness of this institution is unknown. Most likely, its was formally engaged in business, but since its did not request protection, its had no problems with the payment of savings deposits. With the cange in the social system after WWII, Commercial bank of Toplica officially ceased to exist because its liquidation was started.

Bank crisis management and resolution after SVB and Credit Suisse: Perspectives from India and the European Union

AbstractThe March 2023 bank failures of Silicon Valley Bank, Signature, and Credit Suisse, which caused turmoil in financial markets and led to regulatory and central bank intervention, revived the debate about the effectiveness of the bank crisis management, resolution, and deposit insurance legal framework established after the Global Financial Crisis. Although the March 2023 events did not escalate into a full‐blown financial crisis, they drew attention to certain areas of the current framework, where improvements may be needed. These areas include the need for financial regulation and supervision to focus more on small‐ and medium‐sized banks as potential sources of systemic market events; to review the adequacy of the current deposit insurance regime and the treatment of uninsured deposits; and to provide more clarity about the order of creditor claims in case of bank resolution/insolvency. This article reviews the events of March 2023 and the key lessons from these events and discusses how these lessons could shape the frameworks for bank crisis management and resolution in India and the European Union. The two jurisdictions are in the process of updating their laws in this area, and the March 2023 events could influence the relevant decisions.

Analysis of financial services and recent turbulence in the USA banking system

Very recently, the three USA banks that failed this year 2023, Silicon Valley Bank (SVB), First Republic Bank (FRB) and Signature Bank, accounted for 2.4% of all assets in the banking sector. Still, most economists expect a recession in the second half of this year. They estimate the USA Fed’s high interest rates eventually will be felt more profoundly by consumers and businesses. A significant number of steps have been taken by the federal government to boost confidence in the U.S. financial system appears to have contained a potential banking crisis after the collapse of Silicon Valley Bank and Signature Bank. However, turbulence remains over possible spillover effects. It forecasts global finance from increased scrutiny by U.S. regulators and raises questions about the fitness of banks, financial markets around the world (Graeme. Sipa, March 15, 2023). Risk factors imposed on regulators, politicians and the media for confusing the public, supply chain disruptions about the safety of the USA banks and carried out that conditions might have worsened (Hugh. Son, May 06, 2023). The purpose of this paper is to get a better understanding of the turmoil that has affected the U.S. banking system for this year. While the main objective is to analyze the crisis as a whole, which affected several banks as stated previously, an emphasis will be placed on the Silicon Valley Bank (SVB).

Activities of banking institutions on the financial market of Ukraine

The subject of the research is the theoretical, methodological and practical principles of the activity of banking institutions in the financial market of Ukraine. The purpose of the article is to study of the peculiarities of the activity of banking institutions on the financial market of Ukraine in modern conditions. Method or methodology of research. In order to solve the set tasks in the article, a set of methods of scientific knowledge was used, which made it possible to realize the conceptual unity of scientific research. The system method, the method of comparison, analysis, scientific abstraction and generalization is applied. Results of the article. The article examines the peculiarities of banking institutions in the financial market of Ukraine. Factors influencing the development and activity of banking institutions are systematized. The need for prompt response and adaptation of banking institutions to changes in the dynamic external environment for their successful activity was determined. The dynamics of the main activity indicators of Ukrainian banks for 2013–2022 were studied and analyzed. The dynamics of revenues, expenses, and financial results of Ukrainian banks were considered. It is noted that the profitability of assets and the profitability of banks' capital are important indicators that testify to the effectiveness of banking institutions in the financial market of Ukraine, their dynamics during the analyzed period were considered and relevant conclusions were drawn. Field of application of results. The results of the research can be used by banking institutions in order to optimize their activities. Conclusions. Banking institutions occupy an important place in the financial market of Ukraine. The study of the latest trends in indicators of the activity of banking institutions in Ukraine shows that during the analyzed period the number of banks is constantly decreasing. In addition, the banking crisis, which was observed in the period 2014–2017, was noticeable on the activity of banks. Also, the trend towards a decrease in the share of bank assets in GDP is characteristic of the modern banking system. Therefore, taking into account the difficult times of functioning of banks in Ukraine, it is necessary to take a set of measures to increase the efficiency of their activities on the financial market.

Islamic Banks after the 2008 Crisis: Symptoms of the Second Round Crisis and Performance of Sharia Commercial Banks during the Period 2012-2017

The Islamic banking system has long been believed to possess resilience in the face of crises, some even asserting its resistance to such challenges. To validate the aforementioned notion, an analysis of the efficiency performance of Sharia banking is conducted after the occurrence of what is referred to as the Second Round Crisis. This is undertaken due to the discovery that the impact of a crisis might not necessarily be felt during its onset, but rather after its passing. The research case study is Sharia Commercial Banks in Indonesia during the period 2012-2017. The research employs a parametric approach, namely the Stochastic Frontier Analysis Panel (SFA) Greene's approach (2005) to examine the data. The research found that all examined samples experienced a decrease in efficiency in the year 2014. The data also reveal an increase in Non-Performing Financing (NPF) and a decrease in Return on Assets (ROA) during the same period. These findings reveal the presence of a second-round crisis phenomenon affecting the Sharia Commercial Banks in this year. Following this period, there was a gradual improvement in both efficiency and other ratios. In conclusion, it can be inferred that Sharia banks, particularly in Indonesia, are not resistant to crises.

Understanding Systemic Risk Dynamics and Economic Growth: Evidence from the Turkish Banking System

The banking crisis experienced at the beginning of 2023 in the aftermath of the global 2008 crisis served as a stark reminder of the importance of systemic risk once again across the world. This study examines the dynamics of systemic risk in the Turkish banking system and its impact on sustainable economic growth between the period of 2007 and 2022. Through the Component Expected Shortfall (CES) method and quantile spillover analysis, private banks, such as Garanti Bank (GARAN), Akbank (AKBNK), İş Bank (ISCTR), and Yapı ve Kredi Bank (YKBNK), are identified as major sources of systemic risk. The analysis reveals a high level of interconnectedness among the banks during market downturns, with TSKB, Vakıfbank (VAKBNK), İş Bank (ISCTR), Halk Bank (HALKB), Akbank (AKBNK), Yapı ve Kredi Bank (YKBNK), and Garanti Bank (GARAN) serving as net risk transmitters, while QNB Finansbank (QNBFB), ICBC Turkey Bank (ICBCT), Şekerbank (SKBNK), GSD Holding (GSD), and Albaraka Türk (ALBRK) act as net risk receivers. Employing the Markov switching VAR (MS-VAR) model, the study finds that increased systemic risk significantly reduces economic growth during heightened financial periods. These findings underscore the importance of monitoring systemic risks and implementing proactive measures in the banking sector. The policy implications highlight the requirement for regulators and policymakers to prioritize systemic risk management. Close monitoring helps detect weaknesses and imbalances that could put financial stability at risk. Timely implementation of policies and rules is crucial in the prevention of the accumulation of systemic risks and in dealing with the existing hazards. Such measures protect the stability of the banking sector and mitigate potential negative effects on the broader economy.

Optimal capital adequacy ratios for banks

In this paper, we analyse the appropriate capital adequacy ratio for banks from a socio-economic perspective. More equity capital in banks can contribute to financial stability by reducing the risk of costly banking crises, but lending may become more expensive if banks are required finance their assets with more equity. When assessing optimal capital adequacy ratios, the economic costs of more expensive credit must therefore be weighed against the benefits of fewer and less costly banking crises. Importantly, we compute optimal capital adequacy ratios for Norway which allows us to take into account recent changes in bank capital regulation. The results indicate that banks should have a Common Equity Tier 1 (CET1) ratio of between 12 and 19 percent. The current CET1 ratio of around 18 percent in our sample is in line with this. Our estimates are consistent with results from international studies, but estimates vary considerably with changes in uncertain assumptions. However, banks’ capital needs during the Nordic banking crisis in the beginning of the 1990s show that such estimates are not unreasonable.

Creditor Priority in European Bank Insolvency Law: Financial Stability and the Hierarchy of Claims by Sjur Swensen Ellingsæter [Hart Publishing, London, 2023, 280pp, ISBN: 9781509953653, £85.00 (h/bk)

Creditor Priority in European Bank Insolvency Law: Financial Stability and the Hierarchy of Claims by Sjur Swensen Ellingsæter [Hart Publishing, London, 2023, 280pp, ISBN: 9781509953653, £85.00 (h/bk)

The green energy transition and the 2023 Banking Crisis

This study examines the stock price reactions of environmentally responsible stocks during the onset of the 2023 banking crisis, triggered by the collapse of Silicon Valley Bank (SVB). Our findings indicate that stocks poised to benefit from the shift to a low-carbon economy underperformed during the 2023 crisis. This suggests that investors anticipate a slowdown in climate tech development due to distress in the banking sector. Our results underscore the significance of considering not only the influence of the climate crisis on financial stability, but also the pivotal role that financial stability plays in ensuring a successful energy transition.

Liquidity regulations, bank lending and fire-sale risk

We examine whether U.S. banks subject to the Liquidity Coverage Ratio (LCR) reduce lending (an unintended consequence) and/or become more resilient to liquidity shocks, as intended by regulators. We find that LCR banks tighten lending standards, and reduce liquidity creation that occurs mainly through lower lending relative to non-LCR banks. However, covered banks also contribute less to fire-sale externalities relative to exempt banks. For LCR banks, we estimate that the total after-tax benefits of reduced fire-sale risk (net of the costs associated with foregone lending) exceed $50 billion from 2013Q2 to 2017, mostly accruing to the largest LCR banks. Non-LCR regulations enacted during our sample period cannot fully account for these findings. For the banking sector as a whole, lending migrates to smaller, non-LCR banks so that lending shares increase but fire-sale risk does not decrease. Our results highlight the trade-off between liquidity creation and resiliency arising from liquidity regulations that underlie the debate on whether the LCR should be extended following the banking crisis of March 2023.

Banking crises and exporter dynamics

ABSTRACT This article examines the effects of systemic banking crises on exporter dynamics using exporter data at the country-industry level from the Exporter Dynamics Database (EDD). By considering industries with varying levels of external finance dependence, we are able to capture the heterogeneous impacts of banking crises. Our results demonstrate that banking crises lead to a decrease in the number of successful market entries, a reduction in export market concentration, and a slowdown in both product dynamics and destination dynamics. These findings are robust when accounting for other financial crises, industry characteristics, and potential endogeneity concerns. Overall, our empirical evidence confirms the detrimental impact of banking crises on the extensive margin of exports.

Shocking resilience? Effects of extreme events on constitutional compliance

Abstract It is often argued that governments take advantage of extreme events to expand their power to the detriment of the political opposition and citizens at large. Violations of constitutional constraints are a clear indication of such opportunistic behaviour. We study whether natural disasters, conflicts and other extreme events systematically diminish governments' compliance with constitutional constraints. Our results indicate that governments are most likely to overstep their competences or disregard their responsibilities during civil conflicts, at the onset of international sanctions or following successful coups d’état. Interestingly, Cold War interventions by the United States that installed or supported a political leader led to a decrease in constitutional compliance in the target country, whereas Soviet interventions had no such effect. In contrast, banking crises and natural disasters, which threaten societies at large, but not necessarily the political elite, do not cause a significant decline in constitutional compliance.

Crisis and Structural Changes in Banking

Financial issues have always been an important issue of concern to the whole world. This year's Nobel Prize in Economic Sciences was also awarded to three scientists who studied the financial crisis in the 19th century. This article will take the 2008 financial crisis as the research object, and analyze the causes, Consequences and Changes of the financial crisis. In terms of causes, it focuses on the impact of financial credit products such as subprime mortgage loans and CDS brought about by the loose loan policy of the United States on the stability of the US financial market. Secondly, in terms of consequences, it will focus on the bankruptcy of Lehman Brothers, the fourth largest investment bank in the United States at that time, the bankruptcy of many other companies, and the high unemployment rate brought about by the company's bankruptcy. Finally, in terms of changes, the government introduced the bills led by the Dodd-Frank Act and Basel III to deal with the financial crisis and prevent future financial market problems.

Digital Media Coverage of the 2017–2018 Banking Crisis in Ghana: A Framing Analysis

The literature on news framing largely focuses on political news. When Ghana experienced what came to be known as the “banking crisis” in 2017/2018, there was wide media coverage of the issues that came in its wake and that provided an avenue for studies on the framing of a financial phenomenon. This paper examines the online media framing of this crisis through the quantitative content analysis of 97 news articles from two online news portals: Myjoyonline and Graphiconline, which are private, and state owned. The comparative analysis of these two websites showed the predominance of the attribution of responsibility and conflict frames in their reportage, reflecting the infant stage of digital financial journalism in Ghana. Notwithstanding, the study revealed differences in how the websites used the news frames in some significant respects.

Merger of Indian Banks

In this study, we look at how merging Indian public sector banks has affected their ability to work together more efficiently. The purpose of this study is to determine whether this merger would really speed up India's economic development. Bank merger advantages have been analysed using many metrics, including CASA ratio, CRAR ratio, CET I ratio, and advance and deposit size. Net nonperforming asset ratios have also been monitored in order to assess asset quality. The consolidation of 10 public sector banks into 4 is an attempt to achieve size and geographic diversity via consolidation. The merger has unquestionably enhanced the merged entity's size, which has resulted in advantages such as lower operating costs and larger money placed by a greater number of consumers. Insolvent banks have been able to strengthen their financial footing and stability as a result of mergers. Capital has been injected into struggling state-owned banks, which will increase lending and buoy the economy.

Blockchain technology as a potential risk source and a risk mitigator: US reflections and outlook

Cryptocurrency, its risks, its volatility, and recent collapses of crypto-related firms have been splashed across the news for years. It is therefore unsurprising that recent developments surrounding disruption in the US banking system have thrust cryptocurrency into the spotlight again, with conventional financial analysts debating the degree to which blockchain-related institutions and products may have contributed to recent bank runs and instability. In the meantime, many US regulators have tended to focus on the potential downsides and risks of blockchain technology, and have recently increased the intensity of their enforcement activities against crypto market participants, often premised on decades-old legislation and case law. In the context of these broad trends, an underexplored idea is that greater integration of blockchain technology into the mainstream financial system could actually reduce bank run risk. If that is right, certain US regulators should modulate their approach and devote further resources to fostering a healthy adoption of blockchain technology within the financial system. Against that backdrop, this paper explores the potential capacity of blockchain technology to curtail widespread risk in the financial system, suggests that blockchain technology indeed has significant power to act as a risk mitigant, offers some practical observations as to how blockchain adoption could improve the risk profile of financial systems, and concludes that the promise of blockchain technology in this regard should spur US regulators to foster and promote the growth of blockchain.

Time-varying Z-score measures for bank insolvency risk: Best practice

We evaluate several alternative approaches to constructing time-varying Z-scores as bank insolvency risk measures. Focusing on US and European banks during the financial crisis of 2007–2008, we compare the different measures considered using a range of alternative testing procedures. For both US and European data, Z-scores computed with the exponentially weighted moments method are shown to be preferable to those computed with the more commonly used moving moments approach. Generally, or if only simple moving moments are used, Z-scores computed with current values of the capital-asset ratio are recommended.

In search of a Tawney Moment: Income inequality, financial crisis and the mass media in the UK and the USA

Has rising income inequality become a scandalous social problem as the English ethical socialist R. H. Tawney anticipated in an earlier era? We examine the salience and framing of income inequality within major UK and US newspapers over the period 1990–2015. Specifically, this includes the global banking crisis of 2008, which was the most significant financial crisis in capitalist economies since the Great Depression of 1929. Did this event trigger a public outcry? We divide the overall search into a full corpus for quantitative analysis of media salience and a smaller corpus for in-depth qualitative analysis of media frames. We find that media coverage of income inequality increased across the period in both countries and especially after 2008. With this increase, there is a shift in frame prevalence, with pre-2008 frames focusing on conceptualising rising income inequality while post-2008 frames focus on managing rising inequality (through interventions, policies and identifying scale of solutions needed). This shift is accompanied by a more polarised sentiment on income inequality, an increase in moralising language and a more balanced political slant. The proposed ‘solutions’ become absorbed within established repertoires offered by the political right and left, limiting the emergence of a Tawney Moment. Consequently, the rise in income inequality has not generated the kind of scandalising public outcry that Tawney would expect. We conclude by examining the possible reasons for the lack of outrage in the mass media.

From Hero to Zero: The case of Silicon Valley Bank

This paper examines the factors contributing to the rapid collapse of Silicon Valley Bank, once regarded as one of the best banks. We show that the bank invested heavily in debt securities during a period of low interest rates, and the subsequent surge in interest rates in 2022 resulted in significant unrealized losses. Additionally, the bank's deposits were heavily concentrated among a small group of venture capitalists, which increased the likelihood of a bank run. Furthermore, the bank held less equity capital and had an inefficient risk management system, exacerbating the impact of the risk. Overall, the mismanagement of assets and liabilities led to the bank’s failure.

The revision of the banking crisis management and deposit insurance framework in Europe: Why is it important to enhance flexibility?

The Crisis Management and Deposit Insurance Framework - which came into force about ten years ago - is under review by the European Commission. The need for its revision stems from the identification of certain shortcomings and inconsistencies that have emerged in its application in Europe and especially in Italy. The central topics of the debate focus on how resolution should be applied and on possible innovations regarding the tools that can be used to manage the crises of small and medium-sized banks, which until now have been managed on the basis of procedures and tools decided at the national level. The aim of this paper is to investigate the areas subject to reform, using as an evaluation parameter the objective of increasing the flexibility of the framework, as this is considered a fundamental requirement to ensure the full effectiveness of the overall banking crisis management system