Bank Rate Research Articles

Data driven cost-sensitive boosted tree for interpretable banking systemic risk prediction

Systemic risk (SR) in the banking sector poses a significant threat to both the financial system and the real economy. Its inherent characteristics of nonlinearity, non-equilibrium, and interconnectedness make it challenging to analyze using conventional statistical methods. In this paper, a cost-sensitive gradient boosting tree algorithm, FLXGBoost, is proposed for predicting SR. FLXGBoost considers the boosted tree, XGBoost as the base framework, boosting trees as the fundamental framework, guaranteeing the robustness of SR prediction. Additionally, to tackle the challenge of extreme data imbalance prevalent in SR prediction tasks, a cost-aware loss function, focal loss, is embedded into the boosted tree to enable FLXGBoost a risk-aware fashion. Moreover, a tree-derived interpretable algorithm SHAP is incorporated into this cost-sensitive solution, making FLXGBoost an accurate and interpretable risk-aware model. Experimental results on a financial risk prediction dataset pertaining to banking SR evince the capacity of FLXGBoost to significantly reduce the misclassification rate of risk banks, thereby mitigating substantial losses attributed to erroneous predictions of risky scenarios. Moreover, compared with classical imbalanced machine learning-based SR prediction approaches, the diverse evaluation metrics of FLXGBoost show that it is a competitive solution for accurate SR prediction. Besides, the explanatory analysis further demonstrates that FLXGBoost is a promising solution to address the issue of biased predictions in imbalanced banking SR in the interpretation perspective.

Discrimination and health outcomes in England's black communities amid the cost-of-living crisis: evaluating the role of inflation and Bank Rates

ABSTRACT This study utilised longitudinal data from Black History Month events in London from 2021 to 2023. Novel findings revealed that increased inflation and Bank Rates, related to the cost-of-living crisis, were associated with greater discrimination and deteriorations in both general and mental health for Black individuals. Moreover, it was found that during the cost-of-living crisis period, i.e. 2022–2023, discrimination was more adversely related to general and mental health deterioration compared to the period before the cost-of-living crisis, i.e. 2021. In addition, women, non-native individuals, non-heterosexual individuals, the unemployed, economically inactive individuals, those with lower educational attainment, and older individuals experienced higher levels of discrimination and reduced general and mental health compared to reference groups. The findings of the study contribute to the literature by demonstrating the intertwined associations of macroeconomic deteriorations and discrimination with the health of the Black community, and its subgroup differences, providing a basis for targeted policies.

Measuring the U.S. monetary noise shocks

AbstractAgents' beliefs regarding future monetary policy changes influence their current decisions. However, these expectations may not always materialize in the future. This study shows that the monetary fundamental shocks (exogenous changes consistent with expectations) stabilize output and inflation, while the noise shocks (biased beliefs that fail to be realized in the future) increase economic fluctuations. Moreover, factors that amplify financial frictions—the spread between the capital return of entrepreneurs and the risk‐free interest rate of a central bank—can increase anticipation effects associated with these two types of monetary policy shocks.

A BRIEF ANALYSIS OF THE BANKING INDUSTRY IN INDIA

This research paper explores the evolution and current dynamics of the Indian banking sector, focusing on the role of digital transformation and the performance of public, private, and foreign banks. Focusing mainly on the decadal data from 2013 to 2023, the study analyzes the growth of bank assets, the Credit-Deposit (C-D) ratio, and the penetration rate of online banking. The findings demonstrate that the banking sector in India has undergone significant changes, with technological advancements driving increased efficiency and customer reach. Public sector banks faced challenges due to non-performing assets (NPAs), while private sector banks showed robust asset growth, recovering quickly from the economic impact of the COVID-19 pandemic. Foreign banks also displayed resilience, with steady growth in assets. The research highlights the critical role of digital banking in modern banking services, contributing to financial inclusion and economic growth. KEY WORDS: public, private, foreign, assets, Credit-Deposit ratio, online banking

An integrated approach for multi-objective differential algorithm based event constrained optimal power flow for power system resiliency enhancement

ABSTRACT Due to climatic changes, the probability of occurrence and the intensity of extreme weather events increase day by day which leads to power outages. The probability of failure events is calculated using Monte Carlo simulation technique which is used to identify the most frequent failure events. The least eigenvalues of the inverse reduced Jacobian matrix decide the sensitive buses for load shedding using V-Q sensitivity analysis. This work presents the multi-objective differential evolution (MODE) algorithm for solving resilient constrained optimal power flow (RCOPF) in a deregulated power system. The control variables namely the real power of generators in a base case and under event, generator bus voltage magnitude, the real and reactive power demand of the selected load buses, tap settings and capacitor bank ratings. This algorithm is validated in IEEE 30 bus test system and the Indian 62 bus utility test system to show the effectiveness in four different cases including tie lines and distributed generation.

Macroeconomic Impact of Value Added Tax in Nepal: A 2SLS and 3SLS Approach

The study’s aim to evaluate the impact of VAT on macroeconomic variables (TCON, GDP, Import (M) and GOVEXP) and the reverse effects of Macro variables on VAT. This study included macroeconomic development variables such as GDP, GDP (-1), VAT, remittance (REM), total consumption (TCON), export (X), import (M), gross fixed capital formation (GFCF), bank rate (BRATE), trade openness (TOPEN), government expenditure (GOVEXP) and one period lagged government expenditure (GOVEXP (-1)). However, this study has been enhanced over previous analyses by incorporating 45 years of nominal data from 1974/1975 to 2018/19. It examines the connection between VAT and significant macroeconomic variables such as GDP, GDP (-1), REM TCON, X, M, GFCF, BRATE, TOPEN, GOVEXP and GOVEXP (-1). To address the challenges of simultaneous equation bias and inconsistent findings, this study utilized the two-stage least squares (2SLS) and three-stage least squares (3SLS) methodologies to assess the impact of VAT on macroeconomic variables. The findings of the study are that value-added tax (VAT) negatively impacts TCON. VAT positively and significantly impacts on GDP, import(M), and GOVEXP. The study revealed that while TOPEN negatively affected Nepal’s GDP, GOVEXP, GFCF, and X had a significant and positive influence on GDP.

Review of The Financial Health of Bank During Increasing Foreclosed Assets and The Application of Analytic Hierarchy Process (AHP) in Selecting Strategies to Reduce Them

PT Bank Laju International Tbk (the Bank) has struggled with its increased foreclosed assets, particularly those originating from mortgage loans, which could affect its financial health. The research assessed Bank’s financial health using Risk Based Bank Rating (RBBR) framework by analysing key financial ratios and investigating the root causes of rising foreclosed assets through Fishbone and Pareto analysis. Key factors include customer income instability, slow progress in selling foreclosed assets, and lack of insurance protection during economic downturns. To select effective strategies for managing foreclosed assets, the research utilized Analytic Hierarchy Process (AHP), a Multi-Criteria Decision-Making method, to evaluate multiple alternatives based on various criteria, which were derived from Focus Group Discussion (FGD) with Bank’s officers, who directly involved in mortgage loans and foreclosed assets activities, also reference with Bank’s SWOT analysis. The research evaluated three alternatives strategy: Protection Insurance for Customer’s Mortgage Loans. Actively Partnering with property agents to accelerate sale of foreclosed assets as-is. Collaborating with property agents to renovate foreclosed assets. The result showed that despite the increase in foreclosed assets, the Bank remains financially sound, with key financial ratios within acceptable regulatory limits. AHP analysis revealed that alternative 1 stands in first place to be prioritized, followed by alternative 2, however between both alternatives indicates a very small difference in prioritization weight, which means that both strategies are important to be executed and prioritized. Proposal to implement both alternatives in parallel would be a very effective strategy, where alternative 1 conduct as Preventive Strategy in preventing customer’s mortgage loans defaults, while alternative 2 as Corrective Strategy in lowering foreclosed assets volume. Alternative 3 acts as a complement strategy, where renovating foreclosed assets could facilitate quicker sales, however it’ll take longer time for renovation itself.

Firm Characteristics, Interest Rate And Financial Performance Of Microfinance Banks In Kenya

Microfinance Banks gives the forte to improve the economic activity of low-income individuals and eliminate poverty, resulting in economic progress. However, microfinance's Banks financial performance in Kenya has declined over time. The objective of this study is to investigate firm characteristics, interest rate and financial performance of microfinance banks in Kenya. The study was grounded on buffer capital, efficiency structure and interest rate parity theories. The study research methodology rested on positivism research philosophy. Research design was explanatory non-experimental design. Secondary panel data was utilized. 13 microfinance banks in Kenya were target. Information was gathered using secondary data sources from microfinance banks accounting report from 2016 to 2022. Data was analysed using descriptive and inferential statistics. The study used multiple regressions and Pearson’s Product Moment Correlation analysis. All ethical considerations were appropriately observed. Findings indicated that adequacy of capital exerts a notable and direct effect on financial performance, underscoring the importance for microfinance banks in Kenya to prioritize maintaining sufficient capital levels to support their overall stability and financial outcomes. Conversely, quality of asset demonstrates a significant and adverse influence on performance financially, highlighting the need for microfinance banks to enhance their credit assessment processes to ensure the quality of their loan portfolios. The research revealed that efficiency of management has an insignificant direct influence on financial performance of Microfinance banks. To address this, microfinance banks are advised to invest in comprehensive management training programs and capacitybuilding initiatives to improve operational effectiveness and decision-making processes. Earning ability, on the other hand, exhibits a considerable and direct influence on financial performance. Microfinance banks should thus focus on continuous innovation of their products and services to enhance their earning potential and overall financial outcomes. Liquidity levels exhibit an insignificant and inverse effect on the financial performance outcomes. To mitigate potential risks, microfinance banks should establish comprehensive policies and procedures to monitor and manage liquidity effectively. Interestingly, the study reveals that the connection concerning firm-level attributes and financial outcomes for microfinance institutions in Kenya does not appear to be subject to a substantial moderating influence from interest rate movements. Therefore, the survey recommends that microfinance banks concentrate on improving governance structures, operational efficiency, risk management practices, and asset quality. This can be achieved through capacity-building programs, training initiatives, and adopting best practices from successful microfinance institutions. Strengthening these firm characteristics will enable microfinance banks to enhance their financial performance, irrespective of interest rate fluctuations

Forecasting Tingkat Kesehatan dan Ketahanan Perbankan di Indonesia

The number of commercial banks in Indonesia after the 2008 global crisis declined. The decrease in this number was caused by mergers, consolidations, acquisitions, integrations and conversions in the context of forming a resilient national banking industry structure. To ensure a stable banking sector, these banks must be evaluated through a Risk-based Bank Rating. When the 2008 global crisis economic shock and the COVID-19 pandemic occurred, the banking intermediary function was disrupted. In these conditions, the financial performance of banks also experienced a decline. This study aimed to assess the bank rating and resilience of banks in 2008-2020, forecast the bank rating and resilience of banks in Indonesia in 2021-2030 and analyze the effect of bank rating on bank resilience. This study used secondary data, that is a annual financial reports published by the Financial Services Authority. The data was analysed by ARIMA and panel data regression. The results showed that the bank rating and resilience of commercial banks declined during the economic shocks of the 2008 global crisis and the 2020 Covid pandemic. It is predicted that the resilience of commercial banks will increase in 2021-2030. Earnings as measured by ROA had a positive effect on bank resilience. Credit risk (NPL) had a negative effect on resilience, while liquidity risk (LDR) showed a positive effect on the resilience of commercial banks in Indonesia. GCG and Capital had no effect on bank resilience

REGULATORY POLICY OF THE NATIONAL BANK OF UKRAINE: PROBLEMS AND WAYS TO IMPROVE

The article notes that the National Bank of Ukraine (NBU) must ensure price stability, high and stable level of economic development and optimal employment. Conceptually agreeing with this approach, the authors prove that the mechanism for its implementation does not ensure the fulfillment of the NBU mission. Analyzing changes in the banking sector of Ukraine over the last 2.5 years, the authors emphasize that due to the implementation of insufficiently balanced NBU regulatory policy, the volume of banks' investments in NBU certificates of deposit increased almost fivefold –– from UAH 95 billion. at the beginning of 2022 to UAH 456 billion at the end of the year. As a result of such an unsuccessful policy and contrary to economic logic, the NBU generated a huge positive liquidity balance in the banking sector, while the real sector of the economy suffers from a lack of funds Undoubtedly, such regulatory actions, which are "unique" in modern economic theory and historical practice, cannot stand criticism and should be rethought and significantly revised. The reasons and consequences of such an ineffective regulatory policy of the NBU are analyzed and important conceptual ideas aimed at improving bank management are suggested. According to the formulated conclusions, it is necessary to create an effective mechanism of credit monitoring in Ukraine. The activity of which should be devoted to assessing economically justified levels of different banking rates and analyzing innovations in the ideology of banking management that are used in other countries where central banks operate very successfully.

Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks

This study investigates the effect of financial metrics on risk indicators in Nigerian deposit money banks. The analysis employs yearly time series data spanning from 2007 to 2022, acquired from the Exchange Group PLC. Descriptive statistics, panel unit root tests, Hausman tests, and Panel Ordinary Least Squares (OLS) procedures were used at a 95% confidence interval. The study utilized secondary data sourced from the Exchange Group PLC database. The R-squared (0.564390) and Adjusted R-squared (0.540629) values indicate that the models have strong explanatory power. The results show that all variables are stationary at their levels (I(0)). The primary financial metrics influencing risk indicators among deposit money banks in Nigeria are revenue growth, net interest margin, and earnings per share. It was recommended that banks should implement effective risk management systems that can handle increased complexity and scale of operations, and regularly update them, leveraging blockchain technology for decentralized risk management as it relates to revenue growth rate of banks. Maintain a healthy net interest margin through effective risk management practices and internal controls, and utilize this strength to invest in risk mitigation measures, introducing incentive programs to encourage employee involvement in risk management. Conduct regular financial reviews and audits to ensure accurate earnings reporting and risk identification, utilizing AI-powered tools for earnings analysis to identify anomalies and potential risks. Prioritize prudent lending practices and effective risk management to maintain financial stability, implementing dynamic adjustments to the debt-to-equity ratio in response to changes in risk detection needs.

INTEREST RATES AND INFLATION AS DETERMINANT FACTORS OF SAVING IN COMMERCIAL BANKS OF NORTH MACEDONIA

This study aims to analyze the effect of the Central Bank of North Macedonia (National Bank), which is in North Macedonia presented by National Central Bank (BI) Rate and inflation rate on the savings rate at commercial banks in North Macedonia by using the analysis tools of autoregressive conditional heteroscedasticity (ARCH) and generalized autoregressive conditional heteroscedasticity (GARCH). The analysis results show that the BI Rate and inflation significantly affect saving rates at commercial banks in North Macedonia. The importance of being a source of investment funds to support development activities can be a consideration for the government to formulate a policy for allocating investment from these savings funds for productive sectors. Practically, it is hoped that the distribution of savings through investment activities can encourage economic growth and increase economic development in North Macedonia.

ANALYSIS OF BUBBLES ASSETS FOR WEIGHTED AVERAGE INTEREST RATES APPLIED TO BANK LOANS

This study examines the existence of the "bubble effect" in the average interest rates of loans applied by banks to various types of loans for consumers. The purpose of this article is the research of the bubble formations in the average interest rates applied by the banks to consumer, housing (home), vehicle, and commercial loan types. This article examines the existence of bubbles in the average loan interest rates of banks in Turkey using the GSADF unit root test developed by Phillips et al. (2015). Bubble assets are analyzed with weekly data for the period June 2019–March 2023. Monte Carlo simulations performed obtained critical values for the GSADF unit root test. The results show that the bubble effect on housing loan interest rates is statistically significant at the 0.05 level. Against this, although the existence of a bubble effect in consumer, vehicle, and commercial loan interest rates has been determined, these bubbles are statistically insignificant.

Deposit Channel of Monetary Policy in European Countries

Abstract This paper focuses on the first link of the monetary transmission mechanism – interest rate channel. It forks on two subchannels: credit vein and deposit vein. We will investigate the second one, i.e. the impact of the discount (also key, reference) rate of a central bank on the deposit policy of commercial banks. Deposit channel is a very rarely treated as a separate line of the monetary policy from the credit channel. On the basis of VAR analysis of monthly data over several-years period on the banking system of Ukraine, Poland, and Montenegro we found out a tendency of the discount rate to impact banks’ deposit rates changes with some lag of time. The tightest liaison between these indicators is observed during the periods of discount rate stability and sloping down. However, sensitivity of banks‘ deposit rates is lost when the discount rate is rapidly increased during the periods of restrictive monetary policy. It was defined that the essential reason for such picture is an extra liquidity of the banking system. On the one hand, it symbolizes the soundness of banking system, while from the other it makes more difficult for a central bank policy to absorb extra liquidity from the market to reduce pressure on prices. The paper contains some thoughts for increasing effectiveness of restrictive monetary policy in such periods.

Do firm expectations respond to monetary policy announcements?

This paper investigates whether UK firms’ price growth expectations respond to the Bank of England (BoE) monetary policy announcements and explores the underlying mechanism. Using microdata from the UK Decision Maker Panel survey, we isolate the exogenous component of the monetary policy decisions by comparing firms’ responses filed before and after BoE announcements. Guided by a model of dispersed information, our analysis suggests that firms respond to monetary policy announcements but are, overall, not as informed and sophisticated as financial market participants. Firms’ price expectations respond to actual interest rate changes, as well as to bank rate changes purged from their systematic component, but not to high-frequency surprises. The left tail of their expected price change distribution is particularly sensitive to monetary policy announcements. Furthermore, we unveil significant non-linear effects, with changes in interest rates of 50 basis points being mostly responsible for revisions in expectations. This implies that the recent tightening cycle was effective in shifting firms’ expectations primarily at its peak when a sequence of consecutive large rate hikes was implemented. We also show that UK news coverage of the BoE’s activities increases following policy rate changes, highlighting the media’s crucial role in shaping public expectations.

Remittance outflow, financial development and macroeconomic indicators: evidence from the UK

Remittances have become a significant component of international capital flows, with millions of migrants sending billions of dollars back to their home countries annually. However, the way these outflows affect macroeconomic variables has not received sufficient attention in the literature, especially in the context of varying levels of financial development. Using time series data from 1987 to 2022 for the United Kingdom, this study examines the macroeconomic effects of remittance outflows and financial development. Our baseline estimation using the Autoregressive Distributed Lag model reveals heterogeneous impacts, as remittance outflows adversely affect economic growth but improve exchange rates. We find remittances do not have a significant effect on inflation or bank rates. The moderating effect of financial development analysis reveals a similar outcome. Our results suggest governments should consider stimulus policies that support investment in productive sectors to improve macroeconomic indicators and facilitate financial inclusion to enhance the adoption of growth strategies that promote remittances.

Dentists' stress level during the COVID-19 pandemic and their opinion on the oral health status of their patients.

"Severe acute respiratory syndrome coronavirus 2" (SARS-CoV-2) is the name of the etiological agent of the pandemic Corona Virus Disease (COVID-19) which was declared on March 11, 2020 by the WHO and which affected all countries of the world, including Romania. Our study aimed to evaluate the psycho-affective implications and economic consequences for dentists in Romania during the COVID-19 (Corona Virus Disease) pandemic state of emergency and their opinion on the patients' oral health impact. A cross-sectional observational and analytical study based on a questionnaire was conducted. Dentists who work in Romania affiliated in 2020 to the Romanian College of Dental Practitioners was the target population. Three hundred and seventy-three dentists participated in this survey. The age of the respondents ranged from 24 to 70. Men and women have the same expectation regarding the lockdown effect of worsening the oral health of the general population (worst, 79.5% of women and 81.3% of men, P=0.8842). The anxiety regarding the bank rates, supplementary investments, risk of COVID-19 infection and exposure to COVID-19 related mass-media information proved to be significantly higher among young dentists.

Consensus credit ratings: a view from banks

While the production of credit ratings has long been limited mainly to rating agencies (CRAs), recent years have seen the growing popularity of consensus credit ratings crowdsourced from banks (i.e., bank ratings). We provide the first comprehensive examination of the properties and informativeness of bank ratings relative to CRA ratings. We find that bank ratings often deviate from CRA ratings, with over 60% of firm-months having different bank and CRA ratings. These deviations contain useful information. Bank ratings improve out-of-sample prediction of defaults and CRA rating revisions and explain the cross-section of credit spreads. However, bank ratings do not improve out-of-sample prediction of credit excess returns, indicating that current prices incorporate bank rating information. Overall our findings suggest that bank ratings are a useful supplement to traditional credit ratings.

Deposit Money Bank Credit and Non-Oil Export in Nigeria

The non-oil sectors play a crucial role in driving in­dustrial transformation and generating foreign exchange for a nation. Therefore, the performance of this sector is influenced by the implementation of policies and programs, as well as the availability of credit facilities from deposit money banks (DMBs). This study examines the relationship between DMBs' credit and non-oil exports in Nigeria from 1986 to 2022. The data is analysed using the bounds test co-integration procedure of Autoregressive Distributed Lag (ARDL). The results indicate that there is a significant (Prob. < 0.05) positive relationship be­tween DMBs' credit and exchange rates. Furthermore, DMBs' lending rate and inflation rate demonstrate a significant nega­tive relationship, while gross fixed capital formation shows an inverse relationship with non-oil exports in Nigeria. The cau­sality test reveals no causality between bank credit to non-oil sectors, exchange rate, and the volume of non-oil exports in Ni­geria. However, there is a unidirectional causality between gross fixed capital formation, the lending rate of banks, the in­flation rate, and non-oil exports in Nigeria. Based on these find­ings, it is recommended that both the government and the monetary authorities make concerted efforts to stabilise the macroeconomic variables and promote growth-oriented programs meant to boost the aim of enhancing the production of locally produced goods in the non-oil sectors of Nigeria. Additionally, the Central Bank of Nigeria should consider re­ducing the bank rate, as this would directly impact other rates within the country.

Study on the Application of Internal Control in the Management of Urban Commercial Banks

In February 2021, Baoshang Bank, whose total asset size had exceeded 500 billion, exited the stage of history with more than 200 billion in unpayable debts. Now look back on its life, from the clouds fell to the bottom. However, there are traces of its causes. Weak supervision of funds, the organizational structure of the organization is a sham, excessive concentration of equity internal governance failure eventually became the key to its demise. Therefore, this paper will take the current situation of rising non‐ performing loan rate of urban commercial banks as the entry point to discuss the importance of internal governance and make suggestions for the establishment of a sound internal control system in urban commercial banks.