Banking Sector Development Research Articles

Competition and Profitability: Impacts on Stability in Chinese Banking

This study contributes to the banking literature by testing the joint impacts of profitability and industry environment on several types of risk (credit risk, liquidity risk, capital risk, and insolvency risk) in a sample of Chinese commercial banks over the period 2003–2015. The results show that a more highly developed banking sector increases the liquidity risk and credit risk of Chinese commercial banks but decreases their capital risk. It is further suggested that profitability may lead to a reduction in credit risk and insolvency risk. The findings from the current study thus have important policy implications in terms of improving stability in the Chinese banking industry.

Globalization, financial development and economic growth: Perils on the environmental sustainability of an emerging economy

The study examines the effects of globalization, financial development, economic growth, and energy consumption on environmental sustainability in India over the period 1980–2015. The novelty of the study is the assessment of environmental sustainability in a single framework encompassing globalization, financial development, and growth effects. Findings reveal that an increased level of globalization and financial development while improving economic performance are inimical to the sustainability of the environment. In the short-run, globalization, economic growth, and increased energy consumption are contributing directly to environmental degradation, while banking sector development is impacting environmental sustainability adversely through the economic growth channel. Given the severity of the findings amidst India’s tryst with economic growth, proactive policies are warranted to encourage adaptation of greener and cleaner technologies in environmentally sustainable areas. This necessitates improved institutional quality encompassing stringent environmental standards, legal systems, property rights, corruption, financial information quality, etc., alongside the provision of incentives and subsidies to manufacturing firms undertaking technological innovations and complying with the environmental standards.

STRATEGIC ANALYSIS OF THE CURRENT SITUATION OF MOROCCAN PARTICIPATORY BANKING SECTOR

The Moroccan participatory banking sector is relatively new, the development and the future of this industry are still uncertain, in this study we tried to analyze from a strategic point of view the current situation of this banking sector in Morocco, several marketing tools have been used, the PEST analysis, the 5 forces of porter as well as the SWOT analysis. The results of our analysis show that the development of the participatory banking sector in Morocco is promising. JEL: M31, Z33, G21 Article visualizations:

Regional financial integration and its impact on banking development: Evidence from Southern African Development Community countries

AbstractThe study investigated the impact of regional financial integration on banking sector development with specific focus on the impact of the Southern African Development Community protocols on trade and finance and investment. A total of 14 countries made up the study sample, and the panel cointegration fully modified ordinary least squares model (FMOLS) alongside the generalized method of moments (GMM) were used to estimate the nature of the impact. Study findings showed that regional integration through the protocol on trade had a positive and significant impact on size and efficiency of the banking sector using the FMOLS estimator. GMM estimations for the same variables were largely insignificant. Study findings also pointed to an improvement in global financial integration indicators as a result of the trade protocol, which in turn also contributed to an increase in the level of monetization of regional financial markets. The finance and investment protocol had a positive and significant impact on private sector credit for both estimators and largely insignificant relationship with broad money. The study also observed the complimentary relationship between institutional quality and social capital in the financial development process indicating the importance of policies that strengthen sound legal systems, protect property rights, and enhance the rule of law.

The relationship between financial development and income inequality in Turkey

Reducing income inequality and enhancing access to financial institutions play a vital role in achieving the Sustainable Development Goal 10, especially in developing countries. While there are studies on the nexus between financial development and economic growth, literature on financial development–income inequality nexus is limited and lack consensus. This paper examined the different dimensions of financial development on income inequality for the period 1990 to 2015 in Turkey. For this purpose, four financial development indices (i.e., overall financial development index, banking sector development index, stock market development index, and bond market development index) were constructed with principal component analysis (PCA). In addition to financial development indicators, the impact of real income, government expenditures, and inflation on income inequality were investigated using the ARDL bound testing procedure. The results showed that increasing real income and government expenditures reduce income inequality. We found a positive impact of inflation on income inequality in the short run, while the reverse holds in the long run. In the case of financial development, an inverted U-shaped relationship with income inequality for overall financial development and banking sector development was confirmed. A monotonically decreasing relationship between stock market development and income inequality was found in Turkey. The study highlights that the implementation of policies that eradicate discriminatory laws and facilitate equal access to financial privileges will promote equity and decline the outcomes of income inequality.

English

Market opening positively impacts economic growth due to reduction in the cost of capital and international risk diversification, amongst others in Nigeria. Using a robust set of econometric approach involving unit root test, co-integration, vector error correction model and granger causality, there is evidence that current value of economic growth responds to disequilibrium from past values of real gross domestic product, stock market development, foreign direct investment, trade openness, inflation and banking sector development in the long run. The result also shows that past values of real gross domestic product, foreign direct investment and trade openness promotes economic growth in the short run. The study, therefore, concludes that there are bi-directional causalities both in the short term and the long term between the dependent and explanatory variables. Based on the findings, the study recommends that policy makers in Nigeria should pay more attention to factors that can boost stock market development, foreign direct investment, trade openness, inflation and banking sector development in order to impact economic growth more positively in line with theoretical evidence that market opening positively impacts economic growth especially in frontier and emerging markets such as Nigeria. Key words: Inflation, market opening, trade openness.

Foreign Remittances, Banking Sector Development and Private Sector Investment

Foreign Remittances, Banking Sector Development and Private Sector Investment

Adjustment of prudential norms, determining vector of the banking sector development

Currently, the Bank of Russia carries out radical reforms in the administration system of banking supervision and regulation. You can observe the interaction between monetary policy and macro prudential policy. The purpose of the traditional regulator is protection of investors', shareholders', customers' capital. The main problem of the Russian economy is the shortage of investment and working capital from non-credit institutions and the difficulty to get a foothold lending. The main objective of the banking system reform is to create additional sources of investment for non-credit institutions. The tightening Supervisory requirements although eliminate the total bank risks, but reduce business activity and agility of the banking system. The curve of investment demand in the Russian economy is flat, that characterizes the low profitability of investments and the weak dependence on interest-rate policy. In this connection, it has been suggested to consider investment companies as the main criterion of competitiveness and the main argument in decision-making about granting a credit line.The feasibility of the allocation of investment criteria in the monetary rule has been shown in the article. The urgency proportional distribution of regulatory indicators of banking supervision by tier banking system, which are formed from the pacing of functional and regional specificity, – has been substantiated. The mechanism of price stability based on the clustering of financial institutions has been offered. It has been suggested to use the investment criteria as justification for a transfer service of non-bank organization to another bank cluster. Possible trends and implications of key planned reforms of the banking system including the bank's tier and the distribution tier of powers and functions have been analysed.Due to measures of preventive supervision and bank clustering, it is possible to expect regional market segmentation, improving the effectiveness of internal control systems, based on the distribution of the control functions in bank tiers, simplify management and risk reduction in accordance with the profile of the company and the level of the bank's operations. It has been proved in the paper that a focused segmentation of the credit market allows us to reduce the credit risks for banks, as well as to link market characteristics with the business models of each cluster.

Threshold effects in the relationship between financial development and income inequality

AbstractThis paper investigates the existence of nonlinearities in the relationship between financial development and income inequality, using the instrumental variable threshold regression introduced by Caner and Hansen in2004. It is shown, on the basis of cross‐sectional data of 60 developed and developing countries, that there is a significant financial development threshold effect in the finance–inequality nexus. Particularly, our findings are consistent with the Greenwood and Jovanovic hypothesis of an inverted U‐shaped relationship between banking sector development and inequality. However, there is no evidence for an inverted U‐shaped relationship between stock market development and inequality. Besides, our estimates lead to inconclusive results regarding the impact of stock market development on income distribution in low‐ and lower‐middle‐income countries. Our results show that under the lower regime, the weight of the market is very light and its contribution to income distribution does not matter, whereas under the higher regime, market expansion leads to more inequity.

Incomes of the population and the stability of the development of the banking sector in Russia

Stable development of the national banking sector is a prerequisite for macroeconomic stability. In the context of the COVID-19 pandemic, incomes of the population, which are one of the most important banking counterparties, are decreasing and threats to the stability of the banking sector are emerging. The article presents a structural diagram describing the links between the stable development of the banking sector and the incomes of the population. The diagram can be used in the development of banking policy in the process of macroeconomic regulation.

МОНІТОРИНГ ПОКАЗНИКІВ ДІЯЛЬНОСТІ БАНКІВСЬКОГО СЕКТОРУ УКРАЇНИ В СУЧАСНИХ УМОВАХ

The activities of banking institutions play an important role in the processes of financing the development of the economy, providing business entities and individuals with sufficient financial resources. Over the past few years, the banking sector has undergone a series of crisis shocks. In the context of the unstable development of the Ukrainian economy, monitoring the performance of banks requires constant consideration to prevent possible crisis shocks, and in general to determine the prospects for the development of the domestic banking sector. Therefore, the research topic is undoubtedly relevant. The purpose of the scientific article: to analyze the main indicators of the activities of banking institutions in modern conditions and to determine the prospects for the development of the domestic banking sector. The article uses general scientific methods: analysis, synthesis, induction, deduction, concretization - for the collection, systematization and processing of information for the purpose of carrying out the reporting; graphical method - for visual presentation of analytical material on the research topic; abstract-logical method - for the implementation of theoretical generalizations and conclusions regarding the current state and prospects for the development of the banking sector in Ukraine. The scientific article monitors the performance indicators of the banking sector of Ukraine in modern conditions. The values of economic standards in general for the system of banks and economic standards of systemically important banks in Ukraine are investigated. It was determined that the banking system of Ukraine has a high level of capitalization and liquidity, which exceeds the standard values, that is, a sufficient margin of safety for sustainable development. The main prospects for the development of the banking sector in Ukraine have been determined. The main prospects for the development of banking sector of Ukraine have been determined: improvement of legislative acts regulating banking activities; development of incentive banking regulation mechanisms; improvement and development of remote banking services (with the strengthening of quarantine measures, a large number of customers preferred exactly remote banking); development and implementation of the latest digital technologies in the activities of banks and the creation of digital banks (example: the successful Monobank project from Universalbank); introduction of innovative banking services and products; strengthening measures to counter cyber fraud; promoting the development of interaction between the banking sector and businesses that have a high level of compliance; improvement of corporate governance systems in banking institutions. The greatest relevance, in our opinion, will be further research aimed at identifying problematic aspects of the banking sector and finding ways to solve them.

Impacts of Macroeconomic Environment and Governance Quality on the Stock Market

This study examines the relationship between governance quality and stock market performance using the annual data from 2008 to 2016 for fourteen developing countries. This study used four different indicators, namely stock market return, stock market volatility, stock market development, and stock market liquidity to reflect the stock market’s performance from various aspects. The study further combined the four indicators and formed a new proxy to reflect overall stock market performance by using principal component analysis. The two-step system of GMM estimation was used to test the impact of the macroeconomic environment and governance quality on stock market performance. Specifically, the results obtained show that banking sector development and governance quality have a significant negative relationship with stock market volatility. Meanwhile, the income level has a significant negative relationship with stock market volatility, development, and liquidity. These results suggest that developing countries should strengthen the position of the banking sector and allows the funds to be channeled into the stock market efficiently. Besides that, developing countries also need to improve their governance quality to attract foreign investors. Several policies shall be implemented by the developing countries to improve governance quality in the aspects of voice and accountability, political stability, government effectiveness, regulatory quality, the rule of law, and control of corruption.

Application of Gap Model in Finding Service Quality Gaps : Comparative Study on Domestic and Foreign Banks Operating in Pakistan

The banking sector of Pakistan is growing with every passing year and the quality plays a major role in the developed banking sector. To retain loyal customers quality service is vital. Though, quality and customer service are major driving forces in the business community. Moreover, the product's quality is its capability which satisfies customers' expectations and needs. SERVQUAL scale questionnaire is used as research instrument which was developed by Parasuraman et al. (1988) which quantify the expected quality of banking services of selected samples of banks including domestic and foreign banks in Pakistan. The basic aim of this paper is to investigate the service quality and its relationship among domestic and foreign banks operating in Pakistan. A total of 300 respondents (account holders) were surveyed out of which, 50 account holders for each of the 6 banks including domestic and foreign Banks were surveyed. The sample selected is nonrandom convenient sampling method. This study is descriptive as well as comparative. The results, therefore, suggest that Bank Al-Falah has favorable gap scores in terms of Tangibility, Reliability, and Responsibility. Whereas Soneri Bank earned average Gap Scores in Assurance and Empathy. Also, national bank performed as less service quality measure and holding gap scores greater than all the other banks. Hence, therefore, this research indicates that all independent variables tangibility, empathy, reliability, assurance, responsibility, and empathy have significant relationship dependent variables consumer perceive quality. This study offers practical help to researchers and practitioners in providing a direction for service quality improvement by indicating the common theme that develops the service quality model.

Modern Approach to Formation of the Banking Sector Development Trajectory

The results of the study topical issue on effective development of the banking sector with an emphasis on banks with domestic capital are summarized in the article; the modern approach to formatting the trajectory of such development is substantiated. The factors influencing the development of the banking sector are systematized. External and internal factors are distinguished. The supranational and national levels are defined for the group of external factors. Supranational factors are related to globalization and integration. First of all, these are crisis phenomena in the world economy and financial system, the liberalization of capital movements. External factors at the national level mostly have a negative impact on the development of the banking sector. It is shown that certain external factors of the national level depend on supranational ones, and internal factors depend on national ones. Internal factors are grouped into those that have a positive and negative impact on the development of the banking sector. The characteristic of the most significant factors is given, their mutual influence is shown. Factors such as the dangerous level of competitive internalization due to the presence of foreign banks in the Ukrainian banking market, the high level of loans and deposits dollarization, low quality of assets and loans have a negative impact on the development of the banking sector. The influence of internal factors on the development of the banking sector is determined. It is proved using dynamic (simulation) modeling based on an impulse process that the development of the banking sector is significantly influenced by the factor of dangerous level of competitive internalization. It is established that such stabilizing factors as the growth of demand for banking services, increasing confidence in the banking system and stabilization of the national currency together compensate for the destabilizing effect of any negative factor, including competitive internalization. The formation of positive internal factors will contribute to the progressive trajectory of the banking sector development, in particular banks with domestic capital.

The Impact of Urbanization and Industrialization on Bank Development: Evidence from the Gambia

The aim of the paper is to investigate the extent to which urbanization and industrialization affect bank development in The Gambia. To achieve the objective of this research, the Autoregressive Distributed Lag (ARDL) is employed and to check the robustness of th results, the Fully Modified Ordinary Least Square (FMOLS), Dynamic Ordinary Least Square (DOLS), Canonical Cointegrating Regression (CCR) and VECM Granger Causality are employed on time series data from 1990-2017. The results revealed that urban concentration has a positive impact on banking sector development of The Gambia both in the short and long run. Conversely, industrialization has a significant negative association with bank development in the short run, but insignificant in the long run. Furthermore, the results from the Granger Causality technique revealed a unidirectional relationship moving from both urbanization and industrialization to bank development. Urbanization should be encouraged, as urban development leads to bank development and consequently the banking sector accounts for 90% of the financial industry in The Gambia, which can promote economic growth. Furthermore, the manufacturing industries should increase their level of partnership with the banks in order to ease their financial distress and increase productivity.

Microeconomic and Macroeconomic Effects of the Banking Sector Development Policy in Russia

This article studies the impact of banking supervision on the Russian banking sector structure. The article also discusses the main challenges facing the banking system and the macroeconomic role of the Bank of Russia’s supervisory policy. Taking into account some features of the national banking sector, the author justifies the current strict banking supervision despite all possible short- and longterm negative effects of this policy. For example, static and dynamic estimates of the competition level in the Russian banking sector, which were obtained using structural and non-structural methods, show a low competition level. A noncompetitive banking industry increases costs in the economy and exacerbates existing imbalances. For this reason, the paper considers key measures that contribute to the development of banking competition. The article emphasizes the great importance of the goals of building a full three-tier banking system and privatization of public sector banks. However, strict banking supervision and consolidation of the banking industry have reduced the impact of negative factors on the supply of loans and increased the Russian banking sector’s sustainability. These positive changes and macroeconomic reform provide the basis for stable economic growth. The main results obtained can be used by national authorities to develop the Russian banking system.

Banking Sector Instability and Economic Growth: Evidence from Turkey

The banking sector, an important component of the financial system, can affect the economic growth through raising and mobilizing the savings, channeling the funds to the productive uses and enhancing the efficiency. However, the deteriorations in the banking sector stability may negatively affect the economic growth through preventing the efficiently functioning of the aforementioned interaction channels. This study investigates the effect off banking sector instability and banking sector development on the economic growth in Turkey during August 2006-December 2018 through time series analysis. We revealed that the banking sector instability negatively affects the economic growth, but banking sector development positively affects the economic growth.

HAVE ANTI-CRISIS LEGAL REGULATIONS INHIBITED THE EXPANSION OF THE POLISH BANKING SECTOR?

The article concerns the issue of assessing the effectiveness of anti-crisis legal regulations in the context of the functioning and development (including expansion) of the Polish banking sector. The analyzes carried out in the article are the result of many years of the author's own analyses and research and have practical and application value.

Macro-Economic Determinants of Life Insurance Business – Empirical Evidence during 2000-01 to 2015-16

There is a strong link between an institutional framework of insurance sector and sustainable economic growth. Insurance business has a positive impact on economic development and vice versa. As a developed insurance market stimulates economic growth of a country, the level of its economic growth affects insurance business development in return. In India, regulatory changes commenced since mid-nineties for opening up of insurance markets to private and foreign insurers. After more than one and half decade execution of insurance sector reforms, Indian life insurance business have been witnessed the better growth. In this juncture, the present study focuses on an examination of the role of a macroeconomic environment in the development of life insurance industry in India by using time series data with regression analysis. The study finds that the savings to GDP ratio, banking sector development, expenditure on social security to GDP, gross enrolment ratio and life expectancy are most significant and positive factors in driving the life insurance business during the study period.

Trade openness, internet finance development and banking sector development in China

This paper investigates the impact of trade openness on Internet finance development in China. Using a unique panel data set for 29 Chinese provinces, we find that trade openness has a positive impact on Internet finance development and is a leading indicator of Internet finance development. Further analyses show that higher trade openness is associated with faster Internet finance development in wealthier provinces. Moreover, we investigate the effect of Internet finance development on the banking sector development. The empirical results suggest that Internet finance development has a positive effect on the banking sector size and efficiency.