Soundness Of Banking Sector Research Articles

Banking Stability for Financial Stability

This paper while emphasizing the importance of the concept of financial stability in wake of recent global financial crisis in particular and other (banking and financial) crises in general attempts to highlight the significance of the soundness of banking sector in emerging economies where banking sector constitutes a lion’s share in the financial system. This study investigates banking stability by structuring a recursive micro panel Vector Auto Regressive (VAR) model and corroborates the significance of the interrelatedness of the bank-specific variables such as; Liquidity, Asset Quality, Capital Adequacy and Profitability. This paper while underscoring the prominence of financial stability in wake of recent global financial crisis in particular and other (banking and financial) crises in general argues that the soundness of banking sector in banking dominated financial system of emerging economies is of great significance in ensuring financial stability. Further, the paper offers an in-depth review of literature on financial stability in backdrop of the ongoing definition debate for financial stability. A significant contribution of this study is in establishing that liquidity in the banking dominated financial system is reciprocally related with asset quality, capital adequacy, and profitability of constituent banks by employing a robust panel data drawn from 56 leading banks for a period of 12 years. Another contribution of this study is that, employing the most appropriate key determinants of banking sector soundness, the paper models a simple and basic axiomatic form of banking stability index (BSI) in the context of an emerging economy banking sector.

Banking System Resilience and Financial Stability - An Evidence from Indian Banking

This paper while emphasising the importance of the concept of financial stability in wake of recent global financial crisis in particular and other (banking and financial) crises in general attempts to highlight the significance of the soundness of banking sector in emerging economies where banking sector constitutes a lion’s share in the financial system. This study examines banking sector stability by constructing a micro vector auto regressive (VAR) model and establishes the significance of the interrelatedness of the bank-specific variables such as; Liquidity, Asset Quality, Capital Adequacy and Profitability. Further, the paper offers a substantive review of literature on the concept of financial stability in backdrop of the ongoing definition debate for financial stability. A significant contribution of this study is that, by employing the most appropriate key determinants of banking sector soundness, the paper constructs a recursive micro VAR model to explain the interdependence and comovement of the banking stability covariates in a bank-dominated financial system that aids in understanding the dynamics of financial stability of emerging economies

Assessing interbank contagion using simulated networks

This paper presents a new approach to randomly generate interbank networks while overcoming shortcomings in the availability of bank-by-bank bilateral exposures. Our model can be used to simulate and assess interbank contagion effects on banking sector soundness and resilience. We find a strongly non-linear pattern across the distribution of simulated networks, whereby only for a small percentage of networks the impact of interbank contagion will substantially reducoe average solvency of the system. In the vast majority of the simulated networks the system-wide contagion effects are largely negligible. The approach furthermore enables to form a view about the most systemic banks in the system in terms of the banks whose failure would have the most detrimental contagion effects on the system as a whole. Finally, as the simulation of the network structures is computationally very costly, we also propose a simplified measure—a so-called Systemic Probability Index—that also captures the likelihood of contagion from the failure of a given bank to honour its interbank payment obligations but at the same time is less costly to compute. We find that the SPI is broadly consistent with the results from the simulated network structures.

Banking System Resilience and Financial Stability - An Evidence from Indian Banking

This paper while emphasising the importance of the concept of financial stability in wake of recent global financial crisis in particular and other (banking and financial) crises in general attempts to highlight the significance of the soundness of banking sector in emerging economies where banking sector constitutes a lion’s share in the financial system. Further, an attempt is made to define financial stability in backdrop of the ongoing definition debate for financial stability. Another contribution of this study is that, employing the most appropriate key determinants of banking sector soundness, the paper models a simple and basic axiomatic form of banking stability index (BSI) in the context of an emerging economy banking sector.

Impact of the Global Crisis on Banking Sector Soundness in Asian Low-Income Countries

The paper takes stock of the impact of the global financial crisis that began in late 2007 on banking sectors of Asian low-income countries, by exploring bank-level data provided by Bankscope. The paper examines three key channels of possible crisis spillovers: exposures to (i) valuation changes of mark-to-market financial assets, (ii) a drop in crossborder funding, and (iii) rises in NPLs prompted by international real economic linkages. The paper finds that despite relatively low financial integration, the impact of the crisis on LIC banks, particularly the largest ones, were not insignificant. Impacts were most palpable through a loan-to-crossborder funding nexus.

Impact of the Global Crisison Banking Sector Soundness in Asian Low-Income Countries

Impact of the Global Crisison Banking Sector Soundness in Asian Low-Income Countries

Republic of Serbia: Financial Sector Assessment Program Update: Technical Note on Banking Sector Soundness and Stress Testing

This Technical Note reviews banking sector soundness and stress testing in Serbia. Serbia’s banking sector is well capitalized and liquid, but the corporate sector’s weak performance is a source of concern because of its adverse impact on nonperforming loans. Stress tests indicate that banks are quite resilient to further adverse shocks, but they remain vulnerable to credit risk. The results highlight that the banking system is most vulnerable to further exchange rate depreciation, through foreign currency induced credit risk, and a prolonged economic downturn.

Assessing Banking Sector Soundness in a Long-Term Framework: The Case of Venezuela

This paper combines financial soundness indicators (FSIs) and stress-testing methodologies to provide a broad assessment of the soundness of Venezuela's banking sector, based on a diagnosis of its structural and transient shortcomings. While the Venezuelan banking sector appears sound under current favorable economic conditions, it remains significantly vulnerable to cyclical downturns-which have been severe in the past. Banks are particularly exposed to interest rate and credit risks. This suggests that the strong FSIs may be partly the result of a conjunctural credit boom in the context of capital controls and very low real interest rates.

Assessing Banking Sector Soundness in a Long-Term Framework: The Case of Venezuela

This paper combines financial soundness indicators (FSIs) and stress-testing methodologies to provide a broad assessment of the soundness of Venezuela's banking sector, based on a diagnosis of its structural and transient shortcomings. While the Venezuelan banking sector appears sound under current favorable economic conditions, it remains significantly vulnerable to cyclical downturns - which have been severe in the past. Banks are particularly exposed to interest rate and credit risks. This suggests that the strong FSIs may be partly the result of a conjunctural credit boom in the context of capital controls and very low real interest rates.

(Modeling Early Warning Signal for the Bank Vulnerability Using an Option-Based Approach)

Korean Abstract: 본고는 1995∼2001년 중 우리나라 일반은행의 주가지수 및 재무제표를 이용하여 옵션가격모형에 기초한 부도거리를 추정하였다. 추정된 부도거리와 은행의 수익성 및 건전도 지표와의 관계를 분석한 결과, 은행의 수익성이 증가하거나 자산이 증가할 경우 부실화 확률이 낮아지는 반면, 부실채권이 증가할수록 부실화확률이 높고 신용등급이 낮을수록 부실화확률이 높은 것으로 나타났다. 또한 probit 및 logit 모형을 이용한 부도거리의 유용성을 분석한 결과, 퇴출 및 공적 자금 지원 여부를 기준으로 은행위기를 분류한 경우 3년의 시차를 두고, 신용등급을 기준으로 분류한 경우에는 2년의 시차를 두고 부도거리와 은행위기와는 음(-)의 상관관계를(부도확률이 높을수록 은행위기가 발생할 확률이 높음) 보여주었으나, 분석결과가 통계적으로 유의미하지는 않았다. English Abstract: Distance to default is estimated using the option based model utilizing the stock prices and balance sheets of commercial banks in Korea. Estimated relationship between distance to default and indexes which represent the profitability and soundness of banking sector shows that increased profitability and asset size or improvement in credit ratings leads to the lower probability of default. Empirical analysis results of probit and logit model shows that distance to default and banking crisis has negative relationship with 2 to 3 years of lag, implying higher probability of default leading to higher probability of incidences of banking crises, even though statistically not significant.