Banks Face Research Articles

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.

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.

The Role of Direct Credit Facilities in Financing Small and Medium Enterprises in Jordan Case Study (Islamic International Arab Bank)

Objectives: The study aimed to identify the role of Islamic banks operating in Jordan (Islamic International Arab Bank) in providing appropriate financing for small and medium-sized enterprises, and on the effectiveness of the financing methods adopted in the Jordanian Islamic banks to finance small and medium-sized projects, and on the most important obstacles and difficulties facing Islamic banks (Islamic International Arab Bank) when providing appropriate financing to small and medium-sized enterprises. Methods: The study relied on the descriptive approach in order to describe and explain the role of Islamic banks in financing small and medium enterprises and to identify the most important obstacles faced by Islamic banks. Results: The study concluded that there is a role for Islamic banks in financing small and medium enterprises, which is a strong relationship, since the correlation coefficient is 99.8, and there is an effectiveness of Islamic financing formulas in financing small and medium enterprises. There are some obstacles that Islamic banks (International Arab Islamic Bank) face when providing financing to small and medium enterprises. Conclusion: The study recommended the need for the competent authorities such as the Central Bank to work to provide the elements of success for Islamic banks because of their important role in providing financing for small and medium enterprises. And that Islamic banks should provide feasibility studies for the projects that provide financing to them.

Save the Bank: Centralized Digital Bank — Centralization and Digitalization as Strategic Imperatives

This thesis explores the transformation of traditional banks into centralized digital banking systems as a strategic response to the burgeoning challenges posed by decentralized finance (DeFi) technologies such as blockchain and cryptocurrencies. As these technologies disrupt traditional financial paradigms, offering more direct, efficient, and transparent financial services, traditional banks face increasing pressure to adapt and evolve. This work argues for the necessity and feasibility of centralized digital banking as a comprehensive countermeasure to DeFi. Through a detailed examination of current banking challenges, including inefficiencies in customer service, transaction processing, and compliance, the thesis proposes a model of banking that leverages centralization and digitalization to address these issues. The proposed model not only enhances operational efficiency and customer engagement but also fortifies the banks’ competitive edge in a digital economy. Furthermore, the thesis discusses the long-term implications of such transformations, predicting that centralized digital banks will not only coexist with DeFi platforms but may also lead the financial services industry by adopting innovative technologies that drive customer satisfaction and operational excellence. Recommendations are provided for both banks and policymakers to foster an environment conducive to the development of robust, secure, and customer-focused digital banking services. In summary, this thesis affirms that centralized digital banking is not merely a defensive strategy against the rise of DeFi but a forward-looking approach that will define the future of banking.

An Analysis of the Development of Investment Banks' IPO Business under the Registered System

Under the reformed registration system, the role of investment banks in the Initial Public Offering (IPO) business has evolved significantly from the approval system. As crucial "gatekeepers" of the capital market, these banks now bear the responsibility of thoroughly examining issuance application materials for truthfulness, accuracy, and completeness. While the IPO business promises a prosperous future for investment banks, it also presents considerable challenges. Some banks face issues such as insufficient adherence to prudent examination requirements, lax establishment or implementation of internal control systems, and the need for improved information management. To enhance their sponsorship business, it is recommended that investment banks optimize talent training, internal management control, risk management, and intelligent information system construction. Cultivating professional sponsorship talents with comprehensive skills, reinforcing ethical standards, and conducting thorough reviews of IPO companies are crucial. Furthermore, optimizing the management system, establishing effective communication mechanisms, and enhancing risk management capabilities are essential steps. Leveraging advancements in computer technology, the construction of a secure and reliable intelligent information system is advised. As the reform progresses, investment banks should bolster international exchanges, cooperation, and professional competitiveness to evolve into reputable international brand banks.

Kajian Tentang Tingkat Pemahaman Masyarakat Terhadap Sistem Perbankan Syariah

Despite the progress made by Islamic banks, they still contend with the dominance of conventional banking, which implements an interest-based system. This study aims to assess the public's understanding of Islamic banking, particularly in Jakarta. Field research conducted in the capital city revealed that while people are aware of the existence of Islamic banks, their understanding of the intricacies remains limited. Many are unfamiliar with the products and services offered by Islamic banks, attributing this to a lack of information disseminated through various media channels. This study sheds light on the challenges Islamic banks face in raising public awareness and understanding.

Effect of Corporate Environmental Performance on Banks’ Loan Pricing

Effect of Corporate Environmental Performance on Banks’ Loan Pricing

Influence of operational excellence strategy on organisations’ competitiveness among tier III category of Commercial Banks in Kenya

Tier 3 Kenyan commercial banks face significant challenges, including intense competition, financial distress, and declining profits despite consistent loan growth. This study investigates the impact of operational excellence strategies on the competitiveness of these banks using a pragmatic research approach that combines qualitative and quantitative methods. The study is grounded in the dynamic capabilities theory and collected data from 288 respondents across various management roles within the banks through semi-structured questionnaires. The data were analyzed using thematic analysis for qualitative data and SPSS for quantitative data, including descriptive statistics, regression analysis, and ANOVA. The regression model revealed a moderate positive relationship between operational excellence and organizational competitiveness, with a correlation coefficient (R) of 0.685. The coefficient of determination (R Square) was 0.469, indicating that operational excellence accounts for 46.9% of the variability in competitiveness. The coefficient for Operational Excellence is 1.260 (standard error = 0.087, beta = 0.685), with a t-value of 14.493 and a significance level of 0.000. The constant coefficient is -1.565 (standard error = 0.353, t-value = -4.437). This study underscores the importance of strategic investments in operational excellence practices to enhance organizational efficiency and sustainable competitive advantages. However, the study's scope is limited to tier III commercial banks in Kenya, and future research should explore additional factors influencing competitiveness and include a broader sample for improved generalizability.

Post-Merger Commercial Bank Performance Trends: A Case of Kenya

Commercial banks face performance challenges since most of them react to these challenges in a fairly standardized manner. This is because most of the commercial banks offer similar products and services. In so doing, they face high competitions and as a result, they engage activities in pursuit of a competitive edge in order to keep their current customers and attract new ones. Some of the strategic activities these companies have engaged in the recent past have been Mergers and acquisitions (M&A). M&A have become an effective strategic tool to consolidate the Banks and Financial Institutions (BFIs) in Kenya to increase their capital base, expand their business, and bring financial stability. However, despite venturing into mergers and acquisitions, evidence from elsewhere indicates that financial performance stability and improvement still remains a challenge forming a good basis for further empirical investigation. This paper provides an assessment of the post-merger commercial bank performance in Kenya over the period 2008 to 2019 using return on equity as a proxy for bank performance. The target population for this study comprised all 13 commercial banks operating in Kenya between the year 2008 and the year 2019. The study used purposive sampling to select thirteen (13) commercial banks that had undergone mergers and acquisitions in Kenya over eleven years (from 2008 to the year 2019). The study finds that the post-merger effect of mergers and acquisitions on financial performance is mixed. Some commercial banks reported improved ROEs while a few reported declining ROEs during the study period. To enhance performance, the study recommended that commercial banks should prioritize M&A opportunities that align with their long-term strategic goals. This might include expanding into new geographic regions, entering new markets, diversifying product offerings, or gaining access to new technologies. Banks should assess the potential risks associated with the M&A transaction, including credit risk, operational risk, and reputational risk. Develop strategies for mitigating these risks and ensuring a smooth transition. Keyword: Mergers, Strategy, Acquisitions, Performance, Return on Equity, Synergies, profitability.