Big Banks Research Articles

COUNTRY RISK ASSESSMENT FOR THE UNITED KINGDOM

The study aims to make risk assessment of investment in the United Kingdom so as to open a new branch of a big bank in United Arab Emirate. The findings of the risk assessment recommended to establish the new branch in the UK basing on diverse reasons. Firstly, according to the international monitory fund report, the GDP of the United Kingdom will increase from the financial year 2018 through the financial year 2022. The economy will advance and widen. Plus, the growth in GDP indicate that all sector in economy including the banking sector will also develop. Secondly, according to the UK office Budget Responsibility (ORB) projections, the UK interest rate will rise in the coming four financial years that will surely be reflected on the increase of profitability. Thirdly, the inflation rate in the UK will decrease in the coming four years, which has positive effects on the banking sectors because inflation rate leads to low costs of products and services. Additionally, the GDP per capital of the UK rise in the coming four fiscal years which is healthy for banking sector to be highly productive and profitable. More importantly the population of the UK will increase in the coming four years, which is favourable to the banking sector this means that the number of will increase. Moreover, the bank of England allows all the commercial banks in the country. Another reason that encourage investing in the UK is the advancement in technology. Besides, the most important reason encourage investment in the UK is the country’s system of governance that is a democratic system of leadership that does not hinders private investors unless they violate law. The researchers conclude that they recommend the decision to open the new bank in the UK. Since the benefits supersede the costs. 
 
 JEL: E22; F21; G21
 
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Bifurcation of Corporate Management: Traditional and Innovation Logics

In conditions of the global management crisis caused by COVID-19 the issues dealing with management efficiency become especially topical. Integrated corporate structures embracing big banks and corporations make the basis both for economic and political force. Though the disintegration strategy is becoming more and more popular, multinational companies are not weakened and continue influencing governments of many countries of the world. Decisions made in these organizations can impact not only economy of a certain country, its ecology, social policy but often the future of states and regions. That is why corporate strategies, which should be relevant to present day realities, become so important. Today the majority of integrated corporate structures stick to traditional logics in corporate management realizing it within the frames of Freedman theory. The article compares and summarizes traditional and innovation theories of corporate management, shows their advantages and drawbacks, analyzes the experience of big global companies and provides legal substantiation of splitting responsibility inside corporations. An attempt was made to prove groundlessness of traditional logics of profit maximization in today’s world and to identify ways to shifting focus to the company development.

Show Me the (Data About the) Money

Information about consumers, their money, and what they do with it is the lifeblood of the flourishing financial technology (“FinTech”) sector. Historically, highly regulated banks jealously protected this data. However, consumers themselves now share their data with businesses more than ever before. These businesses monetize and use the data for countless prospects, often without the consumers’ actual consent. Understanding the dimensions of this recent phenomenon, more and more consumer groups, scholars, and lawmakers have started advocating for consumers to have the ability to control their data as a modern imperative. This ability is tightly linked to the concept of open banking—an initiative that allows consumers to control and share their banking data with service providers as they see fit. But in the U.S., banks have threatened to block the servers of tech companies and data aggregators—business entities that serve as the middlemen connecting FinTech companies and banks, enabling consumers to get more financial services—from accessing their customers’ data even if the customers agree to it. With no regulation or accepted standards for the ethical gathering and use of data, banks argue that limiting access helps them protect their clients’ privacy, improve their accounts’ safety, and promote consumer protection principles. Banks claim that FinTech apps collect more data than needed, store it insecurely, and sell it to others. But the motivation of the big banks in advocating for such limitations may not be so pure. Banks do not want to relinquish competitive advantages, lose customers, or be held liable for data or fund losses. Witnessing resistance, tech companies are not sitting idly by waiting for banks to limit their data access. Instead, they are working on ways to outsmart banks’ blocking technology and use data aggregation services as a middleman. They also extended the fight into Washington, where regulators such as the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are noticing how technology impacts consumer data flows and credit reporting issues. Advocating for consumers’ rights to control data, tech companies lobby for open banking.

Lost in Missions? Employees as a Top Strategic Priority of the World’s Biggest Banks

Human resources are vitally important to banking. The mission statements of 50 banks with the biggest market value are analyzed qualitatively and quantitatively for subsequent judgments of consideration of employees among top strategic priorities of these organizations. The staff-related notions are found in the only 30% statements. Employees are considered in different aspects, and most frequently in regard to their work and duties. The top 10 banks pay attention to personnel development, career, and success. The findings of the present study indicate on the underrepresentation of the staff-related strategic priority in the mission statements of the world’s biggest banks. This seems to be a serious cavity in their strategic communication, dangerous to organization reputation and job satisfaction, and, thus, many actual mission statements need improvement.

Measuring the competition and banking efficiency level: a study at four commercial banks in Indonesia

The banking sector plays a vital role in the economy of each country. Banks are required to operate in a sound, efficient, and reliable manner in order to stimulate economic growth. To achieve that, a basic framework for the Indonesian banking system has been developed, known as the Indonesian Banking Architecture (IBA) aimed at strengthening the structure and enhancing the competitiveness of the banking industry. This study aimed to analyze the level of competition, the ability, and influence of the competition on banks efficiency, so banks can maintain the performance level and provide economic growth. This study used a quantitative approach with a panel regression analysis model. The results have shown that the banking industry in Indonesia tends to be monopolistic. The character of many sellers, differentiated products, sellers freely entering and leaving the market, as well as the presence of advertisement and product quality competitions were examined. Bank competition that leads to a monopolistic market structure stimulated banks to achieve higher profits and put bank projects and financing at high risk. Competition had a negative correlation with bank efficiency because competition encourages banks to focus on profit rather than efficiency, engage in risky financing/projects, and undertake high lending activities. Moreover, four big banks in Indonesia are in the “too big to fail” position. Banking regulators in Indonesia must maintain and produce reliable and stable banks to compete globally. AcknowledgementThe authors would like to thank all those who have contributed to the completion of this article, especially the leadership of the Department of Economics and the Faculty of Economics and Business, Brawijaya University, who provided facilitation for publication in reputable international journals.

Capital Buffers in a Quantitative Model of Banking Industry Dynamics

We develop a model of banking industry dynamics to study the quantitative impact of regulatory policies on bank risk‐taking and market structure. Since our model is matched to U.S. data, we propose a market structure where big banks with market power interact with small, competitive fringe banks as well as non‐bank lenders. Banks face idiosyncratic funding shocks in addition to aggregate shocks which affect the fraction of performing loans in their portfolio. A nontrivial bank size distribution arises out of endogenous entry and exit, as well as banks' buffer stock of capital. We show that the model predictions are consistent with untargeted business cycle properties, the bank lending channel, and empirical studies of the role of concentration on financial stability. We find that regulatory policies can have an important impact on banking market structure, which, along with selection effects, can generate changes in allocative efficiency and stability.

Uticaj tržišne koncentracije na konkurentnost bankarskog sektora u Srbiji

The concentration level is proof of development and tendencies on the observed market. It determines the existence of competition and fair play among competitors and participants. This paper aims to analyse and measure the concentration level within the banking sector in the Republic of Serbia. The concentration level is measured applying the concentration ratio for four and five biggest banks (Cr4 and Cr5) and Herfindal-Hirschman index (HH index) in the period from 2018 to the third quarter of 2020 for the following banks' balance sheet positions: assets, approved loans, and collected deposits. The banking market is reported to be medium concentrated according to CR5 and low concentrated according to Cr4 and HHI in all observed categories. The empirical research shows that there is competition among banks in Serbia (loose oligopoly), which depends on the concentration level. Furthermore, the acquired results contribute in the comprehension and perception of the direction in which the Serbian banking sector, as an example of an industry in a small emerging country, is progressing towards a modern financial market through bank consolidation.

Are Bigger Banks Better? Firm-Level Evidence from Germany

Are Bigger Banks Better? Firm-Level Evidence from Germany

Measuring profit efficiency of Colombian banks: a composite non-standard profit function approach

We analyse the evolution of profit efficiency of Colombian banks from 2001 to 2013, the most important period of consolidation for this industry. Unlike previous studies, we estimate revenue, cost, and profit efficiency within a unified framework. We find that profit efficiency significantly increased from 80% in 2002 to 91% in 2013. Median profit, revenue, and cost efficiency estimates are around 90.3, 85.2, and 99.5%, respectively. Median return on equity (ROE) was 8%. Without inefficiency, it could have been as high as 14.6%. Cost inefficiencies explain 92% of median unearned ROE while revenue inefficiency explains only 8%. Revenue and cost efficiencies are negatively correlated. However, both correlate positively with profit efficiency. Foreign banks and banks taking on more credit risk are more profit efficient while bigger banks and banks taking on more liquidity and market risk are less profit efficient.

Financial Stability of GCC Banks in the COVID-19 Crisis: A Simulation Approach

Stability and sustainability of the biggest banks in any country are extremely important. When big banks become unstable and vulnerable, they typically stop lending. The resulting credit squeeze pushes the economy into recession or a slow growth path. The present study examines the financial stability and sustainability of the 30 large banks operating in the six Gulf Cooperation Council countries. These banks represent 70% of the GCC banking market. Monte Carlo simulation was attempted assuming that key drivers can vary randomly by twenty percent on either side of the current values. The conclusions are drawn based on 300 simulation trails of the five-year forecast balance and income statement of each bank. Year 2020 is not favorable for the GCC countries because of the COVID-19 pandemic and low oil prices, though the future years may be better. The study identifies several banks, which may become financially unsustainable because the simulations indicate the possibility of negative profitability, unacceptably low capital ratios and potential for heavy credit losses during periods of economic turbulence, which is the current situation due to the COVID-19 pandemic. Through simulation the paper is able to throw light on which factors lead to bank instability and weakness.

Governance and risk-taking in conventional and Islamic banks

PurposeThe purpose of this study is to examine the relationship of the board and risk committee in respect of risk-taking in conventional and Islamic banks in Malaysia.Design/methodology/approachThis study uses unbalanced panel data for 15 conventional and 14 Islamic banks over the period 2007–2016. The generalised least squares random effects technique is applied.FindingsThe evidence shows that independent directors and frequency of board meetings reduce risk-taking but that the number of directors with finance and banking experience and those with multiple directorships tend to increase risk-taking. The findings also indicate that the size of the risk committee, the number of directors on the risk committee and the appointment of a designated risk officer tends to reduce risk-taking in banks. By comparing conventional and Islamic banks, the findings show that Islamic banks have lower exposure to portfolio risk but higher insolvency risk.Practical implicationsThe findings in this study suggest that the board and risk committee have an impact on bank risk-taking. The implications for management include having more independent directors, fewer directors with multiple board memberships and having an efficient risk committee in order to reduce risks. Regulators should look into the issue of multiple directorships as this is positively related to risk-taking. Islamic banks should expand their operations as our findings indicate that bigger banks are better able to manage risk.Originality/valueThis study covers bank governance and risk committee, which are crucial in influencing the risk-taking behaviour of conventional and Islamic banks.

Behind the Veil of Decentralization: Analyzing Blockchain Frames and Sponsors in US News

In recent years, “blockchain” has emerged as an industry buzzword, a technology that can solve pressing problems in economic inclusion, democracy, humanitarian aid, sustainability, and supply chain management among other things. Whether effective or not, this little-understood technology is championed as a way to change socio-economic power structures and democratize and decentralize established institutions like the financial system and government. However, these claims are often unsupported. The hype generated in the news and popular discourse about this technology often obscures questions of whether power relations are actually changing and how. Understanding the visible media frames as a proxy for the power contests that went into shaping discourse, this paper critically examines US news media coverage of blockchain between 2013 - 2018. It examines the news frames used to talk about blockchain, the sponsors of these frames, and how these factors have changed over the five-year period. The paper finds that blockchain-related news coverage is framed in six general ways: Disruptive, Harnessing, Skepticism, Community, Understanding, Menace. These frames, especially the disruptive and harnessing frames are mainly sponsored by big banks (like J.P. Morgan), big technology (like IBM and Microsoft), and Silicon Valley investors. Using this data, the paper argues that the narrative of blockchain as a democratizing/decentralizing technology is mainly pushed by these established institutions and that it is a smokescreen to prevent a critical examination of the use of the technology.

Global financial changes and results in Latin America: à la carte selection of regulation

His article analyzes the implementation of the Basel II, II.5 and III rules in Latin American countries by means of specific banking regulations and finds that because the rules were not fully implemented, banks were then able to use some of the principles that give them room for regulatory arbitrage and facilitate illicit financial flows (IFFs). The Basel banking norms supposed that regulatory capital would be a minimum of 10.5%, but equity to asset ratios computed for big banks fell by 0.8% between 2005 and 2015 and provisions for loan losses on assets increased 0.6% in the same period. The on-demand implementation of these standards puts the region at the mercy of an underground globalization that favors IFFs.

Bank Characteristics Effect on Capital Structure: Evidence from PMG and CS-ARDL

The main aim of this paper was to investigate the impact of bank characteristics on capital structure empirically. The study employed a panel data analysis, Pooled Mean Group (PMG) and Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) estimators were utilized, for the period spans between the years 2008 and 2018. Both the borrowing (leverage) ratio and equity ratio used in the analysis cover short-term deposits and long-term deposits as a fundamental determinant variable on the capital structure. The main findings confirm that the deposit ratio has a positive relationship with the size of the bank. In other words, big banks use more foreign sources than small banks to use the tax shield advantage. At the same time, a percentage increase in bank size and liquidity ratio enhance the bank deposit rate by 0.0068% and 0.479%, respectively, in the long-run, while a percentage change in interest income coverage will reduce the bank deposit rate by 0.004% in the long-run. Meanwhile, the significant causal relationship of growth rate with the bank deposit rate could not be established. In addition, the short-run coefficients of the variables reveal that size, interest coverage, and liquidity have a positive and significant causal relationship with bank deposit rate in the short-run. The findings of the study are in line with the results of capital structure theories, especially the hierarchy theory and balancing theory.

The Impact of Credit Risk on Performance: A Case of South African Commercial Banks

The objective of the study was to comparatively assess the impact of credit risk on the performance of big and small banks in South Africa. Data from audited financial reports of 14 commercial banks were obtained and divided into two panel data sets and analysed using the R-Studio software version 3.5.1 to assess the impact of capital adequacy ratio (CAR), non-performing loan to gross loan (NPLGL), loan-to-deposit ratio (LTDR), leverage ratio (LR), board gender diversity (BGD), with bank size (total asset) and AGE as control variables, on performance, (return on asset [ROA] and return on equity [ROE]). The findings of the study revealed that non-performing loan (NPL), CAR, LR, LTDR and age of banks all have significant and greater impact on performance, as measured by ROA, of small banks when compared with big banks. Surprisingly, NPL was revealed to have a lesser impact on the ROE of small banks as compared to the ROE of big banks but showed no impact on the ROA of big banks during the period of 2008–2017.

Death by capitalism in Eliot’s The Waste Land

ABSTRACT This article is an attempt to construct a socialist Eliot, whose familiarity with German economic policy in the 1910s and 1920s exposed him to a version of socialist economics that caught his imagination. In this essay, I focus on the year that preceded Eliot’s breakdown, when a number of significant mergers transformed British banking, concentrating the industry’s power and wealth among a nucleus of ‘Big Banks’. I understand Eliot to have witnessed the dawn of what Rudolf Hilderding terms ‘finance capital’, and to have recoiled in horror. I read ‘Death by Water’ as an elegy for a lost era in the history of capitalism, when, as Hilferding suggests, the dependence of economic systems on ‘direct relationship[s] between members of society’ made a version of ‘socialist’ banking thinkable.

From State Capture to “Pariah” Status? The Preference Attainment of the Hungarian Banking Association (2006–14)

AbstractOne of the major political narratives in the build-up to the critical parliamentary election of 2010 in Hungary was related to the “government of bankers.” Pre-2010 governments earned this label by the opposition based on their supposed close relationship with banking interests and for purportedly formulating financial and tax policy according to the needs of major financial institutions. In this article, we examine the preference attainment of the Hungarian Banking Association, the pre-eminent interest group in banking, and that of OTP, the biggest bank in Hungary, in order to evaluate this popular claim. The article addresses this challenge by comparing the policy influence of Hungarian Banking Association and OTP in the government cycles ending and starting in 2010. We adopt a computer-assisted qualitative content analysis framework and juxtapose the policy positions of the interest group in their formal communications with actual legislation related to the same issues. Results show that the general preference attainment of the banking lobby on major policy issues decreased after 2010—nevertheless, seismic activity was already under way after 2006.

Enforcement Against the Biggest Banks

Being a big bank means the regular payment of huge fines to a number of different regulators, paired with profuse apologies, and promises to do better next time. This article makes use of a hand-collected dataset to show how this enforcement worked in the United States after the passage of the Dodd-Frank Wall Street Reform Act. American regulators have tended to hunt the big banks in packs, with multiple regulators pursuing fines against financial institutions for the same misconduct. Regulators frequently enforce in a “viral” manner; once they sanction one bank for a type of misconduct, the chances that they will sanction another bank for the same sort of misconduct increases. Some regulators like to bundle a variety of different unlawful actions by banks into one global settlement. Enforcement by DOJ can result in spectacularly expensive settlements compared to the level of enforcement by primary banking regulatory agencies; overall, DOJ sanctions in dollars dwarf those of all other agencies policing part of what a bank does. American enforcement, despite suspicion to the contrary, does not appear to protect domestic banks and discriminate against foreign ones.

Big Banks versus Agricultural Banks: Has Too‐Big‐To‐Fail Regulation Affected Efficiency and Scale Economies Measures?

The Dodd‐Frank Wall Street Reform and Consumer Protection Act of 2010 aimed to improve the financial stability of the banking industry. This reform was intended to reduce the too‐big‐to‐fail practices for very large banks. However, it might also affect the performance of relatively small asset size banks with different lending portfolios. Using the Call Report data from 2006 to 2016, evidence suggests that the Dodd‐Frank Act has affected the estimates of cost efficiency and returns to scale measures of both big banks and small agricultural banks. Results indicate that Dodd‐Frank Act has increased cost efficiency, discouraged mergers, and encouraged product specialization for banks above the $50 billion asset size. However, none of these results hold for the banks just above the $10 billion asset size. This appears to suggest that Dodd‐Frank Act has mainly affected the economic measures of those very big banks that are subject to the more stringent regulations. Nevertheless, Dodd‐Frank has reduced agricultural banks' cost efficiency and increased incentives for mergers. In addition, the Dodd‐Frank Act has dampened the incentives for product diversification in agricultural banking. Likewise, evidence exists that this act has slowed productivity growth, efficiency, and technological change in agricultural banks. Taken together, Dodd‐Frank reduced consolidations in very big banks that are subject to greater oversight but adversely affected U.S. agricultural lending.

Financial Statement Analysis a Tool for Investment Decision Making in the Gambia: Case of Trust Bank Gambia Limited

This study intended to investigate financial statements analysis and investment decision making in The Gambia. The study questions were to examine how financial statement analysis aid potential investors in investment decision making, evaluate the performance of a company for investment decision making, and appraise the fundamental use of financial statement analysis information. The approach was to work with potential investors, big bank depositors and shareholders to achieve the set objectives. The paper used accounting ratios and financial report analysis, namely, liquidity ratio, efficiency ratio and profitability ratios, which might affect the financial performance of the firm. In summary, the approach and research methodologies involved, desk study to review current literatures, and the actual field research study. Data analysis was conducted base on data collected. The explanatory analysis was used. The findings show that financial statement analysis is critical in investment decision making. The respondents appeared to be knowledgeable with financial variables specifically, the liquidity ratios and profitability ratios. The government intervention in financial reports, and unqualified audit reports help vitally in having an accurate opinion. Conclusion was based on findings that investor needs to get proper interpretations of financial statement analysis reports, making consultations and get other none financial information in investment decision making. The findings of this study show that 80% of the respondent was in favor that financial statement analysis is very essential in making an investment decision. This is true.