Capital Reserves Research Articles

Possibility of Capital Reserve Allocation for Nuclear-Risk Insurance Coverage on Transitioning to SMRs

It is shown that on creation of capital reserve to cover the risk of hypothetical severe accidents in NPP the size of the allocation is comparable to or greater than the fuel costs for a power-generating unit of a large NPP. The damage consequent to severe accidents in NPP is 1000 times greater than the insurance limits adopted for nuclear risks. An empirical power-law function (with exponent 1.6) representing the damage consequent to a severe accident as a function of the reactor capacity is studied. As a consequence of the nonlinearity of the reduction of the scale of the damage caused by a hypothetical accident on transitioning to small modular reactors (SMRs) the capital reserve allocated for risk insurance for NPP becomes realistic.

Theoretical and organizational aspects of internal control of capital reserves of enterprises

The need to form an anti-crisis mechanism in conditions of increasing uncertainty of the economic environment of enterprises not only significantly increases the role of internal control in the enterprise management system, but also sets a number of tasks for the development of its methodological and organizational aspects aimed at ensuring the adaptation of economic entities to changes in the external and internal environment. The article systematizes the theoretical foundations of internal control for the development of a comprehensive approach to building a system of internal control of capital reserves. The analysis of the concept of internal control is carried out and the essence of internal control of capital reserves is defined, the purpose and tasks of internal control of capital reserves are outlined. Using the general scientific method of deduction, the stages of internal control of capital reserves are developed and the elements of the system of internal control of capital reserves are determined. According to the results of the study it is established that the system of internal control of reserves of the enterprise covers four types of elements – subjects of control, objects of control, methods of control and means and channels of communication, and the process of this control - three groups of stages, namely organizational and preparatory, research and result-generalizing. Therefore, for the organization of internal control of capital reserves at the enterprise it is necessary to provide effective communication for receiving and transmitting the necessary information flows. Then the internal control system will be able to provide information not only about the past and present state of a particular object, but also to identify its future trends.

Prediction of Systemic Risk Contagion Based on a Dynamic Complex Network Model Using Machine Learning Algorithm

It is well known that the interbank market is able to effectively provide financial liquidity for the entire banking system and maintain the stability of the financial market. In this paper, we develop an innovative complex network approach to simulate an interbank network with systemic risk contagion that takes into account the balance sheet of each bank, from which we can identify if the financial institutions have sufficient capital reserves to prevent risk contagion. Cascading defaults are also generated in the simulation according to different crisis-triggering (targeted defaults) methods. We also use machine learning techniques to identify the synthetic features of the network. Our analysis shows that the topological factors and market factors in the interbank network have significant impacts on the risk spreading. Overall, this paper provides a scientific method for policy-makers to select the optimal management policy for handling systemic risk.

Liquidity and Business Performance : A Study of Selected Indian Banks

Banks across the globe are facing liquidity issues. Sound liquidity management can reduce the probability of serious problems. Ideally, a bank needs to maintain enough high-quality liquid assets to meet its liquidity needs to withstand all kinds of possible stress situations. During the early phase of the 2008 financial crisis, many banks did not manage their liquidity prudently. These banks experienced major difficulties despite adequate levels of capital reserves. The Indian banks responded to the crisis by adopting cautious liquidity management policies. Alternatively, higher liquidity could work unfavorably for banks and mean smaller business. In this context, the present study attempted to understand the liquidity management by Indian banks and its impact on their business. The study focused upon selected large public and private sector banks so as to analyze and compare the liquidity and business performance of banks before the financial crisis (2001-02 – 2007-08) and after the crisis (2008-09 – 2018-19). The results revealed that Indian banks preferred higher liquidity in the post-crisis phase. At the same time, they cautiously managed to grow their business, albeit at a slower pace.

Pengaruh Rasio Kecukupan Modal, Likuiditas, Risiko Kredit, Efisiensi Biaya Dan Tingkat Inflasi Terhadap Profitabilitas Pada Sektor Perbankan

Banking has a very crucial role in the national economy, because banks are often described as being the heart of the national economy. The bad development of a bank will affect the national economy, where this development will always be accompanied by challenges that must be faced. The regulatory burden that requires banks to set aside additional capital for banking capital reserves is aimed at mitigating world financial markets that have the potential to hamper bank stability. This research was conducted to find out how much profitability in banking sector companies listed on the Indonesia Stock Exchange in the 2017- 2020 period had a significant impact on profitability. The population is all banking sector companies listed on the Indonesia Stock Exchange in the 2017-2020 period while the sample is 10 banks listed on the IDX with the largest number of assets based on Bank Indonesia using the purposive sampling method. The results of this study provide significant CAR and LDR but do not affect ROA. Meanwhile, partially NPL, BOPO and CPI have a significant impact on ROA. The magnitude of the impact of predictor variables on profitability using the results of multiple linear regression statistical tests, the adjusted R² value is 0.922. This means that the impact given by the independent variable on the dependent variable is also partially simultaneous, which is 92.2%. While the remaining 7.8% is influenced by other variables outside this research model

Problems of accounting methods in credit unions as non-bank financial intermediary and their solutions

According to the results of the study, it was argued that the main problems of the accounting methodology in credit unions are due to the need to apply accounting and reporting standards intended for commercial enterprises, while credit unions are non-profitable financial institutions. It is determined that mostly this problem concerns about the accounting for equity of credit unions. The article substantiates the expediency of reflecting in the balance of membership dues of members of credit unions precisely as components of equity. The classification and characteristics of capital reserves and cash reserves of credit unions aimed at ensuring the appropriate level of their financial stability are given. Recommendations on improving the analytical accounting of these reserves in accordance with their purpose and the requirements of regulatory documents governing the systematization of accounting accounts are presented. Despite the fact that the activities of credit unions as non-bank financial intermediaries are subject to rather strict legislative regulation, the accounting methodology for the main business operations i.e. attracting deposits and issuing loans, is not sufficiently disclosed in peremptory documents. The article provides a classification of loans and deposits to deposit accounts of members of credit unions. Forms of analytical accounting of contributions to deposit accounts of members of credit unions and loans issued by them are proposed, which make it possible to conduct analytical accounting for each debtor and creditor, and also form an information base for monitoring timely and full repayment of debts on loans and attracted deposits.

Structural modeling of the impact of bank nonperforming loans on the banking sector: the Ukrainian experience

The paper aims to develop scientific and methodological approach to assessing the interaction of nonperforming loans of Ukrainian banking institutions, the profitability of the banking sector and its financial stability, which will allow a more detailed assessment of the directions and degree of mutual influence of these elements. To substantiate this interaction economically and mathematically, structural equation modeling was chosen. Particularly, Statistica was chosen as a software tool to assess the adequacy of the resulting model and determine the level of statistical significance of its parameters. Six key indicators were selected as a research information base, two for each subject of research: indicators of nonperforming loans in the banking sector (the volume of nonperforming loans and the ratio of problem loans excluding capital reserves), profitability indicators of the Ukrainian banking sector (assets profit and rate of return on capital), and indicators of financial stability of the Ukrainian banking sector (regulatory capital-to-risk-weighted assets ratio and liquid assets-to-total assets ratio). For calculations, statistic data of selected indicators for 2005–2019 were used. As a result of calculations, mathematical data were obtained that accurately described the interaction of nonperforming loans of Ukrainian banking institutions, the profitability of the banking sector and its financial stability. The adequacy of the model was verified based on the following criteria: main summary statistics (ICSF criterion, ICS criterion, discrepancy function, maximum residual cosine), noncentrality fit indices (noncentrality parameter, population noncentrality parameter, Steiger-Lind RMSEA index, McDonald noncentrality index, adjusted population Gamma index), other single sample indices (Akaike information criterion, Schwarz criterion), and a normal probability plot.

Provider Burnout and Fatigue During the COVID-19 Pandemic: Lessons Learned From a High-Volume Intensive Care Unit.

Provider Burnout and Fatigue During the COVID-19 Pandemic: Lessons Learned From a High-Volume Intensive Care Unit.

Pengaruh Rasio Kecukupan Modal, Likuiditas, Risiko Kredit dan Efisiensi Biaya Terhadap Profitabilitas Pada Bank Go Public

Abstract - This increase in economic growth does not necessarily increase the profitability of banks in Indonesia. There are three fundamental problems that have been unearthed by the Deposit Insurance Corporation (LPS) for banks, among others, the first decline in bank interest rates continuously causing bank interest margins to thin. Second, the regulatory burden requires banks to set aside capital for additional bank capital reserves and thirdly the potential increase in the risk of non-performing loans due to global economic uncertainty and the uneven recovery of the domestic economy. For this reason, this research was conducted to find out how much profitability of domestic banks listed on the Indonesia Stock Exchange in the period 2014-2018 and also the relationship between internal predictors which, according to the review study, had a significant effect on profitability. The population in this study were 43 banks listed on the Indonesia Stock Exchange in the 2014-2018 period while the sample was 10 banks listed on the IDX with the largest number of assets according to Bank Indonesia using the purposive sampling method. The results showed a significant CAR, LDR, NPL and BOPO significantly influence ROA. While partially LDR, NPL and BOPO have a significant effect on ROA while CAR has no significant effect. The magnitude of the effect of the predictor variable on profitability using the coefficient of determination obtained by 74.2% while the remaining 25.8% is influenced by other variables outside this research model.Keywords: Capital Adequacy Ratio (CAR), Liquidity Ratio (LDR), Credit Risk (NPL), Operational Cost Efficiency (BOPO). Profitability (ROA).

EFFECT OF MANAGING FINANCIAL RISK ON THE FINANCIAL PERFORMANCE OF LISTED BANKS IN KENYA

Purpose: Management of financial risk is a fundamental management task that commercial banks have incorporated to help shield the commercial banks from losses. However, listed commercial banks have, in recent times gone through challenging times from a performance perspective. This research assessed the correlation between financial results of commercial banks on Nairobi Stock Exchange from a perspective of managing financial risk.Methodology: A descriptive research design was used along with quantitative research data by collecting panel data for the period 2009-2018 from annual supervision of banks reports along with audited accounts for the concerned entities. Accordingly, an analysis of collected data followed using SPSS 24, which employed descriptive analysis, correlation and regression testing.Results: Results further indicate that credit risk results in (β) = -1.066; liquidity risk (β) = -.326 and interest rate risk (β) =.603 changes on the banks financial results. Research findings are expected to enhance policy and practice within the banking industry in Kenya.Contribution of Study: To the regulator the study advocates for new guidelines to ensure that banks have better monitoring mechanisms to avoid breaching their capital reserve requirements. Listed banks should design more robust credit analysis policies and loan administration. This will allow the commercial banks to expand their lending activities to individuals and small businesses overcoming the challenges experienced due to the interest rate caps.

The capital structure decisions of Islamic banks in the GCC

PurposeThis study aims to find the determinants of the capital structure of Islamic banks in the Gulf Cooperation Council countries (GCC). The uniqueness of the case of Islamic banks stems from the fact that they are not only subject to the supervision of financial regulatory bodies that organize the banking sector (e.g. central banks) but also subject to the guidelines of Shari’ah law governing their financial transactions, products and contracts. Such characteristics are expected to have an impact on the capital structure decisions of Islamic banks compared to their conventional counterparts.Design/methodology/approachTo achieve the research purpose, an empirical model was constructed to describe the relationship between leverage and the independent variables. The empirical model was tested through multivariate regression analysis using a panel data approach of 12 Islamic banks in the GCC for the period 2005-2014. Three types of regression analysis were used as follows: ordinary least squares (OLS), fixed-effect and random-effect regressions on panel data.FindingsThe research findings show that the leverage of Islamic banks in the GCC is positively related to size of the firm (SIZE) and growth opportunity (GROWTH); and it is negatively related to profitability of the firm (ROA), tangibility of the firm’s assets (TANG) and financial market development (MRKT). The results indicate that larger Islamic banks tend to be relatively more diversified with higher credit ratings, which lower their cost of funding and relatively increase its profitability and the bank’s customer/depositor base. The results also show that higher profitability ratios indicate relatively more internal funds to cover future investments, which leads to less reliance on external funds in the form of debt and/or equity. However, the higher the growth opportunities of Islamic banks, the faster the depletion rate of internal funding, and the more external debt financing is acquired to cover the expansion plans. In addition, the results show that in developed financial markets, savers tend to purchase less traditional depository products, and they prefer to invest directly in the financial markets to avoid higher commissions. The results are in line with the pecking order theory, which states that Islamic banks in the GCC tend to prefer sources of funds that have the least transaction cost and reveal minimal information to competitors. Hence, bank management resort to internally generated funds by its operations rather than acquiring external funds. Furthermore, the results are weakly explained by the agency theory, which states that as the firm assets become more tangible, the required monitoring cost is reduced; and hence, shareholders will have less tendency to raise more debt for the purpose of sharing the monitoring cost with debt holders.Research limitations/implicationsThis research study contributes to the theory of capital structure in re-validating the findings of a previous theoretical and empirical study on capital structure in the GCC and abroad. It helps understand the capital structure of Islamic banks in comparison with financial and non-financial firms. Future research is recommended in several areas. In terms of the methodology, it is recommended to conduct the research topic surveying management and financial executives of Islamic banks in the GCC; this will validate the results using a triangular approach supported by the findings of this paper. It is also recommended to apply the research methodology in other parts of the world where Islamic banking exists. Finally, as studies on the capital structure of financial institutions and other regulated sectors are rare, it is recommended to intensify research effort in these sectors to strengthen our knowledge of capital structure.Practical implicationsFrom a practical perspective, this research bridges the gap between theory and practice in many aspects. The findings can serve Islamic bank executives as guidelines to understand the market and competitive reaction in response to capital structure decisions. On the other hand, research analysts and equity holders can use the findings in their debt and equity research valuations, assessment of the size of dividends and profit distributions, and to make more informed decisions to buy/sell financial securities. Furthermore, the findings help regulatory bodies to issue informed regulations in relation to capital adequacy ratios, reserve requirements, provisions and payout decisions to achieve policy intended purpose. In addition, organizations that are responsible for setting accounting and audit standards for Islamic banks will learn more about the industry practice; and hence, be able to pass practical standards. Moreover, the findings realize the recommendations of international financial regulatory bodies, such as the International Monetary Fund (IMF), the World Bank (WB) and other concerned organizations that emphasize the importance of further understanding of financial institution practices, to enable more effective formulation of risk management techniques, which may prevent future financial crisis.Originality/valueThis paper was amongst the few research studies conducted on determinants of capital structure in the GCC and specifically on the Islamic banking sector.

Risk capital reserve and measurement precision in modeling heavy-tailed single operational losses

Heavy and long tails of loss distributions, an extremely high confidence level and parameter-estimation-based measurement techniques can lead to measurement errors in the calculation of capital reserve for external risks faced by financial institutions. However, studies on the connectedness between the capital reserve and the measurement uncertainty are surprisingly sparse. Our paper attempts to simultaneously quantify single operational losses using a general convolution approach and compute the precision of the quantification output using an error propagation theory. By linking these two models up, we find a nonmonotonic and uncertain relationship between the risk capital estimate and its precision, with exact patterns determined by a set of characteristic parameters of the loss distributions chosen. Such patterns are substantiated by the empirical evidence from the literature. This paper provides a rationale for adopting quantitative buffer capital, designed to absorb variations due to measurement errors, especially those originating from the estimation risk.

The Accounting and Legal Issues of Capital Reserve, with Particular Emphasis on Capital Increase by Share Premium

The type of capital market transaction in which external investors become the members of an undertaking through capital increase by share premium is frequent in everyday business life. We confirmed the significance of the use of the capital reserve for the purposes of maintaining the solvency of an undertaking by using a descriptive statistical analysis. Based on the interpretation of the legal regulation, and the analysis of the accounting and legal practice we found that the Hungarian accounting and legal regulation on capital reserve in force does not ensure sufficient protection and transparency, which weakens social and business trust in business associations. For this reason we would consider it useful from an accounting perspective if capital reserve, similarly to subscribed capital called but not paid, could be paid subsequently, and if it was shown in a separate line of the balance sheet as long as the payment is not made, and if the supplementary notes also contained an obligation to provide information in that regard. Legal risks can be reduced if the arbitral tribunal’s clause is included in the memorandum of association or syndicate contract in the case of capital increase by share premium. The excessive length of proceedings and capital shortfalls may jeopardise the success of the undertaking as a whole. It would strengthen the operation of the economy and legal certainty if the Court of Registration registered capital increase by share premium only when the capital reserve has already been paid in a verified manner in addition to the subscribed capital.

Probability space of regression models and its applications to financial time series

We introduce a notion of a probability space of regression models and discuss its applications to financial time series. The probability space of regression models ℒ=(ℳ,℘) consists of a set of regression models ℳ and a probability measure ℘, which is based on the model “quality”, i.e. its ability t o “fit” into historical data and to forecast the future values of the target variable. The set of regression models ℳ is assembled by selecting various combinations of input variables with different lags, transformations, etc., and varying historical data sets that are used for model building and validation. It is assumed that the model set ℳ is “complete” in the sense that it exhausts all the “meaningful” regression models that are possible to be built given available historical data and independent variables. Each model M from the set ℳ yields a scenario y⁢(t;m) for the target variable y, and thus the probability space of regression models ℒ=(ℳ,℘) allows one to build a probability distribution for Y⁢(t) for each projection time t. We demonstrate how those distributions can be used to estimate risk capital reserves required by the regulators for large U.S. banks for credit and operational risks under the macroeconomic scenarios provided by the Federal Reserve Bank (FRB) for the Comprehensive Capital Analysis and Review (CCAR) stress testing.

CREDIT RISK AND BANK PROFITABILITY OF COMMERCIAL BANKS IN GHANA

This study attempted to explore the connection between credit risk management and the profitability of the Ghana Stock Exchange (GSE) listed commercial banks. The study specifically sought to examine the relationship between credit risk and the profitability of the firms as measured by ROA. The study adopted these variables to measure credit risk (non-performing loan ratio, cost per loan asset, capital reserved 0.1ratio and asset growth ratio) and return on asset (ROA) as a profitability estimator. Following some diagnostic and specification studies to address the fundamental assumptions of the Classical Linear Regression Model (CLRM). The study uncovered that NPLR had a significantly negative effect on the firms’ profitability as measured by ROA [β=-0.1671, (p=0.1360)>0.05]. Also, the cost per loan asset (CPLA) had a positive influence on the firms’ profitability as measured by ROA [β= 0.0249, (p=0.8252)>0.05]. For the other variables of credit risk measurements, capital reserved ratio, and assets growth ratio. The capital reserve ratio had a significant positive association with ROA [β=0.2867, (p=0.0095) <0.05. Similarly, asset growth ratio had a statistically significant negative connection with firm’s profitability measured by ROA [β=-0.3835, (p=0.0004) <0.05. Based on the results, the study suggested that since credit risk had a negative association with the firm’s profitability, the companies should adopt efficient credit risk management methods to assist guide their profitability. This point is raised because, as demonstrated by the results of the study, an increase in credit risk led to a decrease in the profitability of the companies. KEYWORDS: Credit risk, Commercial banks, Loans, Profitability, Ghana Stock Exchange.

Second-generation Succession and the Financialization of Assets: An Empirical Study of Chinese Family Firms

ABSTRACT This research examines whether intra-family leadership succession in Chinese family firms influences the decision to allocate more financial assets, the factors that influence second-generation successors in making such decisions, and their impacts on firm performance. The study collected firm and CEO data in which second-generation CEOs’ characteristics were captured, and the findings suggest second-generational involvement is a critical factor in the financialization of assets. Furthermore, the study finds that second-generation CEOs’ characteristics, market competition, and financing constraints have significant effects on second-generation successors when making asset-allocating decisions, and this is particularly true for financing constraints due to capital reserve motivations. The study finds no significant relationship between the financialization of assets in second-generation family firms and the family firms’ performance. This implies that firm innovation does not mean to neglect primary operating business. The results are robust after considering possible endogeneity issues and to various specifications of variables.

Ruin probabilities for a Lévy-driven generalised Ornstein–Uhlenbeck process

We study the asymptotics of the ruin probability for a process which is the solution of a linear SDE defined by a pair of independent Levy processes. Our main interest is a model describing the evolution of the capital reserve of an insurance company selling annuities and investing in a risky asset. Let $\beta >0$ be the root of the cumulant-generating function $H$ of the increment $V_{1}$ of the log-price process. We show that the ruin probability admits the exact asymptotic $Cu^{-\beta }$ as the initial capital $u\to \infty $, assuming only that the law of $V_{T}$ is non-arithmetic without any further assumptions on the price process.

Choice, Capital, and Competition: Private Mortgage Insurance Application and Availability

ABSTRACTThe financial health of the mortgage insurance industry is vital for the flow of mortgage credit to low-wealth borrowers. Private mortgage insurance competes with insurance offered through the federal government, particularly the Federal Housing Administration. This article employs a Heckman selection model and a database of mortgage insurance applications to examine the impact of capital reserves and federal competition on the credit decisions of private mortgage insurance companies while accounting for applicants’ decisions to seek private insurance. I find private insurers became more likely to deny applications as their capital ratios fell during the Great Recession. However, loans eligible for insurance through the Federal Housing Administration were less likely to be denied than higher loan amounts were. These findings are important for understanding how the conventional mortgage market, including government-sponsored enterprises, functions through a severe housing crisis.

Analysis on the Realization Path of the Coordinated Development of Shaanxi Higher Education and Guanzhong City Group Industry Chain

The joint or coordinated development of urban industrial chain and higher education has become a trend in the development of higher education in the world. In the process of the formation of industrial chain division of urban agglomeration, higher education resources play a two-way aggregation spillover effect. Higher education is closely integrated with the regional economy and society and has developed in regional economic and social development and prosperity. On the whole, the level of higher education investment and industrial agglomeration of Guanzhong urban agglomerations is always at a disadvantage. The coordinated development of Shaanxi higher education and Guanzhong Plain urban agglomeration industrial chain should be achieved through five aspects: increasing financial input, strengthening regional human capital reserve; innovating university application-oriented talent training model, boosting local industrial cluster transformation and upgrading; The talent incentive mechanism attracts high-quality talents; rationally plans the industrial layout, guides the moderate concentration of industries in the region; optimizes the regional layout of higher education.

Organizational culture in the system of human capital behavior regulation

The article examines the evolution of concepts about a human being in labor process. It is determined that the category of «human capital» derived from such definitions as «labor force», «labor resources», «labor potential», and «human factor». The essense and peculiarities of the «human capital» category is disclosed, and its significance for am enterprise is substantiated. That author proves that to manage the human capital it is necessary to form the organizational culture, which will mobilize the reserves of human capital. It is shown that the management of organizational culture allows to make the interests of human capital closer to the values and objectives of the enterprise through the unity of community, the clarity of organization priorities for employees and due to the regulation of personnel behavior. The paper singles out the organizational culture main components, namely, the personnel selection criteria, work and discipline organization, making decision processes, communication systems at the enterprise. The author studies the influence of the determined organizational culture components on the personnel behavior. It is substantiated that the organizational culture impacts strong enough on the formation of functional, economic, adaptive and characterological behavior of human capital. The essence of these types of enterprise behavior are analyzed. For further research the hypothesis is framed, it says according to the arrangement of basic components, the organizational culture bears its different shade for each organization and enables to develop the particular types of employees’ behavior.