Event Of Bank Failure Research Articles

Bank Failure Prediction Model Based on Governance: A Case of Rural Banks in Indonesia

Since it was first operating in 2005 until 2017, Indonesia Deposit Insurance Corporation (IDIC) has liquidated 91 rural banks which were determined as failed banks by supervision authority. The cause of the failing of the bank is mainly due to the incapability of the bank to meet the minimum Capital Adequacy Ratio (CAR). Bank’s capital was shrunk by the loss caused by fraud. The fraud is mostly induced by the lack of good corporate governance implementation. By using the logistic regression, it can be concluded that (1) the incomplete of responsibility letter which will be used in the event of bank failure, submitted by the bank commissioners; (2) the incomplete of responsibility letter which will be used in the event of bank failure, submitted by the bank directors; (3) role duplication between shareholders and board of directors; and (4) bank had classified as special supervision, have impact on the increase of rural banks failure. At the same time, the compliance level of rural banks to a correct premium payment has impacted to decrease of rural banks failure possibilities.

Effect of Ethical Leadership on Corporate Governance, Performance and Social Responsibility: A Study of Selected Deposit Money Banks in Benue State, Nigeria

NOTE: THIS ARTICLE WAS PUBLISHED WITH THE INFORMING SCIENCE INSTITUTE. Aim/Purpose............................................................................................................................................................................. This study seeks to examine the effect of ethical leadership on corporate governance, corporate performance and corporate social responsibility in selected Nigerian deposit money banks. Background............................................................................................................................................................................. Business ethics, corporate governance and corporate social responsibility developed as movements to check unethical and corrupt practices in organizations and by extension improve the performance of the organizations. However, the application of these measures has not yielded the desired results. This is evident in the number of top executives of corporate giants like Enron of the United States of America and Satyam of India that have been embroiled in unethical practices. In Nigeria, the corporate corruption and scandal involving top management of deposit money banks has given rise to mergers, acquisition and failure of some of the banks. Thus, this study argues that there is a missing link in the application of these measures. That missing link is ethical leadership. Methodology............................................................................................................................................................................. The study employed survey research design. Stratified sampling technique was employed to select the respondents that completed the questionnaire. The generated data were analyzed using linear regression. Contribution............................................................................................................................................................................... The study established that a robust organization can be developed by main-streaming corporate governance, corporate performance and corporate social responsibility using a nurtured ethical leader. Findings..................................................................................................................................................................................... The results reveal that ethical leadership has significant positive effects on corporate governance, corporate performance and corporate social responsibility. Recommendations for Practitioners......................................................................................................................................... Management should show more commitment in the selection and development of leaders and followers. All the stakeholders should be equally involved in the formulation of corporate governance principles. A nurtured ethical leader should be employed to mainstream corporate governance, corporate performance and corporate social responsibility through the organizational culture. Recommendation for Researchers............................................................................................................................................ The use of objective measures or better still subjective measures is suggested as a way of generalizing the present findings. Impact on Society...................................................................................................................................................................... The findings of this study will expose deposit money bank stakeholders to the consequences of ethical and unethical practices. It will create in bankers the need to abide by ethical leadership and to be whistle-blowers. The findings are expected to engender more stern monitoring measures by the banks’ regulatory agency. These measures are further expected to ensure the reinvention of the banks’ organizational culture so much so that they will contain the core values of code of ethics, corporate governance, performance and social responsibility. The outcome of the study is expected to make the regulatory agency more proactive rather than being reactive to deposit money bank matters. This will consequently put a stop to the fall in the taxes accruable to government in the event of bank failure. Future Research......................................................................................................................................................................... To generalize the findings for the whole of Nigeria, similar study should be conducted in other geopolitical zones of the country.

Banking and Financial Regulation in Emerging Markets

Purpose: The purpose of this special issue is to gain a deeper understanding of banking regulatory practices in emerging markets in the light of the financial crisis of 2007-08. The crisis necessitated countries to adopt macro-prudential policies in the current environment of globalized capital flows. The interconnectedness of financial institutions occurs not only across the world but also across a plethora of financial markets. Design/Methodology/Approach: The papers in this volume have a focused approach that addresses issues relating to the banking sector. The papers explore diverse issues such as the link between increased competition and the performance efficiency, application of macro prudential norms in credit growth and its relation thereof with the ownership pattern of banks, co-ordination between regulations and compensation in the event of bank failure and risk based regulation. All the papers are country specific and they take in India, Hong Kong and Nigeria.They will contribute to a better understanding of the various issues and will be of great use to academics for further research and for practitioners in new policy initiatives in the area of banking reform and regulation.

Banking Union Resolution Without Deposit Guarantee: A Transatlantic Perspective on What it Would Take

The project of creating a Banking Union is designed to overcome the fatal link between sovereigns and their banks in the Eurozone. As part of this project, political agreement for a common supervision framework and a common resolution scheme has been reached with difficulty. However, the resolution framework is weak, underfunded and exhibits some serious flaws. Further, Member States’ disagreements appear to rule out a federalized deposit insurance scheme, commonly regarded as the necessary third pillar of a successful Banking Union. This paper argues for an organizational and capital structure substitute for these two shortcomings that can minimize the systemic distress costs of the failure of a large financial institution. We borrow from the approach the Federal Deposit Insurance Corporation (FDIC) has devised in the implementation of the “Orderly Liquidation Authority” under the Dodd Frank Act. The FDIC’s experience teaches us three important lessons: first, systemically important institutions need to have in their liability structure sufficient unsecured (or otherwise subordinated) term debt so that in the event of bank failure, the conversion of debt into equity will be sufficient to absorb asset losses without impairing deposits and other short term credit; second, the organizational structure of the financial institution needs to permit such a debt conversion without putting core financial constituents through a bankruptcy, and third, a federal funding mechanism deployable at the discretion of the resolution authority must be available to supply liquidity to a reorganizing bank. On these conditions, a viable and realistic Banking Union would be within reach — and the resolution of global financial institutions would be greatly facilitated, not least in a transatlantic perspective.