Bank Financial Stability Research Articles

PENGARUH KOMPETISI BANK TERHADAP STABILITAS SISTEM KEUANGAN PERBANKAN (STUDI KASUS PADA KBMI IV TAHUN 2019-2022)

The emergence of banking as an intermediary institution plays a very important role in the economy because it is the heart that must pump "money" and distribute it to all organs that need the money. Therefore, it is very important to maintain the stability of the banking financial system. The development of the banking system can trigger competition in the banking industry which can affect banking stability. This research was conducted to determine the effect of bank competition on the stability of the banking financial system. This research focuses on KBMI 4 data which is a large bank HHI index, market share and Loan to Deposit Ratio (LDR) used as a proxy for competition and Non-Performing Loans (NPL) as a proxy for banking financial stability. The analysis technique used is Panel Data Regression with KBMI 4th ​​quarter data for 2019-2022. Of these three variables, the HHI index and Loan to Deposit Ratio (LDR) variables have a significant effect on Non-Performing Loans (NPL). Meanwhile, the market share variable has no significant effect on Non-Performing Loans (NPL).

Effectiveness of banking financial stability in light of the indicators of Central Bank of Iraq (MACHINE LEARNING) - an analytical study of a sample of banks listed on the Iraq Stock Exchange

Effectiveness of banking financial stability in light of the indicators of Central Bank of Iraq (MACHINE LEARNING) - an analytical study of a sample of banks listed on the Iraq Stock Exchange

Does board gender diversity affect bank financial stability? Evidence from a transitional economy

Does board gender diversity affect bank financial stability? Evidence from a transitional economy

The Influence of Financial Technology on Banking Financial Stability

The Influence of Financial Technology on Banking Financial Stability

Does Macroeconomic Moderate The Effect of Risk and Diversification on Financial Stability? Evidence from Islamic Commercial Bank

<em><span>Islamic banking's financial stability can improve efficiency and health and be able to withstand shocks originating from internal and external factors. This study analyzes the impact of risk, diversification, and inflation on the financial stability of Islamic banking. By using monthly time series data from 2018–2022, the analysis method used is multiple linear regression and moderate regression analysis (MRA) using the Eviews version 10 application. The results showed that the credit risk variable (NPF) has a significant negative relationship to financial stability (Z-Score). As well as the liquidity risk variable (FDR), financing diversification has a significant positive effect on the financial stability of Islamic banking (Z-Score). Macroeconomic variables (inflation) can strengthen the effect of financing diversification and weaken the effect of liquidity risk (FDR), but inflation cannot moderate the effect of credit risk (NPF) on the financial stability of Islamic banking (Z-Score). This study introduces a new theoretical approach to the conceptual relationship between variables. The findings can serve as a reference for monetary authorities in considering the impact of inflation in setting financial stability policies.</span></em>

Evaluation of Total Risk-Weighted Assets in Islamic Banking through Fintech Innovations

The assessment of total risk-weighted assets (LTRWAs) in the banking sector is of the utmost importance. It serves as a critical component for regulatory compliance, risk management, and capital adequacy. By accurately assessing LTRWAs, banks can effectively meet regulatory requirements, efficiently allocate capital resources, and proactively manage risks. Moreover, the accurate assessment of LTRWAs supports performance evaluation and fosters investor confidence in the financial stability of banks. This study presents statistical analyses and machine learning methods to identify factors influencing LTRWAs. Data from Bahrain, Jordan, Qatar, the United Arab Emirates, and Yemen, spanning from 2010 to 2021, was utilized. Various statistical tests and models, including ordinary least squares, fixed effect, random effect, correlation, variance inflation factor, tolerance tests, and fintech models, were conducted. The results indicated significant impacts of the unemployment rate, inflation rate, natural logarithm of the loan-to-asset ratio, and natural logarithm of total assets on LTRWAs in regression models. The dataset was divided into a training group (90% of the data) and a testing group (10% of the data) to evaluate the predictive capabilities of various fintech models, including an adaptive network-based fuzzy inference system (ANFIS), a hybrid neural fuzzy inference system (HyFIS), a fuzzy system with the heuristic gradient descent (FS.HGD), and fuzzy inference rules with the descent method (FIR.DM) models. The selection of the optimal model is contingent upon assessing its performance according to specific error criteria. The HyFIS model outperformed others with lower errors in predicting LTRWAs. Independent t-tests confirmed statistically significant differences between original and predicted LTRWA for all models, with HyFIS showing closer predictions. This study provides valuable insights into LTRWA prediction using advanced statistical and machine learning techniques, based on a dataset from multiple countries and years.

Effect of efficiency and inflation rate on the financial stability of banks in Asean-5 countries

effect of efficiency and inflation rate on the financial stability of banks in Asean-5 countries

Comparative Temporal Analysis of SVM-Based Machine Learning Techniques for Bank Risk Assessment

This paper introduces an innovative approach that utilizes support vector machines (SVMs) to predict the bankruptcy of financial institutions within the United States. The study aims to identify influential factors that contributed to bankruptcy during two significant peri-ods: the 2008 financial crisis and post-2013. The goal is to highlight both shared and distinc-tive characteristics between these time frames. The proposed method incorporates a meticu-lous feature selection procedure to identify the most critical variables for assessing a banks financial stability. Subsequently, the SVM model is fed with data containing these key vari-ables from various banks, initiating both the training and testing phases. Specifically, two SVM models were trained: one utilizing a linear kernel, and the other employing a non-linear kernel. The objective was to assess their effectiveness in distinguishing between solvent and insolvent banks. Moreover, a neural network model was developed and subjected to a com-parative analysis alongside the aforementioned SVM models, all with the aim of identifying the optimal method for bankruptcy prediction. The training dataset comprised data from the ten quarters preceding bank failures post-2013, as well as the eight quarters leading up to bank failures in 2010, during 2008 financial crisis. The SVM models were implemented us-ing Scikit-Learn, while the neural network model was trained using PyTorch. Through this comprehensive approach, the paper contributes to the advancement of predictive methodolo-gies for identifying potential financial institution bankruptcies.

Competition and bank financial stability: evidence from an emerging economy

Competition and bank financial stability: evidence from an emerging economy

Capital Level and Financial Stability of Commercial Banks in Kenya

The soundness of banks' finances serves as the foundation for the entire financial sector because they are essential to promoting economic growth. A commercial bank's financial stability should be assessed with specific emphasis given to domestic and foreign issues that affect how the bank operates and figuring out the amount of their influence on the status and operations of the commercial bank. Nevertheless, the impact of the company's capital, liquidity, and asset quality on the financial stability of commercial banks has not been studied. This study aimed to evaluate the effect of capital level on licensed commercial banks’ financial stability in Kenya. The research was anchored by capital buffer theory. The explanatory research design was adopted to analyze thirty-nine banks for the period 2016 to 2022 based on the census approach. The study outcomes were arrived at using secondary data obtained under the guidance of the secondary data collection schedule. The assessment of the investigation was evaluated premised on descriptive and panel approaches. The findings indicated that capital level had a positive and significant effect on the financial stability of commercial banks. The study recommended that commercial banks should adopt strategies and measures that will enable them to increase the capital level leading to an increase in financial health.

The moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance: evidence from Egypt

Purpose The purpose of this paper is to investigate whether audit committee characteristics, in particular audit committee size, audit committee activity and audit committee gender diversity, are associated with financial performance in Egyptian banks. The second purpose of this paper is to explore the moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance. Design/methodology/approach A multiple regression analysis is used to estimate the moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance of a sample of Egyptian banks during the period between 2018 and 2022. Findings The results indicate that audit committee size has a negative and insignificant effect impact on return on assets (ROA) and return on equity (ROE), respectively. The results also indicate that the audit committee gender diversity has a significant positive impact on ROA and ROE, respectively. Regarding audit committee activity, the number of board meetings has a negative and insignificant effect on ROA and ROE, respectively. Regarding gender diversity as a moderating variable, in general there is a positive effect of gender diversity on the relationship between audit committee characteristics and financial performance. Research limitations/implications The study was limited to 20 banks in one country, but it sets the tone for future empirical research on this subject matter. The study also relied on one moderating variable, which is board gender diversity. This study provides an avenue for future research in the area of corporate governance and financial performance in other emerging countries, especially other African countries. Practical implications This study provides useful insights for managers and policymakers to better understand which audit committee characteristics can best encourage a company to improve financial performance. Furthermore, regulators should ensure that banks strictly adhere to corporate governance principles to build a strong banking industry capable of achieving economic development. Social implications Banks will benefit equally from valuable qualities across demographic groupings in society by having females on the audit committee and appropriate audit committee meetings. Additionally, if audit committee members are correctly selected, banks with more females in audit committee and suitable audit committee meetings can successfully contribute to strengthening financial performance and social welfare of diverse segments of society. A culture of good banking governance must emerge to improve bank financial stability and, as a result, greater stability and economic growth. Originality/value To the best of the authors’ knowledge, the study is, perhaps, the first to examine the moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance in Egyptian banks. This study adds to the literature by investigating such an issue in a developing economy that operates in a different context than those in developed countries.

The impact of inflation on bank stability: evidence from the MENA banks

PurposeSerious concerns about the stability of the international financial systems have arisen recently, resulting from the mounting inflation rates and the accompanying procedures to control them. Consequently, this study aims at examining empirically the impact of inflationary pressures/shocks on the stability of banking sectors.Design/methodology/approachThe study adopts a dynamic GMM models and exploits a sample of 188 banks operating in 14 MENA economies, over the period 1999–2021.FindingsThis research finds that high inflation does indeed harm bank financial stability and deteriorates banks credit risk. Furthermore, the examination of the impact of interaction terms between inflation and bank-specific and institutional quality variables shows that better capitalisation levels, higher liquidity buffers, larger asset size, greater market power, foreign ownership and overall political stability, all can counterbalance the impact of inflationary pressures on MENA banks financial stability.Originality/valueIn addition to empirically revealing how inflationary shocks can deteriorate financial stability, the main novelty of this research is examining how the interactions between inflation on one hand, and bank-specific and institutional quality on the other, affect bank stability.

Analisis Monitoring Pembiayaan Mudharabah dalam Mengurangi Resiko NPF pada Bank Muamalat KCP Sukaramai Medan

This research aims to analyze the monitoring and mitigation of NPF risk in mudharabah financing at Bank Muamalat KCP Sukaramai Medan. The research method used is a descriptive qualitative approach with data collection through observation, interviews and analysis of related documents. The analysis results show that Bank Muamalat has implemented various risk mitigation strategies such as financing restructuring, monitoring partners, and portfolio diversification to reduce NPF risk. The significant decline in the NPF level after implementing risk mitigation policies shows the effectiveness of this strategy in maintaining bank financial stability. In conclusion, the monitoring analysis of mudharabah financing at Bank Muamalat KCP Sukaramai Medan proves the importance of risk mitigation strategies in managing NPF risk and ensuring the sustainability of sharia banking business.

Nexus of governance, macroeconomic conditions, and financial stability of banks: a comparison of developed and emerging countries

The study aims to explore the impact of governance and macroeconomic conditions on financial stability in developed and emerging countries. The study sample comprised 122 countries from 2013 to 2020, and a comprehensive set of variables was used to construct the financial stability index (FSI). The results of the two-step system GMM analysis, robust with D–K regression, indicate that interest rate, GDP growth, voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, and control of corruption have a positive and statistically significant impact on financial stability. However, inflation, money supply, and the rule of law have adverse and insignificant effects on financial stability. Notably, the findings vary between developed and emerging countries due to differences in governance and macroeconomic conditions and their role in financial stability. The study concludes that regulatory governance and macroeconomic conditions are crucial for financial stability. These outcomes are significant for central banks, academia, and policymakers, as they emphasize the need for stable financial systems and sustainable, balanced growth through governance and macroeconomic conditions.

Factors of influence on the financial stability of banks in Ukraine

Factors of influence on the financial stability of banks in Ukraine

Board Structure and the Financial Stability of Banks in Nigeria

The stability and prosperity of any bank is to a large extent dependent on the integrity of its business and markets shares. This study therefore examined the effect of Board Structure (board size, board independence and board members affiliations) on Bank Financial Stability in Nigeria. The study employed quantitative research method with data spanning between 2010 and 2022. The descriptive statistics, which involved the characteristics of the existing corporate board structure of listed Banks in Nigeria showed that; no Bank in Nigeria has less than an average number of 10 Board members; that on the average, independent Board members account for 39% of the Board of Directors while 28% has the least affiliated Board members at the period of this study. The empirical results showed that Board size and the board independence have negative and significant effects on the Sharpe ratio of Nigerian Banks. This is an indication that Nigerian banks are highly sensitive to changes in Board independence and the reward to volatility ratio of banks fell approximately by 3% as Board size increased to 10%. Unlike the Board size and Board independence, Board affiliation has positive and significant effect on the Sharpe ratio of the Banks. In this regard, a 1% increase in Board affiliation will engender 0.4% improvement in the financial stability of Nigeria Banks. This follows that not only that the set of people made up of affiliated members are over-blotted but also that their impacts were positively felt in Nigeria Banks. Thus the study concludes that increase in Board size and Board independence inhibits financial stability of Nigeria Banks while Board affiliation, showed positive effect on financial stability. The study recommends that Nigeria banks should reduce Board size and critically look into the type of independent Board members employee while maintaining board affiliation in order to enhance financial stability

Russian Banks Financial Stability Loss Diagnostic: Multidimensional Logit-Model Approach

The financial stability of the banking sector characterizes the "economic health" at the national and global levels and its deterioration is a cause of financial crises. Improving the toolkit for early diagnosis of financial problems is a key element of monitoring and forecasting banking risks. The purpose of the study is to examine the specific features of intrabank factors influencing the risk of financial stability loss in Russian banks. The research hypotheses are as follows: 1) the highly significant predictors of bank's financial instability risk are return on assets and overdue loans; 2) the impact degree of financial stability factors differs for medium- and long-term horizons of risk forecasting. The authors present multidimensional logit models for estimating the probability of the loss of financial stability by banks for 6 and 12 months based on four variables: capital adequacy ratio, overdue loans fraction over 90 days, return on assets, current liquidity ratio. It was revealed that a growth of return on assets has a positive significant effect on financial stability, and an increase in overdue loans has a negative significant effect on a bank's "financial immunity". It is shown the impact degree of financial stability factors is varied for different forecast horizons: the return on assets is a more relevant factor for 6 months, and the overdue loans fraction is more important for a 12 month period. The theoretical significance consists in better scientific understanding of factors impacting on a bank's financial stability. The practical significance lies in the possibility for commercial banks to use econometric models and conclusions in analytical and risk-predictive algorithms.

Country Risk and Financial Stability: A Focus on Commercial Banks in Africa

This paper employs dynamic panel models to investigate the impact of country risk on the financial stability of banks in Africa. Using country risk and bank specific data for 10 African countries over the period of 2000 and 2021, the results reveal that African countries have a high country risk exposure. The country risk negatively and significantly affects African bank stability. The study findings suggest that compliance with at least Basel II capital requirements is needed to protect African banks from the negative effects of country risk on their stability in the short run. However, the adverse effects of prolonged country risk are mitigated by the compliance with higher Basel capital requirements in the long run. The results further show that an efficient legal and regulatory framework is essential to complement the capital buffer against country risk. Policies must be introduced to reduce country risk to enable African banks to adequately support the African economy in good and challenging times. Overall, country risk remains a threatening factor for bank stability, and consequently, banks need adequate capital to reduce the impact of country risk on bank stability in Africa.

An Empirical Analysis of the Dynamics Influencing Bank Capital Structure in Africa

Financial institutions, particularly banks, have long grappled with the dilemma of structuring their capital optimally. This process, commonly referred to as capital structure decision-making, is of paramount importance, especially within the financial services sector, where strict regulations are imposed by reserve and central banks in alignment with global Basel guidelines. This study unveils the key factors that determine the capital structure choices of African banks, using panel data encompassing 45 listed banks across six nations that had embraced the Basel III Accord spanning the years 2010 to 2019. The study used the system-generalised moment methods (sys-GMM) estimator to fit the formulated panel data regression model. The study findings showed positive associations between ZSCORE, an indicator of bank financial stability, and net interest margin ratio (NIMR) with bank leverage (TCTE). In addition, the results revealed positive correlations between earnings volatility (EV), profitability (P), and risk (R) with bank leverage (TDCE). This suggests that profitable banks are inclined to favour debt financing, a phenomenon driven by their ability to comfortably service debt obligations with free cash flows. This study’s overarching conclusion underscores the dominant influence of the Liquidity Coverage Ratio (LCR) on African bank capital structures. Whether assessing traditional or Basel III-prescribed measures of bank leverage, LCR consistently emerged as the primary determinant. This finding is of significant relevance to bank executives and regulators, offering them essential insights for informed decision-making by considering striking a balance between equity and debt financing based on financial stability, profitability, and risk profiles.

Profitability–Stability Nexus in Commercial Banks: Evidence from BRICS

The financial stability of the banking sector is a prerequisite for a thriving and stable economy. Against this backdrop, this article investigates the relationship between bank profitability and the financial stability of the banks by explicitly capturing the role of bank size, institutional quality and market concentration. A sample of 776 banks operating in Brazil, Russia, India, China and South Africa over the period 2005–2020 are examined using panel regression and System GMM. Our findings support this axiom, and we conclude that bank profitability plays a critical role in determining the stability of the financial system. Our results are consistent across alternate measures of stability (VaR and ∇CoVaR), albeit insignificant. Furthermore, the results support the existence of the concentration–stability hypothesis in the banking industry of BRICS nations. The findings also indicate that non-interest income and NPA have a negative impact on stability, whereas institutional quality plays a significant role in maintaining the stability of the banking industry in these emerging economies. This article tries to provide empirical research investigating the association of the financial stability of banks with profitability, non-interest income ratio, market concentration and institutional quality.