Bank Financial Stability Research Articles

The Impact of bank regulation and supervision on bank's financial stability and soundness

The Impact of bank regulation and supervision on bank's financial stability and soundness

The Impact of Banking Competition on Bank Financial Stability: Evidence from ASEAN 5 Countries

In the era of the global economy, increasing banking competition will encourage an increase in banking transactions and activities. Banking transactions and activities will affect a country's financial stability. The purpose is to obtain the nonlinear effect of banking competition on financial stability at a specific regime. Previous research assumed that this impact applies to every economic regime. The impact of banking competition on financial stability can change at certain regime levels. Nonlinear impact occurs according to the regime. The method is based on a nonlinear threshold regression model. The researchers obtained the data from five ASEAN countries. The findings of this research are in-depth information about the financial system stability model. Analysis of the effect of variance supports the inconsistency of the effects found by several previous researchers. Practical implications are aimed at policymakers to make different decisions at the GDP level, CAR and Liquidity. The economic regime in each country is different, so this analysis is constructive for policymakers to see the conditions of banking competition and financial system stability at a certain regime level. The originality article systematically offers an analysis that assumes the effect can change at a certain regime level.JEL Classification: E5, G15, G01, G32, C24

Examining the Corporate Social Responsibility: A Dilemma to Influence Financial Performance, Customer Retention and Banking Financial Stability

Corporate Social Responsibility (CSR) is a form of corporate philosophy which implies that firms have a responsibility to contribute to the communities in which they do business. It is the ongoing commitment by a business to behave ethically and contribute to economic development while advancing environmental stewardship and contributing to society. An objective of this study is to present the impact of corporate social responsibility on firm performance, customer retention and financial stability in a single model that represents the association between these variables. Further, the banking sector of Pakistan has been selected as a target population, and t all the employees of different conventional banks are included in the sample frame. However those employees have included in the sample who belongs to Punjab and sindh province. Ultimately convenience sampling was used to collect data due to a larger population size and after deriving the sample size, data has collected from 236 respondents. A significant impact of CSR has been observed to be associated with the all-study variables, based on the findings of this study. Results of the study can provide the framework for policy makers to improve CSR practices for the wellbeing of society and business. A larger sample and a different methodology may be used in future studies to obtain the results that can generate new insights.

Banking Sector Stability and Economic Development: Assessment of Risks and Efficiency

"The banking sector plays a crucial role in the modern economy and serves as a significant catalyst for its development and stability. A well-functioning banking system is essential to ensure the effective functioning of other sectors of the economy, including support for businesses, households, and investors. However, the banking sector’s substantial importance and significance also make it particularly sensitive to various risks and uncertainties. First and foremost, financial instability in the banking sector can impact the overall economy. It can lead to downturns and crises. Such events emphasize the importance of studying and analyzing the risks associated with banking activities and developing effective mechanisms for their management. This article aims to investigate the stability of the banking sector and its interrelation with economic development. The authors analyzed the banking system’s key risks, such as credit, liquidity, market, and operational risks. In addition, they examined the impact of such factors as macroeconomic changes, regulatory measures, and innovations on the financial stability of banks. Furthermore, the effectiveness of different tools and methods to reduce the risks and ensure the banking sector’s stability is considered. The studies aim to increase the scientific understanding of the issues mentioned above and provide practical recommendations for making reasonable decisions in the sphere of banking policy. The research findings will be helpful for scholars, economists, financial institutions, regulators, and all stakeholders working in the field of financial stability and economic development."

Estimation of smoothing of consumer expenditures of Kazakhstan citizens and their chances to increase the demand for credit resources

The decline in the level of well-being of the population has been observed in recent years in some countries of the near and far abroad, as well as the growth of debt obligations of individuals to second-tier banks. Various indicators are taken as the level of well-being of the population in foreign researches in order to verify these statements. The ability of individuals and households to smooth out consumer spending in response to temporary rather than permanent income shocks is one of the key determinants of well-being according to the permanent income hypothesis and life cycle theory. In this regard, the ability of Kazakhstan citizens to smooth out consumer spending in response to shocks in employment, wages, debt burden and changes in temporary income are studied, as well as the chances of an increase in applications of Kazakhstan citizens for credit resources to second-tier banks are assessed in the presented article. Data for 16 regions of Kazakhstan for 2003–2020 are used to calculate coefficient estimates for the variables of interest. The results obtained indicate the ability of Kazakhstan citizens to smooth out approximately 7 % of temporary income. Meanwhile, negative employment shocks contribute to a 0,22 % reduction in consumer spending, ceteris paribus. The level of education and the average age of Kazakhstan citizens have a positive effect on the growth of consumer spending. It should be noted that the average age in Kazakhstan is lower than in European countries. The economically active population of Kazakhstan are not inclined to increase the demand for credit resources in second-tier banks in response to negative wage shocks. The results of the research indicate the financial stability of second-tier banks in Kazakhstan. At the same time, the financial stability of banks are achieved by gradually reducing the volume of loans to individuals.

RELEVANSI STABILITAS KEUANGAN BANK TERHADAP RISIKO INVESTASI DAN KEBIJAKAN DIVIDEN SEBAGAI VARIABEL MEDIASI

This study aims to test and analyze empirically the relevance of bank financial stability (STAB) to bank stock investment risk (RISK), with dividend policy (DIV) as a mediating variable; and bank company size (SIZE), status of state-owned enterprises (BUMN), and regionally-owned enterprises (BUMD) as control variables. The population in this study are national commercial banks consisting of private banks and BUMN/BUMD banks listed on the Indonesia Stock Exchange for the 2011-2020 period. Using a purposive sampling method, the number of bank companies sampled in this study was 16 bank companies with a total of 160 observations of financial report data (over a 10 year period). In this study, multiple linear regression analysis techniques and Ordinary Least Square models were used with data processing using eviews 9 software. The results of this study indicate that simultaneously STAB, DIV, and the control variables SIZE, BUMN, BUMD have a significant effect on RISK. Meanwhile, partially, STAB and SIZE have a negative effect on RISK in bank stocks. In addition, STAB has a positive effect on DIV, but DIV has no effect on RISK, so it can be concluded that dividend policy is proven not to mediate the effect of financial stability on investment risk in bank stocks.

The Impact of Islamic and Conventional Banking Competition on Financial Stability

The impact of banking competition on financial stability/fragility is an essential issue in the banking literature. There is much research on the association between financial stability/fragility and banking competition in developed countries. However, no prior research examines the comparison of conventional and Islamic banks. The study uses data from nine countries Pakistan, Indonesia, Malaysia, Bangladesh, Egypt, Kuwait, Oman, Iraq and Jorden for the period 2010-2020. This study uses a fixed effects model to examine the influence of competition and income diversity on bank financial stability. We study how these variables affect Islamic and conventional banks differently using an empirical framework. Our findings show a considerable positive association between competition and conventional banks' financial stability; however, this relationship was found to be insignificant for Islamic banks. Furthermore, according to our research, the diversification of income has a positive impact on the financial well-being of both Islamic and conventional banks. Our study highlights the significance of fostering trustworthy competition within the banking sector to enhance overall financial stability. Furthermore, our findings indicate that promoting healthy competition in the industry can contribute to the improvement of financial stability.

Bank opacity and stability in an emerging market

PurposeThe paper analyzes the impact of bank opacity on financial stability in an emerging economy.Design/methodology/approachBased on a unique dataset of 31 Vietnamese commercial banks from 2007 to 2019, the paper captures earnings opacity via discretionary loan loss provisions and reflects individual bank stability through the accounting-based Z-score index and its disaggregate components. The least squares dummy variable corrected (LSDVC) approach is employed for empirical analysis.FindingsIn contradiction to most studies on developed economies, earnings management improves bank financial stability in Vietnam. Earnings management is more important for the financial stability of smaller banks. Further, the effect of financial information disclosure on bank stability is strengthened by unfavorable macroeconomic conditions, particularly economic downturns, the global financial crisis and uncertain times in banking.Originality/valueThis is the first study to shed light on how bank opacity influences bank financial stability in an emerging market. The evidence with the conditioning roles of bank size and macroeconomic factors, such as uncertainty in banking, is entirely novel in the related literature. Additionally, the paper contributes to a growing body of banking literature by using the LSDVC estimator to examine the association between bank opacity and bank stability.

The effect of political risk and corporate governance on bank stability in the MENA region: Did the Arab Spring uprisings matter?

This study examines the impact of political risk and corporate governance mechanisms (CGM) on bank stability. The research problem was addressed using a sample of 954 bank-year observations from 14 Middle East and North Africa (MENA) countries during the period 2010–2018 to take into account the effect of the recent uprisings that broke out in the MENA region (i.e., Arab Spring events). This study uses the three-Stage Least-Squares (3SLS) regression method for data analysis. It is found that political stability enhances banks’ financial stability. Regarding the impact of CGM, it is found that board size, board independence, managerial ownership, and audit committee size and meetings significantly and positively affect bank stability. In contrast, board meetings, board gender diversity, CEO duality, and institutional ownership significantly and negatively affect bank financial stability. By dividing the sample into two subsamples (Arab Spring countries and Non-Arab Spring countries), the results revealed that the Arab uprising events significantly affect the relationship between political stability, CGM, and bank stability.

Does central bank communication on financial stability work? ——An empirical study based on Chinese stock market

The central bank's financial stability communication has become an important monetary policy tool. This paper selects the financial stability reports and Oral communication of the People's Bank of China from 2010 to 2020 as the original text, constructs the emotional dictionary of China's financial stability communication, analyzes the emotional content of the central bank's financial stability communication, and constructs the central bank's financial stability communication index. Equipped with the index, this paper empirically tests the effect of central bank's financial stability communication in Chinese stock market. The results show that: (1) written communication in the form of Financial Stability Report can effectively guide the market trend to the direction expected by the central bank, while oral communication has no significant effect; (2) Written communication can reduce the volatility of the stock market, while oral communication may cause the volatility of the stock market. Further, this paper discusses the mechanism of the central bank's financial stability communication affecting the financial market. The results show that the central bank's financial stability communication mainly plays a role in stabilizing the market through the coordination channel, while the signaling channel plays a relatively weak role. The research results of this paper are of great significance for improving the communication mode of the central bank's financial stability and thus promoting the stability of the financial market.

MANAGEMENT OF THE FINANCIAL STABILITY OF JSC CB "PRYVATBANK" IN THE CONDITIONS OF THE MARITAL STATE

Purpose. The purpose of the article is to analyse the level of financial stability of JSC CB "PryvatBank" and to single out the main areas of increasing the effectiveness of the bank's financial stability management. Methodology of research. The theoretical and methodological base of the article consists of fundamental provisions of modern science and general theories of development. A set of generally accepted methods and techniques of comprehensive research were applied in the research process in order to achieve the set goal: induction and deduction at the stage of collecting the necessary information, systematization and its processing, analysis and comparison to characterize the scientific and methodological approaches to determining the economic essence of the concept of "financial stability of the bank", tabular and graphic ‒ to visualize the results of the study, factor analysis to characterize the main aspects of managing the financial stability of JSC CB "PryvatBank", vertical and horizontal analysis to assess and determine the level of efficiency of financial stability management of JSC CB "PryvatBank" during 2019-2022, the ratio analysis served as the basis for calculating reliability coefficients and main profitability indicators of JSC CB "PryvatBank". A systematic method was used to substantiate the proposals for strategies and measures to ensure financial stability in the conditions of martial law. The method of logical generalization was used to form theoretical conclusions. The information base of the research was served by normative legal acts, periodicals, scientific works of domestic and foreign scientists, statistical analytical data and web sources. Findings. Scientific and methodical approaches to the definition of the economic essence of the concept of "financial stability of the bank" were considered, which made it possible to form a definition that most fully characterizes this economic concept. The essence of the concept of managing the bank's financial stability is determined. The main aspects of managing the financial stability of JSC CB "PryvatBank" are characterized. An assessment was made and the level of financial stability management efficiency of JSC KB "PryvatBank" was determined during 2019-2022. Reliability coefficients and main profitability indicators of the analysed bank were calculated. An overview of the strategies and measures that a bank can take to ensure financial stability under martial law is given. Appropriate conclusions were outlined. Originality.The theoretical principles of assessing the financial stability of JSC CB "PrivatBank" were deepened and recommendations were developed to increase the efficiency of its management in modern conditions of martial law. Practical value. The conclusions and proposals formed based on the results of the conducted research can be used in the formation of the financial stability management strategy of JSC CB "PryvatBank". The implementation of the developed proposals will enable the bank to minimize risks and maintain financial stability in adverse economic and political conditions, such as martial law, as well as to remain a leading bank in the banking services market. Key words: bank, financial stability, management of financial stability, cost-effectiveness, reliability, profitability, liquidity, regulations, ratio, financial condition.

The Effect of Credit, and Liquidity Risk, along with Capital Adequacy and Audit Quality on Bank's Financial Stability: a Comparative Study between Islamic and Conventional Banks of Pakistan

The Effect of Credit, and Liquidity Risk, along with Capital Adequacy and Audit Quality on Bank's Financial Stability: a Comparative Study between Islamic and Conventional Banks of Pakistan

Impact of Fintech on the Financial Stability of Banks: A Systematic Literature Review

In recent decades, financial technology and stability have been debated and studied for decades. This study examines the relationship between financial technology (Fintech) and global bank financial stability. The study collected articles from research databases for this (Science Direct, Welly, Emerald, Springer Link, Google Scholar, and Research Gate). We map the financial technology–financial stability research domain and identify key developments and patterns from 1995 to 2022 using peer-reviewed articles. Financial technology's theoretical relationship to financial stability is also examined. Fintech, financial stability, and determinants are examined. This paper builds a comprehensive model of the relationship between Fintech and banking sector financial stability. Banking sectors use financial technology and financial stability practices to achieve financial stability goals and gain competitive advantages. Financial technology has increased the global banking sector financial stability.

Financial Regulations, Profit Efficiency, and Financial Soundness: Empirical Evidence from Commercial Banks of Pakistan

The purpose of this paper is threefold. First, it measures profit efficiency and financial stability of commercial banks of Pakistan. Second, it empirically estimates the effect of the already implemented financial regulations on the profit efficiency and financial stability of banks. Third, it examines the differential effect of financial regulations on profitability and financial soundness across bank size. To carry out the empirical analysis, a balanced bank-level panel data covering the period 2008-2014 is used. To gauge the profit efficiency of commercial banks, Data Envelopment Analysis (DEA) is utilised, while, to proxy the financial soundness, the Z-score is calculated for each bank. The panel regression approach is used to examine the effects of financial regulations on the profit efficiency and financial soundness of banks. We find that the financial regulations enforced by State Bank of Pakistan (SBP) have significant impacts on the profit efficiency and financial stability of banks. The results indicate that the non-performance loans to assets ratio (NPLL) and the reserve ratio (RR) impact positively, whereas, the liquidity ratio (LIQR) and the loans to deposits ratio (LODEPOSIT), significantly and negatively affect the profit efficiency of banks. However, only LR and RR are positively and significant related to the financial stability. The results also suggest that the financial regulations have significant differential effects on the profit efficiency and financial soundness of banks across bank size. JEL Classification: C23, E44, G21, G28 Keywords: Profit Efficiency, Financial Soundness, Financial Regulations, Data Envelopment Analysis, Z-Score, Differential Effects

FINANCIAL STABILITY AND RESISTANCE OF BANK IN THE CURRENT CONDITIONS OF MARTIAL LAW

The article examines the theoretical foundations of financial stability and stability of a banking institution, examines the main interpretations of approaches to defining the concept of "financial stability". The relationship between the concepts of "financial stability" and "financial stability" was studied, and as a result, it was determined that ensuring the financial stability of banks is the basis of a stable banking system, a key to the success of economic transformations and macroeconomic development. Indicators of financial stability and financial stability of the bank, using JSC CB "Privatbank" were studied as the main object of the study. In order to analyze the financial stability of JSC CB "Privatbank", its financial statements were examined and the reliability coefficient was calculated; financial leverage ratio; the coefficient of participation of equity capital in the formation of assets; capital multiplier factor. The paper calculates the stability and stability indicators of the bank. For a generalized comprehensive assessment of the bank's activity, an integral indicator of the bank's financial stability was calculated using data from the financial statements for 2020-2022. As a result of the study, a methodology for assessing the financial stability and stability of the bank was determined, which takes into account the versatile aspects of the bank's activity by selecting parametric coefficients The article examines the stability of JSC KB "Privatbank" in modern conditions of risks and losses during the martial law in Ukraine. In order to study the influence of the current conditions of martial law on the stability of the bank, the calculation of the coefficients of financial stability was carried out for the period of January-September 2022. The calculation of financial stability was carried out based on the analysis of the general coefficient of stability, the coefficient of instant liquidity, the cross coefficient, the general coefficient of liquidity, the coefficient of capital protection, the coefficient of capitalization of profit. The study analyzed the stability of the bank based on the results of the calculations. In general, the indicator of the financial stability of the bank is not sufficient for stable functioning, the bank is recommended to pay attention to indicators that have an impact on the financial stability of the bank to increase stability, such as: equity, working and liquid assets, liabilities, both short-term and long-term , authorized and protected capital.

Risk management and financial stability of banks

Object: Increasing the role of the banking sector in the economy is one of the main tasks of the state. Kazakhstan’s banking sector is one of the most important sectors of the economy, where the bank acts as a financial institution. Kazakhstan gained considerable success by overcoming the difficult period and achieving its own strategy and tactics of economic reforms after reaching financial stabilization of the peak of structural transformation.Methods: The methods of research, processing and analysis of financial, economic, mathematical, statistical, logical information.Results: The main task of risk management is to minimize the negative impact of risks on the financial results of banks.Justification of the objective need for risk management in banks; identifyingthe importance of risk management in banks and prospects for its development; analysis of data, collected from using statistical methods of data processing and analysis; development of conclusions and recommendations on risk management organization in banks.Conclusions: Risk management identifies the bank management effectiveness, taking into account the factors of uncertainty that may have a negative or positive effect on the bank’s performance. The scientific value of the article is as follows:− specifies the peculiarities of risk management in the bank;− identifies risk management issues in banks and prospects for its development.

Global financial crisis, international capital requirement and bank financial stability: an international evidence

PurposeFinancial crises (FC) remain a global threat to the financial stability of financial institutions and international bank regulatory capital requirement (IBRCR) by the Committee on Banking Supervision provides mechanism for curbing the adverse effect of FC on financial stability. Hence, the purpose of this study is to provide, evidence on how IBRCR tones down the adverse FC effects on bank financial stability (BFS).Design/methodology/approachThe study uses 102 economies between 2006 and 2016 in a two-step dynamic generalized method of moments model.FindingsThe results show that while FC and IBRCR negatively and positively impact BFS, respectively, it is observed that under the increasing presence of IBRCR, the negative effect of FC on BFS declines. Additionally, the results show that economies that maintain minimum IBRCR above 10.5% recommended by BASEL III are able to reinforce a significant reduction in the negative effect of FC on BFS.Practical implicationsThese findings imply that in as much as financial crisis is injurious to BFS, regulators and policymakers can rely on IBRCR to avert the injurious effects of FC on BFS. Clearly, while IBRCR is necessary for reinforcing BFS through FC, bank managers who maintain IBRCR above the recommended 10.5% stands a better chance to taming the avert effect of FC on BFS. Additionally, economies that have not full adopted the BASEL minimum capital requirement may have to do so given its potential of dampening the adverse effect of FC on BFS.Originality/valueThe study presents an international perspective of how BASEL capital requirements can help tame global financial crisis using a global sample of 102 economies.

Noninterest income mix and bank performance: Generalized propensity score fractional dose–response function evidence

This paper investigates the impact of different levels of noninterest income on the risk-adjusted profitability and financial stability of banks in the Middle Eastern and North African banking industry from 1988 to 2020. We apply a program impact evaluation analysis, using the generalized propensity score-fractional dose–response function method, and assess the effect of each level (or dose) of noninterest income mix on bank performance (the dose–response function). Splitting the sample into Gulf Cooperation Council- and non-Gulf Cooperation Council-based banks reveals that while higher levels of revenue diversification are beneficial for the former, a focus on traditional banking activities is preferable for the latter to achieve the best performance. The findings could serve as an early warning flag for bank managers, policy-makers, and regulators in dealing with these strategic shifts.

Credit Creation and Financial Stability of Banks: Evidence in Nigeria

Credit Creation and Financial Stability of Banks: Evidence in Nigeria

The impact of FinTech firms on bank financial stability

This study is the first to examine the impact of FinTech firms on bank financial stability. Using a sample of 26 banks from an emerging market (Malaysia), over the period 2003–2018, we find that the development of FinTech firms over time increases bank financial stability. We uncover further evidence that FinTech firms’ impact on bank financial stability holds when we conduct sub-sample analyses by bank size, bank type (Islamic vis-à-vis conventional), and level of corporate governance. The results are robust to alternative model specifications, measures of financial stability, and FinTech.