Financial Stability Of Commercial Banks Research Articles

The mediating role of intellectual capital on the nexus between diversification, financial stability and efficiency of commercial banks in Ethiopia

PurposeThe main objective of this study is to analyze the mediating role of intellectual capital in the relationship between diversification, financial stability, and efficiency of the banking sector in Ethiopia.Design/methodology/approachSecondary data for this study was obtained from audited financial statements of 17 Ethiopian commercial banks for a decade starting in 2013. A descriptive and explanatory research design with a quantitative research approach was employed. The seemingly unrelated Hierarchical regression analysis is used to estimate diversification’s effect on banks' financial stability and efficiency, considering the interaction between diversification and intellectual capital as a mediating variable.FindingsThe Mediation analysis reveals that asset diversification improves the financial stability of commercial banks when mediated by intellectual efficiency. Investment diversification negatively impacts risk-adjusted return on asset and Z score. Intellectual capital significantly enhances commercial banks' efficiency and financial stability in Ethiopia and mediates the relationship between geographic diversification, financial stability, and efficiency. The mediation analysis also indicates that intellectual capital significantly mediates the relationship between income diversification and efficiency.Practical implicationsThis study highlights the importance of intellectual capital and promotes its strategic allocation by management and regulatory bodies to enhance the financial stability and operational effectiveness of the banking industry in Ethiopia.Originality/value To the best of the researcher’s knowledge, this study is one of the rare attempts to investigate the mediating role of intellectual capital on the nexus between diversification, financial stability, and efficiency of commercial banks in Ethiopia.

The Quality of Financial Information Disclosures and its Contribution to Financial Stability of Commercial Banks in Kenya

The Quality of Financial Information Disclosures and its Contribution to Financial Stability of Commercial Banks in Kenya

Иерархическая система ранжирования коммерческих банков

Introduction. The main objective of the study is to develop economic and mathematical tools for constructing a rating barometer of Russian commercial banks according to the level of sustainability in a long term view using a hierarchical decision-making structure. Theoretical analysis. The method of commercial banks’ integral ranking is based on a system of hierarchical analysis. The methodology is based on ranking indicators and dividing them into subgroups. The priority indicator indicates the ranking vector, two levels of data ranking are performed, and subindices are formed. At the last stage, a convolution into an integral index is performed. The mathematical apparatus of a tree-like solution structure is used; the assumption of the method is the choice of priority indicators based on the principle of a commercial bank’s long-term sustainability. Empirical analysis. An algorithm has been compiled for condensing primary financial reporting indicators into an integral indicator. The methodology was tested on data from Russian commercial banks. Results. A mathematical apparatus is presented that makes it possible to assess the long-term financial stability of commercial banks according to their key indicators, an integral rating of banks is constructed for financial stability and investment attractiveness. The hierarchical rating system of commercial banks developed by the authors characterizes the analyzed banks by the size of the bank’s own funds, capital structure and return on equity.

The relevance of ensuring the financial stability of commercial banks in Kazakhstan through the development of their own financial management

The research topic is relevant due to the fact that the financial system belongs to the main and important areas of sustainable development of any country. The relevance of the article lies in the need to develop our Kazakhstan FM, to increase the stability and reliability of the STB. The purpose of the research topic is to reflect the role and importance of own financial management (hereinafter FM) in the activities of second-tier banks (hereinafter STB) as the main factor of sustainable growth and development of its stability. The article reflects the importance and value of adapting and developing one's FM in the activities of banks, taking into account the available resources and opportunities, the current market situation. In the course of the study, it was revealed that in order to improve the quality of management of banks' resources, more flexible ways of improving FM are needed. During the research, financial analysis and synthesis, deduction and induction, economic and statistical evaluation, etc. were used. The materials of the scientific research were statistical data of the STB RK and Halyk Bank for 2018–2023, legal documents and analytical reports on this topic. The research proves the need for own FM, reveals the theoretical and applied aspects of the development and adaptation of FM in commercial banks of the Republic of Kazakhstan, to improve the quality of staff work, and increase the stability of STB. Despite the fact that many scientists consider FM issues; this problem remains not fully studied for Kazakhstan.

Camel Rating Model and Financial Stability of Commercial Banks in Kenya

The study sought to examine the effect of CAMEL rating model on financial stability of commercial banks in Kenya. This paper was extracted from the Doctoral dissertation of the first author where the co-authors served as supervisors. Buffer capital theory and efficiency structure theory were utilized. Causal research design was used and a census of forty-one commercial banks was undertaken focusing on the period 2013 to 2019. The panel regression analysis revealed that out of the CAMEL rating variables, only earnings ability had significant effect on financial stability of commercial banks in Kenya. It was recommended that the Central Bank of Kenya motivates earnings (profitability) targets to be in accordance with the size (category) of banks. This is as the earnings ability of commercial banks vary from bank to bank. This will in turn facilitate the improvements and sustenance of financial stability by commercial banks. The study recommends that bank managers when setting earnings target should consider their capabilities as a bank by ensuring realistic targets. Higher earnings translate to higher financial stability according to the study findings, hence apart from the traditional intermediation activities, other profitable business ventures can be explored by commercial banks.

Moderating Effect of Interest Rate on the Relationship between Camel Rating Model and Financial Stability of Commercial Banks in Kenya

The study sought to assess the moderation effect of interest on the relationship CAMEL rating system and financial stability of commercial banks in Kenya. The paper originates from the Doctoral dissertation of the first author in which the co-authors served as supervisors. Causal research design was utilized and a census of forty-one commercial banks in Kenya was undertaken for the period 2013 to 2019. Information asymmetry theory and liquidity shiftability were utilized. Interest rate insignificant moderated the nexus between CAMEL rating variables and financial stability with the exception of asset quality. Interest rate only moderated asset quality and financial stability nexus significantly. It was recommended that the Central Bank of Kenya set interest rates in view of the prevailing economic situation. The study further puts forward the recommendation that commercial banks should strive towards reducing non-performing loans which can be through the setting up of effective credit risk management systems. Credit monitoring can be done in order to ensure that loans granted are utilized for the intended purposes. In time of difficult financial conditions, loan restructuring can be considered.

CURRENT STATUS AND PERSPECTIVES OF THE DEVELOPMENT OF INVESTMENT ACTIVITY OF THE COMMERCIAL BANKS DURING MILITARY AGGRESSION

Because of writing the scientific work, it was established that the protracted war, terrorist attacks on the energy infrastructure and the subsequent suppression of the economy provoked by this are the main sources of risks for the financial stability of commercial banks. The state of investment activity of commercial banks was studied and it was determined that in order to increase it and reduce the risk of loss of liquidity in war conditions, commercial banks should apply methods of passive investment portfolio management. It has been proven that the combination of financial assets with different investment terms in the investment portfolio will allow taking into account the fluctuations of interest rates and the level of interest risk, which is under the influence of investment owners. It was determined that with the beginning of the war, the share of non-performing loans expectedly increased, most noticeably in the retail segment. Despite significant write-downs, the banking sector posted a quarterly profit after a loss-making first half, driven by operational efficiency. The net assets of banks for the third quarter of 2022 were analyzed, which increased by 7.5% and exceeded the pre-war level, this happened due to the increase in the volume of deposit certificates of the NBU. It was established that the TOP-10 banks of the country included banks that were able to continue working despite the introduction of martial law and hostilities and maintain their credit and investment portfolio at the proper level: Privatbank, Ukreximbank, FUIB, Ukrgasbank, Raiffeisen Bank, Oschadbank, Sens Bank, OTР Bank, Universal Bank and Credit Agricole Bank. It was established that in order to develop the investment activity of commercial banks in the conditions of military aggression, the following basic requirements must be observed: continuity of the investment process; availability of a diversified portfolio, where capital investment will be focused on 4–5 classes; one must allow the portfolio to grow with the market during upswings, but at the same time protect it during periods of general decline.

THEORETICAL BASIS OF MANAGEMENT OF THE FINANCIAL STABILITY OF THE BANKING SYSTEM

The continuous development of the banking system in our republic is an objective necessity in the conditions of market relations, which, in turn, requires the improvement of the methodological foundations of the creation of the database necessary for the continuous control of the activity and financial stability of commercial banks and their effective management.

ECONOMIC SECURITY OF COMMERCIAL BANKS AND METHODOLOGY FOR ASSESSING THE LEVEL OF ITS PROVISION

The need for an adequate assessment of the economic security for each bank is one of the main tasks, since this will identify potentially dangerous risk factors, with a view to their subsequent minimization in order to reduce the level of probability of financial losses and reduce the likelihood of bankruptcy. The paper discusses methods for assessing the level of economic security of commercial bank, as well as presents the factors affecting the economic security of banks, criteria and indicators for assessing the financial stability of commercial banks

Financial sustainability of commercial banks on the basis of strategic management accounting

This article discusses the tasks of improving the efficiency of ongoing transfor-mations in the economy of Kazakhstan to ensure the financial stability of com-mercial banks, the reliability of the functioning of financial resources, based on the improvement of strategic management accounting. If you look into the theory and essence of the concept of "sustainability", then this means - transformation. At the present stage of scientific development, "transformation" needs new con-cepts to characterize the socio-economic processes of society, to describe radical structural changes, the transition of society to a qualitatively new level of organi-zation, which is especially characteristic of the transformations that are taking place in the Republic of Kazakhstan.

Managing Credit Risk Strategies for Commercial Banks: The Case of Kosovo

The study aims to substantiate effective strategies to manage credit risks in commercial banks, for example, Kosovo. Based on the annual financial statements of commercial banks in Kosovo for 2010-2020. We built polynomial regression models to assess the impact of credit risk on the bank's financial stability. Empirically, determined and argued the different nature of the credit risks influencing the bank's financial stability according to various on the assets size of commercial banks. Preventive and reactive scenarios for minimizing the negative impact of credit risk on the financial stability of commercial banks in Kosovo have been determined using the constructed regression models. The results obtained are of practical importance and can help develop effective strategies for managing the financial risks in commercial banks in times of crisis and building up financial stability in stable conditions.

БАНКЛАР КАПИТАЛЛАШУВ ДАРАЖАСИНИ ОШИРИШНИНГ ДОЛЗАРБ МАСАЛАЛАРИ

This article addresses topical issues of increasing the level of capitalization and strengthening the financial stability of commercial banks. In addition, the amount and dynamics of capital of commercial banks of the republic, the share of authorized capital in their own funds and the state of indicators characterizing their level of capitalization are analyzed and conclusions are made.

Capital adequacy ratio and a bank’s financial stability in Vietnam

The objective of this study is to provide more empirical evidence on the impact of the capital adequacy ratio, as well as control and micro variables, on the financial stability of commercial banks in emerging markets such as Vietnam. The study analyzes the impact of the capital adequacy ratio on the financial stability of 18 Vietnamese commercial banks in the period 2010–2020 using the Generalized method of moments (GMM) model. Empirical research results show that the capital adequacy ratio has a positive correlation with the financial stability of Vietnamese commercial banks during the study period. Besides, the study also uses control variables such as Profitability through ROA and ROE, Bank Size (SIZE), Loans to Assets Ratio (LTA), Deposits to Assets Ratio (DTA), and Loan Loss Ratio (LLR), to analyze their impact on the financial stability of Vietnamese commercial banks. Based on the above results, the study proposes some policy implications to enhance the financial stability of Vietnamese commercial banks using the capital adequacy ratio and the control variables from the GMM model that are statistically significant. The paper also pointed out four limitations of the study in terms of data, research samples, methods and research models, so that further research can be more complete. AcknowledgmentThe author wishes to acknowledge support from the Banking University of Ho Chi Minh City. This research was made possible thanks to all valuable support from relevant stakeholders.

Current Issues of Financial Security of Commercial Banks

Ensuring financial security is a prerequisite for ensuring the liquidity and financial stability of commercial banks. Thus, the deepening of risks in the activities of banks negatively affects their liquidity and financial stability. The article identifies topical problems associated with ensuring the financial security of commercial banks of the Republic of Uzbekistan and developed scientific proposals aimed at solving these problems.

The impact of credit risk on the financial stability of commercial banks in Vietnam

This study investigates the impact of credit risk on the financial stability of Vietnamese commercial banks. The paper uses the Z-score to proxy the financial stability of banks. We use the data of 27 Vietnamese commercial banks on BankScope, during 2010 - 2019. The paper applied a dynamic panel data approach; the selected method is the difference GMM (DGMM). The key question discussed is which factor impacts on Z-score. Analysis results show the negative effect of non-performing loans on the financial stability of banks. When commercial banks have higher non-performing loans, the lower the financial stability is. Additionally, bank-specific variables such as equity on asset ratio, the return on equity, the size of the bank and set of macroeconomic variables affect the bank’s financial stability. Based on the analysis results, we imply relevant policies for the State Bank of Vietnam and commercial banks.

TINJAUAN STABILITAS KEUANGAN BANK MELALUI TINGKAT PERSAINGAN DAN DIVERSIFIKASI PENDAPATAN: STUDI PADA BANK UMUM YANG TERDAFTAR DI BURSA EFEK INDONESIA

This study investigated the relationship between the level of competition between banks and revenue diversification on financial stability of commercial banks during 2008- 2013. The level of competition in this study measured by the market share of net interest income. Revenue diversification measured using Hirscman Herfindhal Index, while the bank's financial stability is measured by ZScore for banking industry. Models were analyzed using a fixed effect regression models. The results showed that the bank samples is vurnerable to the intense of competition. Although the research sample has relatively high market share, but its has not shown the resilience to face the competition. Low level of revenue diversification on bank samples showed that they did not implement a diversification strategy, then can not gain benefit from revenue diversification strategy

УДОСКОНАЛЕННЯ МЕТОДОЛОГІЇ ПРОГНОЗУВАННЯ І МОНІТОРИНГУ ОКРЕМИХ ПОКАЗНИКІВ ФІНАНСОВОЇ СТІЙКОСТІ БАНКІВСЬКОЇ УСТАНОВИ

Justification of expediency of improvement of methodology of forecasting and monitoring of indicators of financial stability of commercial banks for the purpose of increase in stability of credit institution, prevention, prevention and minimization of influence of the destabilizing factors on functioning and development of bank. Technique. The methodology has been improved through the use of economic and mathematical modelling tools for selected indicators of financial sustainability. Results. The need for continuous monitoring of the bank's financial sustainability indicators to ensure its stable functioning under the influence of numerous risks of various origins has been proved. Among the existing standards of stability and stability of the commercial bank, the norm of equity adequacy has a special role. It is on the volume of equity that the ability of a credit institution to timely calculate its obligations, compensate for unforeseen losses and minimize business risks depends. Regardless of the level of development of the banking system of the countries of the world, there are requirements in national legislation to ensure the minimum necessary level of the bank's equity. Due to the need to maintain a certain level of equity adequacy, it is necessary to constantly monitor and predict its level and individual indicators of the bank's activities, which directly affect the level of equity adequacy. The improvement of the forecasting methodology is based on the use of trend extrapolation methods, helps to identify the boundaries of forecasting and, on this basis, to develop alternative scenarios for ensuring and maintaining a sufficient level of financial stability. Scientific novelty. The feasibility of using trend extrapolation methods for forecasting and monitoring selected indicators of financial sustainability of commercial banks is justified. Practical significance. The results of the study are practically applied and can be used by banks and other credit institutions in the development of strategies and current plans to ensure the stability and sustainability of the institution, as well as compliance with statutory standards of activity

Modeling of credit portfolio management efficiency

Credit operations, among the great variety of services provided by the bank, are one of the most important activities. In the assets of commercial banks, loans occupy a strong position of the most extensional and profitable items. The reliability and financial stability of commercial banks depends on the composition and structure of the bank's loan portfolio and the process of its management. Under current conditions, the development and improvement of the bank's loan portfolio management system intended to minimize the credit risks and ensure the sustainable operation of commercial banks have become particularly important. Crisis phenomena in economy have proved that the activities of any economic entity is associated with uncertainty in market development. Adverse developments in the world markets directly affected the solvency of borrowers of many banks. The increase in defaults of most borrowers resulted in the increase in defaults on loans, causing the increase in overdue debt, lower profitability and liquidity problems in banks. Thus, the recent crisis in the world economy, including Ukrainian economy, has demonstrated the failure of the methods used to assess and manage credit risk in banking, as well as the imperfection of the methods used to manage the loan portfolios of commercial banks. The results of the previous carried out investigation indicate that in order to form the correct management decisions and take practical actions concerning the formation of loan portfolio for commercial bank, it is necessary to assess its status. In this regard, the method of econometric modeling (determination of the relationship between gross domestic product and overdue debt of the banking system in Ukraine, the relationship between the volume of loans issued by banks and the discount rate; the relationship between the volume of loans issued to individuals and the volume of the loan portfolio in general) is differentiated in this paper from other estimation methods. This method made it possible to determine the effectiveness of loan portfolio management of commercial banks. The results of the calculations provide reasons to confirm that there is insignificant relationship between the level of loans to individuals and the loan portfolio.

The Impact of Operating Cash Flows on Financial Stability of Commercial Banks: Evidence from Pakistan

The Impact of Operating Cash Flows on Financial Stability of Commercial Banks: Evidence from Pakistan

Non-Performing Loan and Financial Stability of Banking Industry in Pakistan

The objectives of this study to assess the state of financial stability of commercial banks in Pakistan and then estimate how good, bad and worst economic conditions would influence the stability. Our design of the study is a mix of techniques. Pakistan have not experienced financial crisis due to some shocks, therefore stress events and its effects not included in design. This study examines the effect of non-performing loans on financial stability empirically. Based on the above premise, this thesis investigates the association of financial stability with non-performing loans for all commercial banks of Pakistan for the period of 2014-2018. The study used the 27 commercial banks having 162 bank year observations. The study measured of financial stability (FS) through the financial leverage ratio and liquidity ratio using the common effect model. For the non-performing loans this study uses the non-performing loan ratio. Using secondary data that is panel in nature and applying panel data models for analysis, the study finds out that non-performing loans negatively associated with financial stability of commercial banks in Pakistan. Keywords: Loan, Finance, Banking, Stability, Pakistan.