Financial System Architecture Research Articles

Determining the combined effect of financial system architecture, macroeconomic factors and governance on the development of local currency government bond market in Kenya

This study sought to examine the current state of the local currency government bond market in Kenya to determine the effects of financial system structure, macro-economic factors and the country’s governance on its development. The study used secondary data from the World Bank’s WDI and DataStream databases for the period 1998 to 2019. Descriptive statistics - applying trend analysis, measures of central tendency and dispersion and documents analysis were employed to conduct a stocktaking of Kenya's government bond market development since its inception, while multiple linear time series regression using Ordinary Least Square (OLS) technique was employed to examine the determinants of the government bond market development in Kenya. In the findings, the combined model, corporate bond, political stability and general election were largely positively significant. Bank credit to the private sector and fiscal balance were positively significant, whereas inflation and interest capping were negatively significant at a 5 per cent confidence level. GDP_ growth rate was significant at 10 per cent. The study thus recommends that the government's efforts should focus towards building the financial markets, controlling its micro and macro-economic factors and building a strong administrative structure in its quest to achieve its Vision 2030 objectives of financial independence. It is this structure that will encourage bond market growth and liquidity that will, in future, enable them to achieve financial independence.

A NOVEL APPROACH TO BANKNOTE CLASSIFICATION USING TRANSFER LEARNING

Banknote classification is a fundamental component of financial system architecture. Recognition as well as verifying the integrity of banknotes is extremely important for secure transactions at financial institutions. A highly precise multi-classification model can be created using deep learning along with an extensive image dataset of these currency notes featuring them in a myriad of conditions. In addition to providing accuracy, this would also assist reduce the amount of manual intervention required, which would result in greater employee efficiency. This study involves the implementation of transfer learning on a publicly available image dataset of Indian and Thai banknotes. The results of the study will help create an automatic banknote identification and integrity verification layer in the transaction system architecture of financial institutions. KEYWORDS : Banknote Classification, Banknote Identification, Multi classification, Machine learning

Social Trust, Bank Liquidity Creation, and Financial System Architecture

Social Trust, Bank Liquidity Creation, and Financial System Architecture

Exploring the Sustainable Development Path of a Green Financial System in the Context of Carbon Neutrality and Carbon Peaking: Evidence from China

In the 75th session of the United Nations General Assembly, the Chinese government first proposed the goal of carbon neutrality and carbon peaking. Since then, China’s economy and society have undergone a comprehensive green and sustainable development upgrade and transformation. The development of green finance can provide financial support for the achievement of the dual carbon goals and mitigate the impact of climate change, and more importantly can contribute to the sustainable development of the national economy and society. In this study, we innovatively draw on the quality function deployment theory in marketing to logically formulate the research idea of this paper. The greatest advantage of this approach is that it enhances the readability of this paper and enriches the research logic system of this paper. On this basis, we also applied the G1-entropy value method from fuzzy mathematical theory for quantitative research. In fact, it should be noted that the G1 method we propose in this study is actually an improved subjective assessment method, in which we introduce expert ratings to improve the reliability of the subjective assessment results. As we all know, financial system architecture and research is a common academic topic, but unlike the classical research on the development quality of financial systems, we innovatively addressed the actual national conditions in China and fully integrated green elements in the construction of the index system from the perspective of green finance and sustainability. Finally, we calculated the index weights through G1-entropy quantification, and qualitatively propose countermeasures for the development quality of China’s green finance for key index factors. In conclusion, we sort the contributions of this paper into the following three aspects: (1) we innovatively combined the quality function deployment theory and built the quantitative analysis process architecture in this paper, which enhanced the readability of this paper; (2) we realized the use of quantitative research for qualitative analysis and proposed the G1-entropy value method, which made up for the defects of the subjective and objective methods in the traditional evaluation methods; and (3) we realized the organic combination of quantitative and qualitative analysis, and proposed relevant countermeasure suggestions based on the quantitative index calculation results, which provided relevant countermeasure suggestions for promoting the sustainable and high-quality development of green finance in China.

Проактивный режим оказания государственных услуг на рынке труда: направления совершенствования

Restrictive measures of the pandemic period accelerated the digitalization process, stimulating a forced transition to an all-encompassing remote format of interaction between economic actors. As a result, the problems and the shortcomings demonstrated the inability of classical technological solutions to become the basis of the digital state. The article proved that the exceptional interaction in the information and communication environment, based on disparate autonomous electronic systems, not only did not satisfy the needs of modern society, but also contributed to the growth of offenses and damage to the economy. The conclusion was drown about the inability of the electronic environment of remote interaction to ensure the effective and high-quality implementation of the proactive regime for the state and municipal services, which has been actively introduced since 2021. Thus, during the pandemic period, the labour market became the most vulnerable, first of all requiring the effective and expeditious mediation role of state structures in order to ensure its sustainability. The study revealed the main problems of the remote format of interaction between entities under the conditions of the modern financial system architecture and the traditional way of organizing information processes. By comparing classical and innovative approaches to the organization of a proactive system for the state and municipal services the authors proposed the directions for its improvement taking into account the interests of the state and citizens.

Design of Enterprise Financial Information Management System Based on Blockchain Technology

According to the development of information technology, a large amount of data information has been increasing, especially financial information. There are many acts of fraud, which makes it impossible to trace the data sources of enterprise financial information and relevant personnel. According to the fact that most staff are unable to complete accurate queries on the required financial statements, there are serious problems of nonstandard behavior and lack of key information in the financial statements of these enterprises. Because many comparable challenges have not been handled adequately, it has always made financial information management more complex for businesses, posed a threat to the whole industry's ecosystem, and harmed the interest of many stakeholders, among other things. Due to the qualities of blockchain, such as centralization, anonymity, trustworthiness, and willfulness, which make information difficult to forecast and tamper with, blockchain has gotten a lot of attention in recent years, and bitcoin and other digital currencies have grown popular. Because these characteristics are related to the information storage security and information transmission speed required by enterprise financial information management, blockchain has become a new idea to solve problems related to enterprise financial information management, according to current application and exploration. The overall management system incorporating blockchain technology is created in detail with the financial management system architecture and data processing scheme provided by blockchain technology in order to build an open and secure transmission mechanism for blockchain data. Moreover, it also integrates the encryption technology of the combination of symmetric key and asymmetric key and fast and secure data access control.

Financial system architecture and the patterns of international trade

Countries differ in the extent to which their financial systems rely on banks or on financial markets. We offer a model featuring a complex relationship between countries’ financial system architecture and their comparative advantage. Countries with capital markets that are relatively more efficient than their banking systems gain comparative advantage in sectors with strong dependence on market finance. Moreover, countries specializing in sectors that depend on market finance develop their capital markets more than their banking systems. To empirically investigate these links, we construct a measure of sector bank dependence and establish a bi-directional relationship between countries’ comparative advantage and their financial systems architecture.

Exit the main stream ! Options to restore financial markets at the end of the neoliberal disaster

In the context of the currently ongoing financial crisis some research work has been done to outline the major weaknesses of the deregulated and liberalized financial system architecture. A growing shadow-financial system, the abuse of investment techniques and the available financial instruments, accompanied by poorly performing and overestimated rating agencies, short term oriented financial behaviour and a poorly developed regulatory and supervisory environment led to a two-digit trillion Dollar damage. The system has in parts lost its function to efficiently intermediate between savers and borrowers and thus became a continuous threat to the value creating real economy. To restore the functionality of the financial system a set of measures is discussed. The Vietnamese financial system partially mirrors weaknesses of the current global financial system, although its particular strengths and weaknesses have to be considered separately as they are borne by the specific features of the Vietnamese economic system.

Financial System Sustainability Assessment Model Creation

Purpose of the article: The article is devoted to analyse the sustainability in the financial system. Sustainability in financial systems leads to the financial institution’s positive economic performance during the financial crisis. The sustainable financial system must keep the country’s economy healthy, effective, and profitable, and this is one of the tasks the answer to which still is looked for. Methodology/methods: The article includes the observation of financial system sustainability approach, the analysis of the financial system structure, architecture, and soundness. In addition, positive and negative impacts of sustainability on financial systems are discussed. The literature analysis, comparison methods, quantitative analysis, the multiple objective optimization MULTIMOORA method, and the graphical representation were used in the article. Based on the MULTIMOORA method and the indicators of sustainability, the model to measure sustainability is implemented. Scientific aim: The main goal of this article is to create and adopt a model of sustainability in the financial system measurement. Findings: The results show that sustainability in financial systems helps the financial institution to maintain positive economic performance even in the crisis time. Conclusions: Sustainability of the financial system is measured according to the sustainability approach; the interaction of economic, social and environmental aspects should be considered. The multiple objective optimization was used to obtain sustainability in the financial system and the MULTIMOORA method was selected for the analysis of the financial system sustainability. For the analysis, 10 countries were selected, which joined the European Union in 2004, in other words, named as “A10” countries. MULTIMOORA proved that the financial system is a complex system, with interrelations between objectives and alternatives that are taken into account at the same time and ,different values of the indicators, representing a particular group of indicators.

DO BANKS GAME ON DYNAMIC PROVISIONING?

Reducing credit procyclicality represents one of the key challenges on the regulatory agenda to reform the financial system architecture. Some early experiences may provide some insights on how countercyclical regulations may be effective. The Spanish dynamic provisions scheme implemented in 2000 is one of the main reference points in this context. We analyze the effects of dynamic provisions on managerial accounting discretion and ex-ante risk-taking behavior by banks. We empirically examine a sample of Spanish banks using quarterly information from 1995Q1 to 2013Q4. Our findings suggest that the counter-cyclicality of provisions has been reduced over time, as it has also been the case of managerial discretion (income smoothing and profit signaling). However, the results suggest that banks game on dynamic provisions by taking an ex-ante riskier behavior once the dynamic provisioning scheme is adopted.

Financial System Architecture and the Patterns of International Trade

Countries differ on the extent to which their financial system relies on banks or on the financial market. We offer a model featuring a possible two way relationship between countries’ financial system architecture and their comparative advantage. Countries specialising in bank dependent sectors favour the development of the banking sector. Simultaneously, countries with more efficient capital markets develop comparative advantage in sectors with strong dependence on market finance. To empirically investigate our model’s predictions, we construct a measure of sector bank dependence and establish a strong relationship between countries’ comparative advantage and their financial system architecture.

The Design and Implementation of Financial System Architecture based on J2EE

With the rapid development of information technology and economical globalization, the traditional financial system can no longer adapt the great change in e-ecommerce environment. Then new advanced financial administration is needed. In this paper, the way how to perform and improve the functionality of financial system architecture based on J2EE is going to be the focal points in the realm of financial management.

The Beneficial Coexistence of Banks and Markets: The Role of Capital Requirements and Underwriting

We propose a model of financial system architecture that highlights the positive interaction between banks and markets in a setting where each agent believes that she can evaluate information better than any other agent. Banks emerge endogenously and their interaction with markets is facilitated by the use of underwriting and regulatory capital requirements. Bank Capital reassures market investors that the underwriting contract will be fulfilled. The profits they make on underwriting enable banks to fund more projects in the future. Thus, a complementarity loop is achieved which results in the financing of positive NPV projects that were previously denied credit.

Notes on Financial System Development and Political Intervention*

The paper studies the impact of political intervention on a financial system that consists of banks and financial markets and develops over time. In this financial system, banks and markets exhibit three forms of interaction: they compete, they complement each other, and they co-evolve. Coevolution is generated by two new ingredients of financial system architecture relative to the existing theories: securitization and risk-sensitive bank capital. The authors show that securitization propagates banking advances to the financial market, permitting market evolution to be driven by bank evolution, and market advances are transmitted to banks through bank capital. Then they examine how politicians determine the nature of political intervention designed to expand credit availability. The authors find that political intervention in banking exhibits a U-shaped pattern, where it is most notable in the early stage of financial system development (through bank capital subsidy in exchange for state ownership of banks) and in the advanced stage (through direct lending regulation). Despite expanding credit access, political intervention results in an increase in financial system risk and does not contribute to financial system evolution. Numerous policy implications are drawn out.

Evolution of China's financial system and its impact on economic development

In this paper, I try to show and emphasise how China has adopted alternative economic policies in the transition and in the evolution of its financial system. In fact, the ‘step by step’ or ‘gradualism’ approach followed is in contrast to the fashionable idea that indiscriminately prescribes market-oriented financial system architecture to emerging and transition economies, and is, I believe, more close to the financial policies recommended by Post-Keynesians.

Macroprudential Banking Regulation: Does One Size Fit All?

The macroprudential regulatory framework of Basel III imposes the same capital and liquidity requirements on all banks around the world to ensure global competitiveness of banks. Using an agent-based model of the financial system, we find that this is not a robust framework to achieve (inter)national financial stability, because efficient regulation has to embrace the economic structure and behavior of financial market participants, which differ from country to country. Market-based financial systems do not profit from capital and liquidity regulations, but from a ban on proprietary trading (Volcker rule). In homogeneous or bank-based financial systems, the most effective regulatory policy to ensure financial stability depends on the stability measure used. Irrespective of financial system architecture, direct restrictions of banks’ investment portfolios are more effective than indirect restrictions through capital, leverage and liquidity regulations. Applying the model to the Swiss financial system, we find that excessively increasing regulatory complexity has destabilizing effects. These results highlight for the first time a necessary change in regulatory paradigm to ensure effectiveness and efficiency of financial regulations with regards to fostering financial system resilience.

Notes on Financial System Development and Political Intervention

This paper studies the impact of political intervention on a financial system that consists of banks and financial markets and develops over time. In this financial system, banks and markets exhibit three forms of interaction: they compete, they complement each other, and they co-evolve. Co-evolution is generated by two new ingredients of financial system architecture relative to the existing theories: securitization and risk-sensitive bank capital. We show that securitization propagates banking advances to the financial market, permitting market evolution to be driven by bank evolution, and market advances are transmitted to banks through bank capital. We then examine how politicians determine the nature of political intervention designed to expand credit availability. We find that political intervention in banking exhibits a U-shaped pattern, where it is most notable in the early stage of financial system development (through bank capital subsidy in exchange for state ownership of banks) and in the advanced stage (through direct lending regulation). Despite expanding credit access, political intervention results in an increase in financial system risk and does not contribute to financial system evolution. Numerous policy implications are drawn out.

Financial System Architecture and the Co‐evolution of Banks and Capital Markets

We study how flnancial system architecture evolves through the development of banks and flnancial markets. The predominant existing view is that banks and markets compete, which often contradicts actual patterns of development. We show that banks and markets exhibit three forms of interaction: they compete, they complement each other, and they co-evolve. The co-evolution loop is generated by two elements missing in previous analyses of flnancial system architecture: securitization and bank equity capital. As banks evolve via improvements in credit screening, they securitize higher-quality credits in the capital market. This encourages greater investor participation and spurs capital market evolution. And, if capital market evolution is spurred by exogenous shocks that cause more investors to participate in the market, banks flnd it cheaper to raise equity capital to satisfy endogenously-arising risk-sensitive capital requirements. This enables banks to serve previously-unserved high-risk borrowers, expanding banking scope and spurring bank evolution. Numerous additional results and empirical predictions are drawn out, and the implications of the analysis for bank governance and regulation are discussed.

The Financial Crisis and Regulatory Reform (in German)

The report provides an analysis of the financial crisis of 2007/2008 and draws some conclusions about the need for regulatory reform. The analysis ascribes the crisis not only to problems in subprime mortgage lending and securitization, but also to excessive maturity transformation and overindebtedness of financial institutions and to flaws in financial system architecture. Because of these flaws, the initial shocks of August 2007 induced a self-supporting downward spiral in financial markets and financial institutions, which only ended in October 2008 when taxpayers were forced to provide guarantees for financial institutions. The first part of the paper provides an in-depth analysis of developments in subprime mortgage lending and securitization, focusing on problems of security design and governance, and lack of external discipline from rating agencies or investors. The second part discusses maturity transformation and excessive indebtedness and their implications for the fragility of individual institutions as well as the system as a whole. Systemic fragility is seen as a result of the interplay of price declines in malfunctioning markets, fair value accounting, an insufficiency of bank equity, and regulation induced or market induced deleveraging, putting further pressure on markets and prices. The third part of the paper goes through the different causes of adverse developments, with a distinction between individual misbehavior and systemic flaws. Among systemic flaws, the paper discusses governance problems in mortgage origination and securitization as well as banking and shortcomings of regulation, in particular, capital regulation under the model-based approach. Reform proposals concern capital regulation, liability and remuneration of bank management, procedures for dealing with banks in difficulties, and insolvency law. The latter two subjects are introduced in order to reduce the scope for submitting government to blackmail by banks in difficulties.

Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Financial Crisis

The paper analyses the causes of the current crisis of the global financial system, with particular emphasis on the systemic elements that turned the crisis of subprime mortgage-backed securities in the United States, a small part of the overall system, into a worldwide crisis. The first half of the paper explains the role of mortgage securitization as a mechanism for allocating risks from real estate investments and discusses what has gone wrong and why in the implementation of this mechanism in the United States. The second half of the paper discusses the incidence of systemic risk in the crisis. Two elements of systemic risk are identified. First, there was excessive maturity transformation through conduits and structured-investment vehicles (SIVs); when this broke down in August 2007, the overhang of asset-backed securities that had been held by these vehicles put significant additional downward pressure on securities prices. Second, as the financial system adjusted to the recognition of delinquencies and defaults in US mortgages and to the breakdown of maturity transformation of conduits and SIVs, the interplay of market malfunctioning or even breakdown, fair value accounting and the insufficiency of equity capital at financial institutions, and, finally, systemic effects of prudential regulation created a detrimental downward spiral in the overall financial system. The paper argues that these developments have not only been caused by identifiably faulty decisions, but also by flaws in financial system architecture. In thinking about regulatory reform, one must therefore go beyond considerations of individual incentives and supervision and pay attention to issues of systemic interdependence and transparency.