Investment Banks Research Articles

Exporting the just transition? The European Investment Bank, the European Green Deal and environmental and social rules for green projects outside the EU

Abstract The European Union’s European Green Deal (EGD) aims for a just transition to carbon neutrality both within and beyond its borders. This contribution to the special issue on the external dimensions of the EGD focuses on the role of the European Investment Bank (EIB). As a newly declared climate bank and a major funder of ‘green’ projects, the EIB’s role in this vein deserves attention. Do the environmental and social principles the EIB uses to judge funding applications contribute to an environmentally just transition? We explore this question by identifying key issues in impact assessment processes in the literature, brought into focus through an original illustrative case study on the Gibe III hydroelectric dam inaugurated in 2016 in Ethiopia, and linking these to three central aspects of Environmental Justice: recognitional, procedural and redistributive justice. This forms the basis for an analysis of the EIB’s environmental and social statements over time, and a reflection on how far current rules address critical issues. While the EIB’s rules pay increasing attention to critical issues such as the content of Environmental and Social Impact Assessments (ESIAs), and questions around inclusion, timing, and trust, their contribution to a just transition could be strengthened by sharing responsibility for impact assessments with funding applicants and including rules about their co-design. A bottom-up approach to environmental and social issues could contribute to building shared norms amongst funders and a more universal adoption of ESIAs, and to strengthening networks of grassroots expertise to tackle power asymmetries.

انعكاس فهم الهيكلية المالية في تحديد وتقييم المخاطر الجوهرية وتعزيز جودة التدقيق الخارجي

Understanding the financial structure is one of the most important matters of interest to users of financial statements because it affects the financial performance of companies, due to the availability of many financing alternatives that the company wants to compose appropriately, and the company may be exposed to financial risks affecting the structure, which requires the external auditor to take action by determining the extent of its exposure to risks and evaluating the effectiveness of its strategies to manage those risks. The measurement process depends on different tools and methods that provide accurate insights into potential risks and their financial impact, in order to enhance the quality of the audit, which is measured by knowing the extent of compliance with auditing standards and performance standards in the audit process. And the extent of the auditor's ability to diagnose errors and material violations in the financial statements. The link between more than one variable in this research is an important step as previous studies did not address it, and the research aims to identify audit procedures when analyzing the financial structure in the financial statements by studying the financial ratios with a statement of the effects of some economic variables, such as interest rates and inflation rates on the result of the analysis, while comparing the availability of audit quality indicators. The research relied on the applied aspect on analyzing the financial statements for three years for the research sample, which includes Ashur International Investment Bank and Al-Nokhba Company, calculating financial ratios, applying the proposed audit risk identification and assessment model, and measuring the quality of the audit as a result of the results of the analysis of the reality of external audit reports. The research reached many conclusions, namely the existence of interconnected relationships between the research variables that contribute to planning the audit in a way that enhances its quality on the other hand, and giving a true picture of the fairness of the financial statements that serve the users of those statements to make appropriate decisions. These conclusions are important in the banking and contracting sectors.

Evaluation of the fintech era on the performance of Moroccan banks: analysis through non-performing loans

Background This study aims to contribute to a better understanding of the impact of the financial technologies (fintech) era on the performance in the banking sector, measured through non-performing loans (NPL) and their coverage by provisions for NPL. It is a question of knowing whether banking investment in fintech makes it possible to better evaluate the granting of credits, and therefore makes it possible to reduce overdue credits. Methods To this end, the method used consists of using a regression analysis and a Pearson correlation applied to the financial data of Moroccan banks observed during two distinct periods, namely 2007-2014, considered pre-fintech, and the period 2015-2022, considered as the fintech period. Results With the emergence of the fintech era, investment in digital technology, which is supposed to help better assess credit applications, the Moroccan banking situation improved slightly compared to the pre-fintech period: bad debts have remained stable despite the significant increase in net banking income and the size of banking assets during the fintech era. Conclusions The implementation of financial digitalization has improved customer relationship management, credit risk analysis and loan monitoring services, which ultimately reduces non-performing loans and improves the coverage of non-performing loans by provisions. The main implication of the results allows us to deduce that the implementation of fintech makes it possible to have a positive impact on stabilizing non-performing loans despite increasing loan volumes, and is likely to serve as a lever for the inclusion of those excluded from banking services.

Talking down the competitors: How do investment banking relationships influence analysts' forecasts?

AbstractOur study reveals that financial analysts issue more pessimistic forecasts for their investment banking clients' competitors than for unrelated firms. Our evidence is consistent with this behavior stemming from analysts' strategic incentives rather than their true beliefs. We find that analysts' pessimism for the client's competitors is more pronounced when the client is more important to analysts' brokerage houses, when high uncertainty prevents competitors from detecting analysts' strategic motives, and when analysts' brokerage houses are less prestigious. Additionally, we explore the economic consequences of the pessimism from the perspectives of the covered firms, brokerage houses, and financial analysts. Finally, we consider the impact of the 2003 Global Analyst Research Settlement. Overall, our results demonstrate that issuing pessimistic forecasts for clients' competitors is an understudied channel through which analysts curry favor with their investment banking clients.

Analisis Faktor-Faktor Penyebab Inflasi di Indonesia Menggunakan Regresi Ridge, LASSO, dan Elastic-Net

<p>The economic condition of a country can be measured using one of the indicators, the inflation rate. Therefore, the inflation needs to be maintained so that its rate can be controlled. To support this, it is necessary to pay attention to several factors that influence the inflation rate. These factors include the amount of exports, imports, narrow money (M1), broad money (M2), the rupiah exchange rate against the USD, interest rates, rice prices in wholesale trade, farmer exchange rates (NTP), world crude oil prices, bank investment credit, GDP, and foreign exchange reserves. In this study, we analyze the significant factors influencing the inflation rate in Indonesia using the best model of the Ridge regression, LASSO regression, and Elastic-Net methods. In this modeling, the γ and λ values from the three methods are optimized first. The data used in this study consist of inflation data in Indonesia and its factors for 2020-2024, sourced from the BPS. Among the three high-dimensional data methods, the LASSO regression is the best method with the smallest MSE for modeling inflation data in Indonesia. The LASSO regression model produces 8 predictor variables that significantly influence inflation data, i.e., imports, M1, interest rates, and world crude oil prices with positive coefficient signs, as well as rice price variables in wholesale trade, NTP, GDP, and foreign exchange reserves with negative coefficient signs.</p><p><strong>Keywords</strong><strong>: </strong>inflation; ridge regression; lasso regression; elastic-net.</p>

The Role of Banks’ Business Models in their FinTech Acquisitions

Abstract In this paper, we examine the role of banks’ business models on their decisions to acquire FinTech firms and how they do so. We find that banks with diverse assets, funds, and income structures are more inclined to engage in FinTech acquisitions. Investment banks display selectivity in FinTech acquisitions while wholesale and traditional banks appear more wary, possibly because of the limited need for FinTech in their business models or the externalities in their existing business models.

Banking and Financial Contract Review (BaFiCoRe) Framework: Next-Gen Contract Review Framework for Investment Banking and Financial Services

In the fast-changing landscape of Banking and Financial services, effective Investment contract review is for maintaining regulatory compliance, mitigating risks, and ensuring transparency among partners / institutions / clients and their stakeholders. Traditional methods of manual contract review, which often involve labor-intensive and repetitive processes, particularly when handling larger volumes of complex agreements. This paper proposes the BaFiCoRe (Banking and Financial Contract Review) Framework, which harnesses the capabilities of Generative AI (GenAI) and Blockchain technologies to revolutionize the contract review processes. GenAI is employed to automate critical tasks such as contract analysis, adherence to accounting standards and conclusions (including U.S GAAP – U.S Generally Accepted Accounting Principles and IFRS – International Financial Reporting Standards) and identification of discrepancies, thereby significantly minimizing errors and improving efficiency. Concurrently, Blockchain technology is employed to address the challenges in contract verification, secure storage, and the transparent audit trails. By integrating GenAI and Blockchain technologies, the BaFiCoRe Framework provides transformative methodology for contract review, ensuring consistent governance, enhanced security, and operational effectiveness, ultimately fostering a more transparent and innovative banking and financial service industry.

Strategies for trading in money markets

Money market trading is a part of Investment Banking and highly business relevant to the Swiss Banking sector. It is astonishing, therefore, that there are very few scientific studies or papers available on this subject. The goal of this article is to clarify and analyse the relevance, chances, and risks of money market trading within the Swiss banking sector and provides comprehensive information not only to professionals such as employees of banks but also for other clients interested in this specific topic. Various aspects of the money market were analysed, taking in a mix of interviews with experienced banking professionals as well as literary analysis. These aspects include products of and participants in the money market and combine it with the politics of the Swiss National Bank over the last few years. Furthermore, the implications of Basel III on cash trading were explored and explained by way of an example. From the interviews with banking experts, some basic requirements for the job profile of money market traders were defined, 5 strategies for money trading designed and related risks identified.

Evolution of banking systems: A comprehensive historical analysis

This paper provides a comprehensive historical analysis of the evolution of banking systems, tracing their origins from ancient Greece and Rome through medieval Europe, the Renaissance, and the emergence of modern banking institutions. It explores the foundational practices of ancient Greek "trapezitai" and Roman "argentarii," which laid the groundwork for more advanced systems that flourished in the Italian city-states during the Middle Ages and Renaissance. The development of commercial and central banking systems in early modern Europe, including the establishment of the Bank of Amsterdam and the Bank of England, is examined in detail. The study further highlights the role of colonial powers in shaping banking structures across the globe and discusses significant innovations of the 19th and 20th centuries, such as fractional reserves and the rise of investment banking. Emphasis is placed on the transformational impact of globalization, deregulation, and technological advancements in the modern banking era. Additionally, the paper delves into contemporary challenges, including cybersecurity, data privacy, and the integration of artificial intelligence, offering insights into the future trajectory of banking institutions. By bridging historical developments with modern trends, this analysis underscores the enduring significance of banking as a dynamic and essential component of economic systems, providing valuable lessons for understanding its future evolution.

Financial and legal provision of investment activities under EU legislation

This article is devoted to the study of the financial and legal provision of investment activities under EU legislation. The author analyzes the legal mechanisms, financial instruments, and institutional foundations that facilitate investment attraction and the creation of a favorable investment climate in the EU. Particular attention is paid to the study of the EU institutional system, which ensures the management, financing, and implementation of investment projects, promotes the attraction and effective use of investments. The role of the European Investment Bank (EIB) as the main financial institution of the EU, which provides financing for strategic projects in various sectors of the economy, including infrastructure, energy, innovation, and support for small and medium-sized enterprises (SMEs), is analyzed. The article examines the key provisions of the main EU legal acts regulating investment activities, in particular the Treaty on the Functioning of the European Union. It is noted that EU legislation aims to ensure legal certainty, transparency, and predictability for investment process participants, which helps to reduce investment risks. The author focuses on the financial instruments used to provision investment activities, in particular on EU programs, funds, projects, and initiatives. It is indicated that these instruments contribute to stimulating private investment through the use of co-financing mechanisms and the provision of guarantees. The article also provides an overview of the legal challenges and problems that arise in the process of implementing EU financial and legal norms in Member States. In particular, the issues of harmonizing national legislation with EU legal standards, adhering to the principles of sustainable development, and ensuring financial stability are highlighted. As a result of the study, it is concluded that effective financial and legal provision of investment activities in the EU depends on a balanced regulatory approach that takes into account both the interests of investors and the strategic goals of the EU, as well as on systematic financial and military support for Ukraine in the defense against armed aggression of the russian federation. The author proposes a number of recommendations for improving the financial and legal regulation of investment activities in order to further develop the European single market and increase its competitiveness at the global level.

In-Depth Analysis of Investment Companies: Industry Dynamics, Management Mechanisms and Strategic Adjustments

As the global economy continues to evolve, investment firms are facing unprecedented challenges in adapting to market volatility, optimizing asset allocation, and responding to policy guidance. The purpose of this paper is to explore how investment companies can respond to industry dynamics through strategic adjustment and strengthen management and analytical methods. Through an in-depth analysis of the investment case of Wal-Mart Investment Bank, the core functions of state-owned capital investment companies in serving the national strategy, optimizing the layout of state-owned capital and enhancing industrial competitiveness are discussed. Through an in-depth analysis of the organizational structure, governance structure and business choices of state-owned capital investment companies, this paper also proposes the risks and challenges that investment companies will face in the new era, as well as how to make decisions and control mechanisms. Finally, this paper aims to make effective suggestions and solutions for how to adjust the investment strategies of various multinational companies in the future development.

Using Big Data and Predictive Analytics for Informed Decision-Making in Investment Banking

Using Big Data and Predictive Analytics for Informed Decision-Making in Investment Banking

COST EVALUATION OF EXISTING PRODUCTION

The issues of cost evaluation of existing production have been in the focal point while in transit to market economy. The article analyses the notion of “the cost of existing enterprise” (CEE) defined in scientific literature and official documentation such research publications, thesauruses, textbooks, documents issued by RF Ministry of Finance. The publications of those engaged in accounting are also in the focal point of this submission. The analysis made is intended to help to remedy the disadvantages of existing cost evaluation methodology. The author provides comparative analysis of interpretation of this notion, adjust its contents and justify the necessity of counting such cost components as goodwill in cost evaluation of an enterprise. The methodology of the profitable approach to estimating the cost of production based on discounted cash flows in an unlimited billing period is analyzed, as well as the presented direct method for calculating the CEE by the amount of complex non-current and current capital used for the reporting period. The article introduces the methodology of CEE calculations based on the total value of capital (current assets and fixed assets). The formula of CEE calculations with goodwill counted is viewed as seller’s extra earnings transformed in a particular part of future balance costs of a buyer company, which is increasing its capital costs and reducing its production efficiency to some average industry standard. The article is aimed at managers, entrepreneurs, investors, professional appraisers, employees of investment companies and banks, teachers, students and postgraduate students.

Decision Support System for Recommendation Sharia Banking Investment Products Using Simple Additive Weighting (SAW)

The swift expansion of Islamic banking has resulted in the creation of many investment products, such as mudharabah deposits, sukuk, and Islamic mutual funds, all compliant with sharia rules. Notwithstanding this advancement, the customers' inadequate financial literacy presents considerable obstacles in identifying appropriate investment alternatives that correspond with their objectives and risk appetite. This work seeks to fill this gap by creating a Decision Support System (DSS) that employs the Simple Additive Weighting (SAW) method to aid users in making educated decisions on Islamic banking investments. The SAW technique was selected for its straightforwardness and efficacy in normalizing data and assessing alternatives according to established criteria, including profit potential, risk level, investment duration, and compliance with sharia principles. The research encompassed multiple phases, including the identification of evaluation criteria, the collection and analysis of pertinent data, and the application of the SAW method to rank investment choices. The DSS effectively delivered precise and dependable suggestions, designating Sharia Deposits as the optimal investment choice due to its robust agreement with the established criteria. The results underscore the system's capability to improve financial inclusion and literacy, especially in Indonesia, where comprehension of sharia-compliant financial products is still inadequate. Future improvements to the DSS involve the incorporation of real-time data and the expansion of its application to include more financial industries, such as insurance and microfinance. This study highlights the importance of utilizing technology to address deficiencies in financial literacy and facilitate the sustainable development of the Islamic banking sector.

Assessment of the Investment Attractiveness of VTB Bank Shares

The study of VTB Bank's investment attractiveness is undoubtedly relevant due to the fact that deterioration of the geopolitical situation, the bank's inclusion in the sanctions list, as well as tightening of the monetary policy of the Bank of Russia, a pronounced weakening of the national currency had a negative impact on the activities of this commercial bank, the second most important for the Russian banking system, and in 2022 it received a record the loss; in addition, the bank's equity was significantly affected. In 2023, VTB Bank's operations began to recover, and in 2024, the bank carried out a reverse split of its own shares. The growth of investment attractiveness and a high reliability degree of systemically important commercial banks, including VTB Bank, ensure soundness and stability of the banking system, which plays a leading role in ensuring the economic development of the country. The objectives of this study are to assess the investment attractiveness of VTB Bank (PJSC) using the instrumentarium of fundamental and technical analysis and to determine the prospects for its development in terms of potential investments in the bank's shares. Materials and methods. Methods of technical analysis and econometric modeling were used to predict the share price; among special methods of financial and economic analysis, the method of estimating financial coefficients was used. The main data sources were the Investfunds, TradingView, and Smart-lab platforms. Study results. The analysis of candle patterns, construction of moving averages and tracking the relative strength indicator RSI allowed us to assert that in the first half of 2024 there was no entry point into VTB shares. The conditions under which an investor can buy shares of VTB Bank, including after the reverse split, are outlined. It has been established that construction of the ARIMA econometric model makes it possible to accurately predict the future change in VTB Bank share prices by smoothing the time series of stock prices. In the long term, such models will be ineffective, since they do not take into account changes in external factors, as well as individual factors that are characteristic of VTB Bank's activities as an issuer. The fundamental analysis has shown that problems with the bank's equity have a negative impact on the bank's investment attractiveness, since capital adequacy ratios are at a low level and do not give the bank the opportunity to pay dividends. It may take several years to restore VTB Bank's capital position, and during this period, profits will be directed to capitalization increase, rather than paying dividends. The results of the study may have practical significance for potential investors in VTB Bank securities. Conclusions. While maintaining the stability of the bank's financial position, the decisive role in shaping its investment attractiveness will belong to the decisions of the Bank of Russia regarding the key rate and the strategy of the state as the majority shareholder in the management of VTB Bank. The policy of the Bank of Russia in the form of setting a high key rate is aimed at reducing the business activity of economic entities and the inflation rate to target values, which limits the growth of the bank's loan portfolio and net interest income. In 2024, the impact of this factor will have a significant influence on the activities of VTB Bank and may affect the bank's financial results and result in a decrease in net profit, and therefore the degree of its investment attractiveness.

A Study on the Impact of the Belt and Road Initiative on the Global Financial System

Since its inception, the Belt and Road Initiative (BRI) has significantly influenced the development of the global financial system. This study mainly explores the specific measures and achievements of the BRI in promoting global financial market connectivity, the construction of diversified financing channels, and addressing financial risks. The research analyzes the progress made through the establishment of cross-border payment and RMB settlement systems, which enhance transaction efficiency, reduce costs, and promote the internationalization of the RMB. It discusses how diversified financing tools, such as the Silk Road Fund and the Asian Infrastructure Investment Bank (AIIB), provide financial support for infrastructure development and economic cooperation, as well as their role in fostering regional economic integration. The study also emphasizes the challenges and strategies for financial risk management and regulatory coordination under the BRI. By strengthening financial market connectivity, promoting diversified financing, and enhancing financial risk management, the BRI has improved the stability and sustainability of the global financial system.

Quality of Life and Bank Investments of the Population in the Regions of the Russian Federation

Improving the living standards of citizens and improving the investment climate are the key benchmarks of any state.The purpose of this study is to analyze the relationship between quality of life and the growth of bank deposits in the regions of Russia.Materials and methods. The integral index of the quality of life of the population of the Russian regions from 2011 to 2021 was assessed using the method of principal components based on blocks of variables reflecting not only material but also spiritual and moral spheres of society. The authors analyzed the presence of correlation between the integral index of the quality of life and the volume of bank deposits. Assuming that the integral index of the quality of life can have a significant impact on the growth of bank deposits, panel data models with fixed and random effects were constructed and analyzed. The data from the Federal State Statistics Service (Rosstat) and from open Russian Internet resources on banking analytics were used in the paper.Results. The paper shows that despite the presence of a stable correlation between the value of the integral index of the quality of life and the estimate of the volume of deposits, the quality of life does not have a significant impact on the growth of bank investments. Regional inflation is expected to have a negative impact on deposit growth.Conclusion. The increase in free cash stimulates the population to choose the most reliable ways of their preservation and multiplication, for example, bank deposits. However, improving the quality of their lives, the population may begin to consider other, albeit less reliable, but perhaps more profitable areas of investment, such as real estate or mutual funds. In addition, today the compensation for deposits in a bank, in respect of which an insured event has occurred, is paid to the depositor in the amount not exceeding 1.4 million rubles, which encourages agents to consider other investment instruments, if the available free cash exceeds the above amount. In conditions when the growth rates of consumer prices exceed the return on deposits, their real return becomes negative, which means that the population will look for alternative ways of investment. Analysis that takes into account different types of investment by regions of the country is currently a difficult task due to the aggregation and non-transparency of this type of data. We also note that the turbulent period starting from 2022, characterized by a sharp increase in interest rates, requires separate consideration.

Climate finance and new multilateral development banks: approaching co-productive dynamics?

ABSTRACT Multilateral development banks (MDBs) play a key role in directing private capital and public resources to finance climate action. Different from the mainstream literature that focuses on the role of new MDBs in promoting climate finance, this paper provides novel evidence on how and why they can also be reshaped by climate finance. It takes as a case study the Asian Infrastructure Investment Bank (AIIB), a newly established yet now the world’s second largest MDB by membership, drawing on the bank’s climate trajectory since 2016, and 57 in-depth interviews with its officials and experts in Beijing, China. While initially created as an infrastructure-focused MDB, AIIB has been substantially shaped and reshaped into a climate-oriented bank. The shift is explained by the bank’s (1) financial considerations, (2) strategic considerations, and (3) organizational culture. The co-productive interaction entails two long-term effects. First, despite its geostrategic intentions and institutional setbacks, AIIB carved out an extra space for itself to grow. Second, there is an increasing risk of AIIB’s unique developmental identities being weakened as it leans towards climate finance.

Fearless Woman: Financial Literacy, Confidence, and Stock Market Participation

Women are less financially literate than men, and it has been difficult to determine whether this gap reflects a lack of knowledge or, rather, a lack of confidence. To address this important research question, we designed two survey modules that enable us to calculate the extent to which confidence matters for both financial literacy and behavior. We developed and estimated a model that provides a new measure of financial literacy and disentangles confidence from knowledge. We find that confidence accounts for about 30% of the gender difference in financial literacy. Moreover, both financial knowledge and confidence are linked to stock market participation. We also provide researchers with a method to account for confidence in regressions. This paper was accepted by Bo Becker, finance. Funding: This work was supported by the European Investment Bank Institute (n/a), which is gratefully acknowledged. The findings and views presented in this article are entirely those of the authors and should not be attributed in any manner to the European Investment Bank or its Institute or to the European Central Bank, the Eurosystem, or De Nederlandsche Bank. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00425 .

Analysis of Investment Strategy and Practice in the Construction of China's Belt and Road Initiative

The current study offers a thorough study of investment strategies and practices under the BRI (Belt and Road Initiative) to promote international economic cooperation and development and China announced BRI in 2013. The study delves into the financial strategies employed by China, such as governmental loans, commercial financing, and the creation of specialized funds to support infrastructure projects across participating countries. It also examines how China has tight ties with the Asian Infrastructure Investment Bank (AIIB) and other global financial institutions, to leverage technical and financial support. Key focus areas include the optimization of investment layouts, innovation in financing models, and the creation of mechanisms for risk management to ensure a guaranteed sustainability of investments for long term. This research emphasizes the importance of balancing long-term strategic goals with short-term economic benefits, particularly when investing in large-scale infrastructure projects that require significant capital and extended timelines for returns. Furthermore, the study investigates the role of sustainable development and the necessity of building cooperative models that foster mutual growth, with the aim of contributing to the shared prosperity of China and its partner nations along the Belt and Road.