Iranian Banking Sector Research Articles

From hubris to nemesis: Irish banks, behavioural biases and the crisis

The collapse of the Irish economy, still ongoing after 5 years, has its roots firmly in the banking sector. Lax risk management, aided by poor board oversight and behavioural biases among senior executives, is now viewed as one of the primary causes of the over-lending during the ‘Celtic Tiger’ years that fuelled the excessive growth in credit and subsequent banking implosion, eventually resulting in all Irish banks ending in state ownership. The causes of the Irish banking sector collapse are approached from a behavioural perspective of the role of Boards of Directors in bank risk management and then proceed to explore the likely presence of behavioural biases among senior executives in Irish banks. The Irish context provides a pertinent case study of what can happen when hubris and associated behavioural biases take control of a bank's risk management strategy.

Performance evaluation of banks using balanced scorecard

The performance evaluation of banks has important results for creditors, investors and stakeholders since it determines banks’ capabilities to compete in the sector and has critical importance for the development of the sector. The aim of this study is to propose a fuzzy multi-criteria decision model to evaluate the performance of Iranian banks. The three largest commercial banks of the Iranian banking sector are examined and the performance of each is evaluated. Drawing on the four perspectives of a balanced scorecard (BSC), this research first summarised the evaluation indices synthesised from the literature relating to banking performance. Then, to screen these indices, 22 indices were selected for banking performance evaluation. Furthermore, the relative weights of the chosen evaluation indices were calculated by fuzzy analytic hierarchy process (FAHP). As to the prioritisation of BSC’s aspects, results indicated that the financial aspect or criterion stands atop the priority list followed by the criteria of customers, learning and growth, and the internal process of the organisation respectively.

The degree of competition in Iranian banking industry: Panzar-Rosse approach

The Iranian banking sector has undergone huge and substantial reform in the last decade;¬ privatization¬, establishment of private banks and development of modern technologies (IT). Based on a sample of 19 banks, This paper investigates the competitive condition of the Iranian banking industry over the period 2005-2010 using the H-statistic proposed by Panzar and Rosse.. The properties of this non-structural methodology (e.g. using firm level data, robustness in small samples, no need to specify a relevant market, etc.) make it an excellent framework for assessing the degree of competition in the banking industry. To estimate H-statistic Panel date approach has been used. The estimated H statistics for the whole sample period is 0/7101 and the Wald test for the market structure of monopoly or perfect competition is rejected and implying that the banks earned their revenues in the condition of monopolistic competition. Key words: Competition, Panzar-Rosse, Market structure, Iranian banking industry.

From Hubris to Nemesis: Irish Banks, Behavioral Biases, and the Crisis

The collapse of the Irish economy, still ongoing after five years, has its roots firmly in the banking sector. Lax risk management, aided by poor board oversight and behavioral biases among senior executives, is now viewed as one of the primary causes of the over-lending during the ‘Celtic Tiger’ years which fueled the excessive growth in credit and subsequent banking implosion, eventually resulting in all Irish banks ending in state ownership. We approach the causes of the Irish banking sector collapse from a behavioural perspective of the role of Boards of Directors in bank risk management, and then proceed to explore the likely presence of behavioral biases among senior executives in Irish banks. The Irish context provides a pertinent case study of what can happen when hubris and associated behavioural biases take control of a bank’s risk management strategy.

Financial Stability and Reform Bill 2013

The purposes of this Bill is to create a situation of stability within the Irish banking sector by creating a series of regulatory limitations on the activities of banks via a series of ring-fencing rules and capital requirements. The Bill also looks to expand the capabilities of the Central Bank of Ireland by requesting that it undertake a study to see how a so-called Volcker Rule could be applied to the Irish banking environment.This Bill draws from US and UK models of financial regulatory reform following the Global Financial Crisis, the effects of which are still be felt by national governments.

Investigating the critical success factors of corporate social responsibility implementation: evidence from the Iranian banking sector

PurposeThe main purpose of this paper is to identify the critical success factors of corporate social responsibility (CSR). By illustrating the CSFs of CSR implementation, policy‐ and decision‐makers can handle the business at a higher level of effectiveness and efficiency and will achieve sustainable development in a turbulent business environment. To achieve this purpose and to identify the CSFs of CSR implementation, evidence from the banking sector of Iran will be gathered. By using the experts in this field, the CSFs identified will be validated and then ranked.Design/methodology/approachTo achieve this purpose and to identify the CSFs of CSR implementation, evidence from the banking sector in Iran will be gathered. By using the experts in this field, the CSFs identified will be validated and then ranked. This research, implemented in the banking sector, is an innovative study that can contribute valuable insights for both academicians and professionals in the field. In the final section of this work, applied and theoretical recommendations will be presented.FindingsIn this research the critical success factors for CSR implementation are identified and presented. For gathering data and sampling, the banking sector of Iran was selected as the case study of this research. Based on the viewpoint of the experts of this research, 23 CSFs for CSR implementation were identified and then the importance of these CSFs was determined. This is an innovative study in the field of CSR in the banking sector that presents a new category for critical success factors for CSR implementation. All the identified CSFs are categorized into the five main sections of the organizational functional areas. These functional areas include financial, marketing, environmental, strategic and human resources.Originality/valueThis study first provides a framework for CSR implementation in the banking sector. Also the main CSFs are identified and ranked. By means of the results of this study, decision makers in the field will be more familiar with CSR and can make higher decisions for the chief departments of the organization. Finally academicians in the field can use the framework of this research and develop CSR for other organizations and sectors of business.

Bank performance evaluation using dynamic DEA A slacks-based measure approach

Data envelopment analysis (DEA) has been applied in many studies in the banking industry but deficiency of empirical studies in Iranian banking sector that incorporate time factor into the efficiency, have still remained. Previous studies measured the efficiency of bank branches in a single period within cross-sectional data. They did not considered effect of interconnecting activities (links) between two consecutive terms. The main contribution of this paper is to evaluate the efficiency of an Iranian bank using dynamic SBM model in DEA during three consecutive terms considering net profit as a good link and loan losses as a bad link. In order to realize most important variables (inputs-outputs), relative to our case, we made a checklist and distributed them among headmen of branches and arranged an interview with the CEO of bank. Dynamic SBM efficiency is compared with its static efficiency to check the validity of described model. In addition, input-bad link excesses and output-good link shortfalls (slacks) are analyzed and further suggestions to the management are provided.

Mortgage Credit (Loans and Bonds) Bill 2012

The Danish mortgage banking model was created in 1797 with the Kreditkassen following the 1795 Great Fire in Copenhagen which destroyed a large proportion of the city and left many homeless and created an instant and wide-ranging demand for housing. In order to meet this demand a pooling system was designed to obtain the necessary level of capital at a reasonable rate. Though bubbles were not entirely prevented throughout the history of the Danish system it is extremely robust and has acted as a moderating influence on the housing market in Denmark. The aim of this process is to provide capital to allow the housing and banking markets to mend. The Irish banking sector continues to mend its balance-sheets. That places a priority on banks having large capital backstops and limiting lending to the wider economy. The continued concerns about existing mortgage arrears and the recession-reduced household disposable incomes available to serve mortgages that are currently being serviced weighs heavily on the banks with respect to their lending decisions.

Sliding Doors Cost Measurement: The Net Economic Cost of Lax Regulation of the Irish Banking Sector

AbstractThis paper develops a restrictive procedure for evaluating economic policy decisions, by comparing actual economic history with a simulated history where a specific policy decision is replaced with a counterfactual, but credible, alternative. We apply the procedure to the mistaken decision to impose excessively lax banking sector risk regulation in Ireland during the period 2003–08. We measure the differences in banking sector stability and national income that would have occurred if the stricter regulatory approach enforced in Ireland in 2009 had been put in place six years earlier. We find that a few simple, reasonably prudent regulatory controls on the Irish banking sector would have greatly limited the vulnerability of the domestic sector to the 2008 global credit freeze and almost certainly prevented the 2008–09 collapse of the domestic banking sector and the consequent deep Irish recession of 2009–10. On the other hand, the risky and unsustainable inflow of foreign capital mediated by the domestic banks accounts for a substantial part of Irish economic growth during the 2003–07 period. Without this net foreign borrowing inflow, cumulative gross domestic product over the early period would have been substantially lower.

An empirical study on the impact of operating risk on structure capital and profitability in Iranian banking sector

Article history: Received December 25, 2011 Received in Revised form March, 25, 2012 Accepted 24 April 2012 Available online April 29 2012 Banking system plays an important role in boosting the economy and when they become profitable, they could help industries more efficiently. The proposed study of this paper attempts to investigate the effects of operating risk and capital structure on profitability of banking industry. The proposed study of this paper includes 17 commercial banks, which were active from 2006 to 2010 in Iran and the results of the study indicate that although there was a positive relationship between capital structure and profitability but there was no meaningful relationship between operating risk and capital structure. In addition, the results of our study mention that operating risks negatively impacts profitability and economic figures do not have any influence on profitability, operating risks and capital structure. © 2012 Growing Science Ltd. All rights reserved.

An Empirical Analysis to Design Enhanced Customer Lifetime Value Based on Customer Loyalty:Evidences from Iranian Banking Sector

The more a marketing paradigm evolves, the more long-term relationship with customers gains its importance. Also, the move towards a customer-centred approach to marketing, coupled with the increasing availability of customer transaction data, has led to an interest in understanding and estimating customer lifetime value (CLV). There are several researches about the CLV formulas and calculating relations. But the effect of the CLV on the other departments of the organization and especially the effect of the CLV on the key parameters for organization’s profitability such as customer loyalty and satisfaction had little attention. This research is about these shortcomings and covers another essential element for organizational sustainable profitability, customer loyalty. The main purpose of this research is to demonstrate the effect of customer loyalty on the customer lifetime value.

Within‐role, extra‐role and anti‐role behaviours in retail banking

PurposeThis paper aims to explore front line employee performance in retail banking and presents distinct components of employee performance, including extra‐role and sabotage behaviours.Design/methodology/approachData was collected from Irish bank employees. Usable responses were received from 404 respondents and subjected to exploratory factor analysis. Structural Equation Modeling (SEM) was used to undertake a confirmatory factor analysis of the emergent five‐factor model.FindingsResults indicate front line employee performance is multi‐faceted and comprised of civility, assurance and reliability, customer orientation, as well as extra‐role behaviour and anti‐role behaviour, or sabotage.Research limitations/implicationsThis exploratory study focuses on the Irish banking sector. To explore the generalisabilty of results, replication studies among other samples of branch banking employees in other countries are in order. Moreover, our survey is limited to the views of branch employees. We advocate research among bank managers and customers to triangulate potentially divergent views about performance.Practical implicationsFindings have implications for recruitment, training and rewards. To ensure new hires are service minded, managers must consider their potential for extra‐role or sabotage behaviour. Employees who demonstrate extra‐role behaviours must be rewarded to encourage the adoption of such behaviours. Managers must also seek to minimise job stress in order to curtail anti‐role behaviours.Originality/valueThis paper offers insights into employees' views about their own performance at the front line. It extends the conceptualisation of service quality, by considering extra‐role behaviour and sabotage as components of employee performance.

An empirical study to determine the critical success factors on customer retention: A case study of Iranian banking sector

Article history: Received 30 August 2010 Received in revised form 16 November 2010 Accepted 18 November 2010 Available online 19 November 2010 One of the most important strategic issues for any enterprise is to create and deliver superior value for its customers and provide enough evidences to convince them not to choose another competitive. In this study, we study the effects of customer value, customer satisfaction and customer loyalty on customer retention. The results indicate that all aspects of the customer value have positive relationships with customer satisfaction but only emotional value has a positive and direct relationship with customer loyalty. The study confirms that while none of customer value aspects has direct and positive relationship with customer retention, both customer satisfaction and customer loyalty positively and directly affect customer retention. © 2011 Growing Science Ltd. All rights reserved.

An empirical study to determine the critical success factors on customer retention: A case study of Iranian banking sector

Article history: Received 15 August 2010 Received in revised form 3 December 2010 Accepted 3 December 2010 Available online 5 December 2010 The new millennium must be called the century to compete for survival. The increase interaction among international organizations has changed the world into a global village and firms have no choice but to develop a variety of instruments and equipments to compete with each other. Value engineering (VE) is one of the new techniques of management science emerged in using the power of organizational creativity and entrepreneurship programs. VE modifies the organizational activities, removes the non value-added activities and increases the current values of organizations. VE has been successfully implemented in many areas of management such as quality, productivity, project management, etc. The success of a VE program depends on many organizational factors such as the availability of resources, the strategy and the organization structure, the senior management support, the organizational culture and the communication and information systems. In this study, we identify and prioritize organization factors affecting the implementation of VE using ELECTRE III method. © 2011 Growing Science Ltd. All rights reserved.

Sliding Doors Cost Measurement: A Restrictive Approach to Analyzing the Net Economic Cost of Policy Decisions and an Application to Irish Financial Regulation

This paper develops a restrictive procedure for evaluating economic policy decisions, by comparing actual economic history to a simulated history where a specific policy decision is replaced with a counterfactual, but credible, alternative. Our procedure is theoretically straightforward, but empirically problematic since it requires the identification of a feasible policy alternative and a model linking a specific policy choice to subsequent economic outcomes. We apply the procedure to the mistaken decision to maintain an excessively lax financial regulation regime in Ireland during the period 2003-2008. We measure the differences in banking sector stability and national income that would have occurred if the stricter regulatory regime imposed in Ireland in 2009 had been put in place six years earlier. We find that a few simple, reasonably prudent regulatory controls on the Irish banking sector would have greatly limited the vulnerability of the domestic sector to the 2008 global credit freeze, and almost certainly prevented the 2008-2009 collapse of the domestic banking sector and the consequent deep Irish recession of 2009-2010. On the other hand, the risky and unsustainable inflow of foreign capital mediated by the domestic banks accounts for a substantial part of Irish economic growth during the 2003-2007 period. Without this net foreign borrowing inflow, cumulative gross domestic product over the early period would have been substantially lower.