Large International Banks Research Articles

Value-at-risk and the global financial crisis

Using daily data for seven large international banks, we examine the forecasting ability of bank value-at-risk (VaR) estimates around the 2007–9 global financial crisis (GFC) period. We find that the banks’ internal VaR estimates are very inaccurate. They systematically overstated VaR during the pre- and postcrisis periods, with mixed performance during the GFC. Some banks inflated their VaRs, while others experienced excessive VaR exceptions and clustering. VaR estimates based on simple models of generalized autoregressive conditional heteroscedasticity (GARCH) type easily outperform internal VaR estimates. The VaR estimated via a GARCH-t distribution captures the extreme losses reasonably well. We attribute the poor VaR estimates at banks to the banks’ inappropriate choice of internal VaR models.

Использование мягкого права в сфере противодействия коррупции

The methods of combating transnational corruption, other than criminal law, are analyzed. These methods include the creation of informal networks of interaction between national anti-corruption agencies; participation in combatting corruption by non-state players such as the World Bank, the International Chamber of Commerce, and non-profit organizations such as Transparency International; the development by large international banks and development agencies of regimes for investigating and punishing companies that are involved in corrupt activities within the framework of projects they finance; implementation of Model Codes of Corporate Ethics and the functioning of compliance mechanisms in corporations. It is noted that these methods are especially beneficial at the international level, where there is no supranational sovereign, and the effectiveness of interstate cooperation remains limited. It is concluded that the creation of new mechanisms, including “soft law” mechanisms, makes it possible to develop more versatile and effective anti-corruption approaches. In particular, through the development of soft law mechanisms such as dialogue and face-saving, as well as the creation of regulatory networks, non-state organizations are able to control the activities of corporations. It is emphasized separately that such mechanisms are not a panacea, but they represent a valuable regulatory resource, which should be recognized by the international community.

The Existing Deficiencies of Virtual Currency and Its Possible Development Direction

The virtual currency market born from the blockchain is developing rapidly, and the market has reached a scale of hundreds of billions of dollars. Even some countries are trying to use virtual currency as the official currency. However, due to the limitations of virtual currency itself such as decentralization, the current virtual currency is not a good substitute for existing currency, and there are also illegal activities such as using virtual currency to launder money. This article will focus on explaining the main shortcomings of virtual currencies, the inadequacy of the trading market and its regulation, and the possible negative impact on the economy. And explore the possibility of future virtual currency development from two aspects: virtual currency adapts to the existing market and new market adapts to virtual currency. And finally came to two conclusions, large international companies or central banks can also develop virtual currency, so that virtual currency can adapt to the existing market to some extent. At the same time, the constantly developing virtual reality technology and the possible virtual world in the future may also provide a broad application space for virtual currency.

Assessment of the Impact of Commercial Banks’ Operating Activities on the Natural Environment by Use of Cluster Analysis

The aim of the paper is to identify groups of banks with similar environmental commitment, taking into account their direct environmental impact. The study, which employs the aggregation method, reveals that small banks with a relatively worse financial standing are characterised by the lowest level of disclosures within pro-ecological initiatives. At the same time, large international banks belong to clusters defined by the highest or the lowest disclosure rates. The above-mentioned phenomenon results from the dichotomy of integrating environmental policy into their strategies and business models. This study is the first comparative analysis of the extent to which all listed (and at the same time the biggest) banks operating in Poland have taken initiatives to reduce the negative environmental impact of their activities.

Modeling the default probability of Moroccan companies

The financial crisis that has rocked the world in recent years, expressed by the bankruptcy of large international banks (Lehman Brothers in the United States for example), it has led to a questioning of the banking risk management model including credit risk. The objective of our research is to assess the probability of default of firms through a sample that includes 2030 Moroccan companies made up of SMEs and large companies. For this, we used the logistic regression technique which was appreciated in the field of finance mainly in epistemological surveys and credit scoring. This quantitative approach allowed us to measure solvency and at the same time identify healthy borrowers from defaulting borrowers through a number of financial ratios calculated from the balance sheet of the 2015-2017 financial statements.

Power dynamics in organisations and the role of information systems

Power dynamics in organisations and the role of information systems

Power relations inscribed in the enactment of systems development methods

AbstractIssues of power are often neglected in information systems (IS) studies and under‐theorised in IS research. Systems development methods (SDMs) are commonly used in the IT industry to coordinate the activities between developers and clients. The role of power in the relationship between clients and systems developers remains an important topic of research in information systems development (ISD). Yet, despite the importance of understanding this relationship better, there has only been a limited number of studies exploring the role that an SDM can play in influencing this relationship. What is not widely acknowledged or researched is how different forms of power are inscribed in and enacted through an SDM. The aim of this paper is to advance our understanding of different forms of power—here, obtrusive and unobtrusive power—to show how ISD concepts provide structures during the enactment of an SDM and thereby influence relationships between developers and clients. We present qualitative results from an exploratory case study within an IT division of a large international bank and interpret the results using Clegg's (1989) circuits of power (CoP). Our analysis shows that developers feel disempowered in relation to the client, with developers playing a cooperative but submissive role. Prior SDM enactment studies have either not encountered or not recognised cases where obtrusive and unobtrusive forms of power inscribed within the SDM directly determine the relationship between developers and the client. Our results are presented as a set of propositions explaining how obtrusive and unobtrusive power is inscribed in the SDM and the effect such inscription has on the enactment of the SDM.

Cumplicidade e impunidade: uma análise pós-colonial do envolvimento do setor bancário na corrupção transnacional

Esta pesquisa aborda a corrupção, reconhecendo a importância das redes transnacionais informais na perpetuação da corrupção. O objetivo geral é compreender, sob a lente pós-colonial, como a corrupção se constitui um fenômeno transnacional. Realizamos uma pesquisa qualitativa, com a análise de documentos sobre casos de corrupção envolvendo um grande banco internacional: o HSBC Holdings Plc. O material empírico foi extraído da organização International Consortium of Investigative Journalists (ICIJ) e do jornal britânico The Guardian, sendo submetido à análise temática. O mapa temático final destaca dois temas que desvelam as relações coloniais: a cumplicidade dos agentes do sistema financeiro com os infratores e a impunidade do colonizador com esses mesmos agentes. Os resultados apontam para um padrão histórico de leniência e conivência do banco com criminosos, com diversos processos acusatórios encerrados com acordos, resumidos às multas que, por maiores que fossem em relação às práticas da justiça até então, não representavam sanções que inibissem as eventuais reincidências.

Death in Veneto? European banking union and the structural power of large banks

ABSTRACT We argue that the evolving preferences and power resources of large cross-border banks help explain the crucial political moves to European banking union. As they became larger and more European, these banks benefited from the supranationalization of supervision through reduced compliance costs and the effective opening of European markets. The political divergence in the interests of large international banks and small national ones eventually caused the German and the French governments’ change of position in intergovernmental bargaining. Once in place, banking union accelerated balance sheet consolidation to the benefit of large banks that took over their weaker competitors.

Bank intermediation activity in a low‐interest‐rate environment

AbstractThis paper investigates how a prolonged period of low‐interest rates affects bank intermediation activity. We use data for 113 large international banks headquartered in 14 major advanced economies during the period 1994–2015. We find that low‐interest rates induce banks to shift their activities from interest‐generating to fee‐related and trading activities. This rebalancing is stronger for low capitalised banks. Banks also moderately adjust their funding structure, away from short‐term market funding towards deposits. We observe a concomitant decline in the risk‐weighted asset ratio and a reduction in loan‐loss provisions, which is consistent with signs of evergreening.

The Impact of Corporate Sustainability and Digitalization on International Banks’ Performance

AbstractWe analyse the implications for international banks of two contemporary megatrends: corporate sustainability (CS) and digitalization. The digital environment and the availability of massive data from customers generate asymmetric information for banks to the detriment of customers, who experience individual vulnerabilities such as privacy rights. This can hinder the positive influence of digitalization in banks’ performance, with relevant managerial and political implications. In this context, the reputation generated by CS strategies can constitute a credence factor that reduces customers’ fears of opportunistic behavior and information asymmetries. We test and find support for our hypothesis over a panel data of large international banks from developed countries. Our findings shed light on the mutual reinforcement of CS and digitalization strategies in enhancing banks’ market performance and efficiency.

Post-Crisis Changes in Global Bank Business Models: A New Taxonomy

The Global Financial Crisis unleashed changes in the operating and regulatory environments for large international banks. This paper proposes a novel taxonomy to identify and track business model evolution for the 30 Global Systemically Important Banks (G-SIBs). Drawing from banks’ reporting, it identifies strategies along four dimensions –consolidated lines of business and geographic orientation, and the funding models and legal entity structures of international operations. G-SIBs have adjusted their business models, especially by reducing market intensity. While G-SIBs have maintained international orientation, pressures on funding models and entity structures could affect the efficiency of capital flows through the bank channel.

Post-Crisis Changes in Global Bank Business Models

The Global Financial Crisis unleashed changes in the operating and regulatory environments for large international banks. This paper proposes a novel taxonomy to identify and track business model evolution for the 30 Global Systemically Important Banks (G-SIBs). Drawing from banks’ reporting, it identifies strategies along four dimensions –consolidated lines of business and geographic orientation, and the funding models and legal entity structures of international operations. G-SIBs have adjusted their business models, especially by reducing market intensity. While G-SIBs have maintained international orientation, pressures on funding models and entity structures could affect the efficiency of capital flows through the bank channel.

Preaching water but drinking wine? Relative performance evaluation in international banking

The rise in the level of executive compensation in international banking in the last two decades has been striking. At the same time, corporate declarations of relative performance evaluation (RPE) have enjoyed widespread popularity. RPE determines the level of CEO pay by accounting for common market shocks that are out of a CEO’s control, providing better governance and incentivizing CEOs to maximize shareholder value. In this paper, we test for evidence of RPE in international banking and pay particular attention to banks that openly disclose its use. To that end, we collect compensation data on 46 large international banks. Taken as a whole, our sample shows moderate evidence consistent with RPE. We report stronger evidence once we investigate the subsample of RPE-disclosing banks. These results hold up to a series of robustness checks. In addition, we find that the use of RPE is positively related to firm size and negatively related to growth options.

Financial Incentives and Loan Officer Behavior: Multitasking and Allocation of Effort under an Incomplete Contract

We investigate the implications of providing loan officers with a nonlinear compensation structure that rewards loan volume and penalizes poor performance. Using a unique data set provided by a large international commercial bank, we examine the main activities that loan officers perform: loan prospecting, screening, and monitoring. We find that when loan officers are at risk of losing their bonuses, they increase prospecting and monitoring. We further show that loan officers adjust their behavior more toward the end of the month when bonus payments are approaching. These effects are more pronounced for loan officers with longer tenures at the bank.

Does perceived top management involvement and knowledge sharing affect perceived project performance? Evidence from the banking sector

This study explores the impact of perceived top management involvement and knowledge sharing on perceived project performance. Relationships are examined from a sample of CEOs, directors and project managers from one large international bank in Serbia. Our results confirm that the “human factor” is critical to project success because perceived top management commitment exerts the most relevant direct relation, in addition to having an indirect relation through perceived knowledge management. Moreover, a nontrivial proportion of perceived project success (35%) is explained through perceived top management involvement and knowledge sharing.

Death in Veneto? European Banking Union and the Structural Power of Large Banks

We argue that the evolving preferences and power resources of large cross-border banks help explain the crucial political moves to European banking union. As they became larger and more European, the relative dependence of these banks on national regulators declined even as the dependence of states on these banks increased – resulting in a net rise in the structural power of large banks. These banks benefited from the supranationalization of supervision through reduced compliance costs and the effective opening of European markets. The political divergence in the interests of large international banks and small national ones eventually caused the German and the French governments’ change of position in intergovernmental bargaining. Once in place, banking union accelerated balance sheet consolidation to the benefit of large banks that took over their weaker competitors.

Post-Crisis Changes in Global Bank Business Models: A New Taxonomy

The Global Financial Crisis unleashed changes in the operating and regulatory environments for large international banks. This paper proposes a novel taxonomy to identify and track business model evolution for the 30 Global Systemically Important Banks (G-SIBs). Drawing from banks' reporting, it identifies strategies along four dimensions-consolidated lines of business and geographic orientation, and the funding models and legal entity structures of international operations. G-SIBs have adjusted their business models, especially by reducing market intensity. While G-SIBs have maintained international orientation, pressures on funding models and entity structures could affect the efficiency of capital flows through the bank channel.

Regulators and the quest for coherence in finance: The case of loss absorbing capacity for banks

After the international financial crisis, new financial regulation was adopted at the international, regional and national levels, raising the issue of how to promote regulatory coherence, defined as the consistency between the rules adopted at different governance levels and in a variety of policy venues. A major recent area of reform concerned the loss absorbing capacity (LAC) of banks. In practice, the lack of regulatory coherence concerning LAC hampers the effective resolution of large international banks in a timely manner, ultimately undermining financial stability. We examine the role of regulators in the quest for coherence on LAC, explaining the incentives they had and how they deployed their delegated competences at different levels to achieve coherent rules that ensure financial stability. Theoretically, we combine insights from the public administration and political economy literatures. Methodologically, we process trace the making of LAC rules on three governance levels and in multiple policy venues.

Corporate Social Responsibility Engagement as a Determinant of Bank Reputation: An Empirical Analysis

AbstractThe relationships between sustainable behavior, firm reputation, and economic performance are significant issues that continue to become more important. Corporate reputation has important implications for economic performance while corporate social responsibility engagement is considered a key determinant of reputation. The aim of this study is to empirically test such relationships regarding the banking sector and for the sub‐prime crisis period (2008–2012). We apply our hypothesis to 75 large international banks using Reputation Institute and ASSET4 data and adopting a multiple econometric approach. Our initial results are encouraging and consistent with the existing literature: bank reputation is positively related to accounting performance and is negatively related to leverage and riskiness profiles. However, while a positive relationship between reputation and social performance exists, relationships between reputation, corporate governance, and environmental performance are always negative. We discuss these results by identifying related causes and by presenting avenues for future research. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment