Large Banks Research Articles

The Role of Innovation in the Competition Between Fintechs and Traditional Banks in Brazil

The Brazilian banking market has distinct and peculiar characteristics, resulting from its historical evolution, specific cultural traits and control exercised by the Central Bank. This article aims to analyze, from the perspective of one of the largest Brazilian banks, the role of innovation, products and processes, in the competition between fintechs and traditional banks. The methodology used was a single case study, qualitative and descriptive approach, with data collection through interviews with managers and customers of Alfa Bank and internal and external documentary survey. It has been evident that the emergence of Fintechs, with its flexible business model, with reduced operational costs, provided by product and process innovation, impacted the banking market in Brazil, traditionally dominated by a small number of large banks, which operated in a traditional way. The analyzed bank, known as Alfa, follows technological developments and improves its main products and services, taking into account suggestions from both employees and customers. The results also showed that Brazilian customers recognize the importance of innovation, especially technology-based, but also value the physical presence of traditional banks, which inspires more confidence in them than Fintechs, which operate online.

PENGARUH KOMPETISI BANK TERHADAP STABILITAS SISTEM KEUANGAN PERBANKAN (STUDI KASUS PADA KBMI IV TAHUN 2019-2022)

The emergence of banking as an intermediary institution plays a very important role in the economy because it is the heart that must pump "money" and distribute it to all organs that need the money. Therefore, it is very important to maintain the stability of the banking financial system. The development of the banking system can trigger competition in the banking industry which can affect banking stability. This research was conducted to determine the effect of bank competition on the stability of the banking financial system. This research focuses on KBMI 4 data which is a large bank HHI index, market share and Loan to Deposit Ratio (LDR) used as a proxy for competition and Non-Performing Loans (NPL) as a proxy for banking financial stability. The analysis technique used is Panel Data Regression with KBMI 4th ​​quarter data for 2019-2022. Of these three variables, the HHI index and Loan to Deposit Ratio (LDR) variables have a significant effect on Non-Performing Loans (NPL). Meanwhile, the market share variable has no significant effect on Non-Performing Loans (NPL).

Nonconforming Preferences: Jumbo Mortgage Lending and Large Bank Stress Tests

Nonconforming Preferences: Jumbo Mortgage Lending and Large Bank Stress Tests

Implementing B-BBEE: Leader Experiences in the South African Banking Industry

Orientation: Large banking institutions in South Africa remain complex organisations facing a myriad of challenges as they navigate the Fifth Industrial Revolution (5IR) and strive to remain relevant. A significant challenge relates to how these organisations can utilise Broad-Based Black Economic Empowerment (B-BBEE) to create diverse and inclusive teams for organisational success and sustainability.Research purpose: To explore the experiences and sense-making processes of senior leaders tasked with the implementation of affirmative action as part of a B-BBEE strategy as they navigate this responsibility within a South African bank.Motivation for the study: To shine on the complex experiences of senior leaders tasked with implementing affirmative action within a B-BBEE strategy in a large financial institution.Research approach/design and method: A qualitative interpretivist case study was applied to explore senior leaders’ negotiation of their perceptions and experiences of leading the implementation of B-BBEE in a large bank. Ten semi-structured interviews were utilised as the main data generation tool.Main findings: Study reveals how senior leaders hold strong convictions about the value of diversity and inclusion in the workplace. This included the continued necessity for legislation such as B-BBEE given South Africa’s racial history and existing personal biases that impact workplace diversity and inclusion. The study further reveals that senior leaders believe that B-BBEE is poorly implemented and attribute this to the tension leaders experience between diversity and performance, a lack of organisational policies and practices required to hold leaders accountable for B-BBEE implementation and leaders who lack the skills and expertise required to successfully create diverse and inclusive work environments.Practical/managerial implications: Positive contributions to diversity and inclusion policies and practices, leadership development and transformation of the banking organisations in South Africa and the industry at large.Contribution/value-add: Banking institutions as large market players can play a significant role in leading workplace transformation through improved implementation of diversity and inclusion legislation and principles within B-BBEE.

Bank audit committee financial expertise and timely loan loss recognition

AbstractThis study investigates the effects of audit committee financial expertise on the timeliness of banks' loan loss provisions. I employ two regulatory shocks that mandated audit committee expertise—the Federal Deposit Insurance Corporation Improvement Act in 1991 (FDICIA) and a modified listing standard for NYSE and NASDAQ firms in 1999—as quasi‐exogenous settings to investigate the effects of audit committee financial expertise on the timeliness of loan loss provisioning. Using a difference‐in‐differences research design, I find that the timeliness of loan loss provisions increases with audit committee financial expertise both for the FDICIA treatment group, which had larger banks than the control group, and for the NYSE and NASDAQ exchange treatment group, which had smaller banks than the control group. Further, I find that the results are stronger for banks that have lower regulatory scrutiny, are audited by Big 4 auditors, and do not have staggered boards. Finally, I find that audit committee financial expertise decreases discretionary loan loss provisions and financial restatements. Overall, these findings suggest the importance of audit committee financial expertise in loan‐related matters, which is particularly relevant in the context of the recent Current Expected Credit Losses implementation.

Microfinance in Nepal: An Overview

This paper aims to explore the current challenges and opportunities of the microfinance sector in Nepal. The secondary data and descriptive research with a critical approach are adopted to explain the study. The data were mainly collected from Nepal Rastra Bank's (NRB) annual Reports, and other available literature. The result shows that the center numbers (numbers of microfinance user group) change ratio was reduced from 17.11% to 1.30%, the total group numbers were 13% to 2.88%, the borrower 7.51% to (-9.66%), staff progress 9.75% to (-3.48%), loan outstanding 41.18% to (-5.06), profit 150.53% to (-7238), active loan 40.26 to (-7.94), and saving 22.87 to 3.91 between 2020/2021 to 2022/2023. Similarly, the Overdue member change ratio increased upto 53.66%, the passive loan from 79.47% to 104.3%, and the NPL increased continuously from 2.56% to 5.52%. So, all microfinance institutions are in a critical situation in Nepal. However, microfinance is an important concept to reduce poverty and unemployment. Further, it enhances easy access to financial institutions in rural where large banking institutions are merely available. However, microfinance in Nepal is facing critical challenges as many fraud cases are emerging. The policy implication is crucial as policymakers should formulate both long-term and short-term policies and implement those policies immediately in microfinance to revive the critical current situation.

Purkinje Cell Dendritic Swellings: A Postmortem Study of Essential Tremor and Other Cerebellar Degenerative Disorders.

Under stress, Purkinje cells (PCs) undergo a variety of reactive morphological changes. These can include swellings of neuronal processes. While axonal swellings, "torpedoes", have been well-studied, dendritic swellings (DS) have not been the centerpiece of study. Surprisingly little is known about their frequency or relationship to other morphological changes in degenerating PCs. Leveraging a large brain bank, we (1) examined the morphology of DS, (2) quantified DS, and (2) examined correlations between counts of DS versus 16 other PC morphological changes in a broad range of cerebellar degenerative disorders. There were 159 brains - 100 essential tremor (ET), 13 Friedreich's ataxia, and 46 spinocerebellar ataxia (SCA) (14 SCA1, 7 SCA2, 13 SCA3, 5 SCA6, 5 SCA7, and 2 SCA8). DS were a feature of PCs across all these disorders, with varying morphologies and changes elsewhere in the dendritic arbor. On Luxol fast blue/hematoxylin and eosin-stained sections, the median number of DS per PC ranged from 0.001 in ET to 0.025 in SCA8. Bielschowsky-stained sections yielded higher counts, from 0.003 in ET to 0.042 in SCA6. Torpedo counts exceeded DS counts by one order of magnitude. DS counts were more robustly correlated with torpedo counts than with counts for any of the other PC morphological changes. In summary, DS ranged in prevalence across cerebellar degenerative disorders, from 1/1,000 to 42/1,000 PCs. Across disorders of cerebellar degeneration, these swellings of the dendritic compartment were most robustly correlated with swellings of the axonal compartment, suggesting a similar type of cellular response to duress.

On bank stock return spillovers in South Africa: Implications for portfolio hedging

The purpose of this study is to investigate the return spillovers among the five systemically important banks in South Africa. The study employs a time-varying parameter vector autoregression (TVP-VAR) framework utilising daily data between 2000 and 2024. A minimum return connectedness portfolio is constructed from the spillover indexes and compared with traditional portfolio optimisation methods in terms of risk reduction and reward-to-risk ratios. The research findings reveal that Capitec, the smallest bank in terms of assets, has weaker return connectedness with other banks while ABSA, FirstRand, Nedbank and Standard Bank are moderately connected. Moreover, the two largest banks in terms of assets, Standard and FirstRand, are more connected than any other pairwise connection in the network. During significant events such as national elections, the global financial crisis and the COVID-19 pandemic, system-wide connectedness increases.

The Effect of the Current Expected Credit Loss Approach on Banks’ Lending during Stress Periods: Evidence from the COVID-19 Recession

ABSTRACT In the wake of the financial crisis, policymakers expressed the concern that the incurred loss model delays loan loss recognition to economic stress periods and thereby exacerbates banks’ lending contraction during these periods. Addressing this concern, the FASB issued Accounting Standards Update 2016-13, which requires large public banks to accrue for loan losses using the current expected credit loss (CECL) approach starting in January 2020. We hypothesize and find that banks that adopted CECL prior to the COVID-19 pandemic increased loan loss provisions and reduced loan growth during the accompanying recession more than other banks. The lending contraction is stronger for adopting banks with low regulatory capital and low loan impairment and is primarily driven by commercial loans. Lastly, we find that counties in which CECL-adopting banks have higher market share experience larger increases in unemployment rates during the recession and slower subsequent recoveries. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: E32; G21; G28; M41; M48.

Funding Liquidity and Risk-Taking Behavior of Banks in India

This study, utilizing bank-level data for India, investigates the relationship between funding liquidity and banks’ risk-taking behavior. The study uses two risk measures: risk-weighted assets (encompassing credit, market, and operational risk) and liquidity creation (encompassing intermediacy risk). Findings reveal that banks with higher funding liquidity exhibit higher risk-taking behavior. This risk-taking behavior is more pronounced during economic recuperation and expansionary monetary policy phases. Notably, during economic recuperation, banks display heightened intermediacy risk, contrasting with the absence of such evidence during expansionary monetary policy phases. Larger banks with higher deposit shares demonstrate lower risk-taking behavior. Additionally, banks with a return on equity (ROE) below the average ROE exhibit a proclivity for increased risk-taking. This study advocates for liquidity regulation as a crucial complement to bank capital regulation, offering empirical support for moderate risk-taking among highly liquid banks and fortify their balance sheets for a stable banking system in India. JEL Codes: E32, E52, G21, G28

Konvergensi Bank dan Ketahanan Bank terhadap Pandemi

Book bank 4 is the bank with the largest number of assets and controls more than half of the banking market in Indonesia. Since the early 2000s BUKU 4 bank is an exclusive club consisting of the 4 largest banks in Indonesia. This changed in 2017 when CIMB Niaga bank entered BUKU 4 bank and a year later Panin bank joined. This study examines what factors underlie these banks can merge into a BUKU 4 bank. Further this research then examines the resilience of BUKU 4 banks to the pandemic. The research method is a quantitative method using multiple linear regression. The research uses data taken from the financial statements of 2010 to 2018. The results show that the factors that drive the convergence of banks are the factors of capital adequacy, low borrowing loans and operational efficiency of banking. Meanwhile, in order for banks to survive this research finds investment factors in technology, maintaining capital adequacy and unpaid debt management.

Canadian Bank Capital and Liquidity Creation*

AbstractWe find a significantly positive relationship between the Tier 1 capital ratio and on‐balance‐sheet liquidity creation for Canadian Big Six banks, implying that large banks in Canada can take risk due to risk absorption by using capital to fund illiquid assets. Our results are robust to the 2018 initiation of a domestic stability buffer (DSB) of total risk‐weighted assets for Pillar 2 risks, core deposits financing, non‐deposit funding restrictions, and bank mergers and acquisitions. The positive relation (regulatory capital ratio with liquidity creation) becomes significantly negative during the 2007–9 Global Financial Crisis and COVID‐19 pandemic.

Bank wholesale funding in an era of rising geopolitical risk

AbstractThis paper examines the impact of geopolitical risk on bank wholesale funding using a sample of 2333 commercial banks in 41 countries over the period 2002–2021. Evidence suggests that increased geopolitical risk reduces the share of bank wholesale funding. Interestingly, our finding is driven by small and medium‐sized banks, as large banks do not lose funding from wholesale financiers when geopolitical risk is higher. Delving into the mechanisms that drive our findings, we find that wholesale financiers rely on noisy public signals on bank asset quality such as insolvency risk, earnings volatility and bad debts to determine whether to refinance or withdraw their financing. Small banks lose funding from both informed and uninformed wholesale financiers as their asset quality is adversely affected when geopolitical risk is elevated. Large banks with better asset quality are not significantly affected by geopolitical risk and benefit from the flight‐to‐safety motive.

Social Objectives of Microfinance Institutions and Evaluating its Implementation: A Systematic Review

This research explores the social goals of Microfinance Institutions (MFIs), emphasizing their role in empowering underserved groups, including women, rural populations, and micro-entrepreneurs through financial services. Despite their noble intentions, the commercialization of MFIs, influenced by large banking entities, has shifted the focus towards profitability, potentially undermining their mission to alleviate poverty. A systematic literature review conducted from 2010 to 2020 discloses mixed results regarding the relationship between financial sustainability and outreach depth for microfinance institutions (MFIs). The study explores such as balancing financial sustainability and social outreach, mission drift, regulatory hurdles, and governance shortcomings. It underscores the necessity for collaborative regulation, financial literacy, and enhanced governance to maintain the sustainability and efficacy of microfinance efforts. The study highlights the need for MFIs to balance financial sustainability with their social missions, advocating for enhanced governance, regulatory cooperation, and financial literacy to optimize their impact on poverty alleviation and economic inclusion. Academically, it calls for continued research into the trade-offs between profitability and social outreach, and the effectiveness of innovative microfinance interventions.

The impact of the COVID-19 pandemic on bank funding costs

This study examines how the COVID-19 pandemic influences bank funding costs using a sample of around 5300 US listed banks from 2018:Q3 to 2021:Q2. We consistently find that the COVID-19 pandemic significantly reduces bank funding costs. Digging deeper into bank funding structure, our findings show that the decline in bank funding costs is mainly driven by the increase in the supply of retail deposits rather than wholesale deposits. We also find that large banks with higher asset quality benefit more from the pandemic than small and medium-size banks in terms of cheaper funding costs during the pandemic.

Herd behavior in U.S. bank stocks

This study investigates investor herd biases in U.S. banks' stock returns before, after, and during the COVID-19 pandemic by focusing on the differential impacts of monetary policy cycles and bank regulatory framework. Our results display fundamental herding for both large stress-tested banks and non-stress-tested regional banks during the pre-pandemic tightening monetary policy period in which bank fundamentals were improved through regulatory changes after the global financial crisis. However, we find evidence of nonfundamental herding during the post-pandemic tightening monetary policy period in which bank fundamentals were weakened. This situation might have contributed to the value irrelevance of bank fundamental information to stock prices. Our results have important implications for regulators, policymakers, and investors.

Study into the reshaping process of large reservoir banks using remote sensing

Background. During the first 10—20 years after the creation of large reservoirs, the process of processing of coastal territories is activated, which leads to the loss of land resources, has a negative impact on the existing coastal infrastructure and changes in the depth of the reservoir as a result of activation of the process of rock accumulation, destruction of coastal slopes. Shoreline retreat is 10—15 meters per year. The paper considers the process of recycling of reservoir banks on the example of the Volgograd reservoir.Aim. Development of a methodology for studying and forecasting the process of reshaping of reservoir banks using remote sensing.Materials and methods. The data of 1980—1990 on the actual magnitude of bank reprocessing of the Volgograd reservoir were collected, processed and analyzed, and the coastal territory was typified. It is proposed to use remote sensing materials to obtain the values of coastal overbanking for the period from the 1990s to the present time. Forecasting of the process of reformation of reservoir banks is carried out on the basis of application of mathematical statistics methods.Results. On the basis of solving the set tasks, a universal new methodology for studying and forecasting reservoir bank reformation was proposed. The methodology was tested on the materials of the Volgograd reservoir.Conclusion. The proposed new methodology makes it possible to obtain data on the dynamics of the Volgograd reservoir bank reformation process and to make a forecast for the next 10 years. This methodology can be used to study the process of bank reformation of large reservoirs.

Determinants of banking stability in India

Purpose This study aims to examine the various internal and external factors affecting the financial stability of Indian Commercial Banks. The aim is to improve the effectiveness of the Indian banking system in facilitating the transmission of monetary policy and to strengthen its resilience in the event of a banking crisis. Design/methodology/approach A panel data regression analysis is employed on unbalanced panel data of Indian commercial banks including public sector, private sector and foreign sector banks for the period of 2005–2022. Findings This study revealed that Indian banks with higher profits and high capitalization are more stable than others. However, banks with large bank size and high management costs are less stable as compared to other banks. In the case of macroeconomic variables, foreign exchange reserves have a significant positive impact on banking stability. Moreover, the unemployment rate has a significant negative impact on the banking stability of India. Research limitations/implications Research identifies relevant micro and macroeconomic drivers pertaining to India’s banking stability, a developing economy. These findings have significant implications and can attract the attention of analysts, regulators, bankers and academicians in this area. Nevertheless, the scope of the study is limited to the variables chosen to evaluate their contribution to banking stability, but other variables may influence Indian banking conditions. Practical implications Indian banks are advised by the research to place a high priority on profitability, capitalization and effective risk management. Customers and investors should choose banks with strong metrics. The priorities for policymakers should be preserving robust reserves and tackling unemployment with focused initiatives. Adopting digitalization can improve banks’ customer service and operational effectiveness, which is important for overcoming economic obstacles. These tactics provide doable measures to improve the resilience and stability of the banking industry in India and other emerging nations. Originality/value This research differentiates from the rest by focusing solely on the Indian banking system, in contrast to previous ones that often treated India as part of a bigger part like the BRICS or South Asia continent. It acknowledges the need to comprehending the unique traits and difficulties faced by the Indian banking system. Moreover, the current study distinguishes itself by focusing on the combined impact of microeconomic and macroeconomic indicators in the Indian context, unlike earlier research that concentrated on assessing the effects of individual variables. The current study also investigated new variables like corporate governance and foreign exchange reserves in the context of Indian banking which have not been explored by existing literature. Research is also crucial in the context of the analysis’s time frame, since it captures the period of economic transformation that included demonization, implementation of GST, major mergers and global COVID-19 pandemic.

Assessment of bank risk exposure considering climate transition risks

This study utilizes the Merton model to assess how the climate transition risk exposure of banks may be affected by transition risk shocks across a 30-year horizon, considering three representative climate scenarios outlined by the Central Banks and Supervisors Network for Greening the Financial System (NGFS). The calculation results show that the rise in carbon prices will increase corporate costs and reduce operating profits, thereby increasing the probability of corporate default and ultimately raising the overall level of banks' credit risk exposure, with utilities and energy sectors being the most affected. Variations in loan distributions result in different transition risk impacts across bank types, with large state-owned banks having higher exposure due to loans in carbon-intensive sectors.

The Bibliometric Analysis of Bank Stability

The central role of banks in the economy has been getting more attention since the global crisis occurred in 2008 which was caused by the bankruptcy of large banks in the United States. The collapse of the economic system has had implications for high recovery costs so efforts to maintain bank stability must be thought continuously. The studies to analyze literature reviews on the subject of bank stability have never been specifically conducted therefore this study aims to determine and analyze literature mapping on bank stability by meta-data network and studies trends over the last 10 years (2013-2023). We used a literature review study method (a bibliometric analysis approach) to review 165 articles during the observation period. The results of this study shows that studies of bank stability associated with other keywords such as monetary policy, bank profitability, shadow banking, and price stability are still rarely conducted. Then, based on the development of studies trends over 2013-2023 shows a downward trend. This also opens up space for the study of bank stability considering that its existence is needed to prevent a global economic crisis. Furthermore, based on the density visualization, it shows that themes that are rarely associated with bank stability are efficiency, commercial bank, systemic rice, and price stability so these three variables could become study opportunities in the future.