Regional Commercial Banks Research Articles

Does digital inclusive finance affect the credit risk of commercial banks?

This paper adopts the data of commercial banks from 2011 to 2021 to carry out the research on the impact of digital inclusive finance on the credit risk of commercial banks. The results show that, first, digital inclusive finance reduces credit risk of commercial banks, and has a greater mitigating effect on credit risk of national banks than regional banks. Second, economic policy uncertainty makes banks' credit risk rise. Compared with national commercial banks, economic policy uncertainty increases the credit risk of regional commercial banks more significantly. Third, the higher the profitability of banks, the more beneficial digital inclusive finance is to reduce the credit risk of commercial banks.

Climate impacts on the loan quality of Chinese regional commercial banks

The objective of this paper is to investigate the impact of climate risk on the stability of regional commercial banks in China. We examine both physical and transitional risks and their potential to adversely affect loan quality. The sample for this study spans from 2010 to 2019 and includes 591 regional commercial banks in China. Our analysis reveals a positive association between higher levels of climate risk and higher levels of non-performing loans. This relationship holds true even after conducting various robustness tests. Additionally, we find that banks react to transitional policies by modifying their portfolios, as evidenced by a quasi-natural experiment of green finance reform. These findings contribute to the expanding literature on climate finance and underscore the need for regulators to consider climate risk as a critical factor in maintaining financial stability.

Fintech development, firm digitalization, and bank loan pricing

Using loan-level data of Chinese listed companies from 2011 to 2018, this paper finds a significant decrease in bank loan prices due to the regional development level of financial technology (fintech). For small and medium-size regional commercial bank lenders, a 1% increase in the regional fintech development level can reduce the spread of bank loans for local firms by 1.13 basis points. The reduction effect is greater for enterprises with more binding financial constraints and those headquartered in regions with a lower level of banking competition. In addition, this study discusses the policy effect of firm digitalization. The results show that firm digitalization can reduce bank loan prices directly while weakening the policy effect of fintech in reducing loan prices indirectly. To promote the coordination between fintech development and firm digitalization in reducing corporate financing cost, fintech enterprises should take the role of helpers of commercial banks rather than competitors.

The impact of social trust on loan grants and default risk: Evidence from China’s regional commercial banks during branching policy changes

We investigate the impact of social trust on loan grants and default risk among regional commercial banks in China by using exogenous shocks stemming from the unique regulatory reforms of bank branch deregulation and re-regulation. We find that social trust has different impacts during the two periods. In particular, banks located in regions with higher levels of social trust exhibit a more pronounced increase (decrease) in loan grants following deregulation (re-regulation). We also find a stronger positive relationship between social trust and default risk after deregulation and re-regulation. Our results highlight the relevance of changes in banking regulation for the impact of social trust on loan grants and default risk. They also provide valuable insights for banking regulators and bank managers in evaluating the outcomes of banking regulation reforms.

FinTech development and commercial bank efficiency in China

The rapid development of financial technology (FinTech) is challenging the business of commercial banks. This research analyzes the impact mechanisms of FinTech on the efficiency of commercial banks in China, drawing from the principles of consumer theory, disruptive innovation theory, and technology spillover theory. We apply the DEA–Malmquist model to calculate the total factor productivity of 74 commercial banks from 2012 to 2019 and utilize the text mining method to construct the FinTech development index during the same period. Finally, this study investigates FinTech's effects on commercial bank efficiency in China through the dynamic panel-generalized model of moments. The results show the following. First, FinTech development reduces the commercial bank efficiency for the overall effect. Second, its development affects the debt side of commercial banks, which becomes less efficient because of the rising debt cost. Third, various types of commercial banks are impacted differently by FinTech; urban commercial and rural commercial banks are the most influenced by FinTech, while joint-stock banks are the least influenced. Fourth, regional commercial banks are impacted more by FinTech, with those in the east region more affected. The research conclusions offer theoretical and practical values for deepening the reform of commercial banks and for developing and applying FinTech.

ОБОСНОВАНИЕ ФАКТОРОВ ФИНАНСОВОЙ УСТОЙЧИВОСТИ РЕГИОНАЛЬНОГО БАНКОВСКОГО СЕКТОРА (НА ПРИМЕРЕ БАНКОВ ЮЖНОГО ФЕДЕРАЛЬНОГО ОКРУГА)

The present study contains the results of a study of the level of financial stability of re- gional banks. The relevance of assessing the financial stability of this group of banks is due to the peculiarities of the formation of their financial resources, the range of clients and offered banking products, which to a certain extent, may affect the efficiency of banks. The choice of the territorial affiliation of the banks – the objects of research – is determined by the constant reduction in the number of credit institutions in the Southern Federal District, which implies the practical significance of the scientific justification of the factors of such a reduction. The purpose of this study is to quantify the factors of fi- nancial stability of the regional banking sector. The methodological basis of the study was the methods of complex analysis of the financial stability of banks, including V. Kromonov's methodology, as well as the author's own coefficients. The materials of the study were the official published financial statements of regional commercial banks for the time period under study. The scientific novelty of the study consists in substantiat- ing the most significant factors of reducing the financial stability of regional banks of the Southern Federal District, classifying regional banks depending on their level of fi- nancial stability and the causes of financial problems, justifying the need to introduce additional indicators to assess the level of financial stability of regional banks. The con- clusions and recommendations presented in the study can be used by regional credit or- ganizations in the development and improvement of both financial policy as a whole and its individual components.

Оценка системной значимости региональных кредитных организаций в субъектах Арктической зоны РФ и определение возможностей их поддержки

The article is devoted to the analysis of the banking sector in the Arctic regions of the Russian Federation, the identification of systemically significant regional credit organizations in the subjects of the Arctic zone of the Russian Federation and the study of possible areas of their support. The dynamics of existing credit organizations and their subdivisions in the Arctic zone of the Russian Federation in 20202021 is considered. It is determined that there are five regional credit organizations operating in nine Arctic re-gions now, of which one is a private non-banking one. Their activities are mainly aimed at the development of the real sector of the economy of the home region, at lending to small and medium-sized businesses. The detailed characteristics of the regional banks registered in the Arctic regions and the indicators of their activity are given. It is concluded that the allocation of significant banking structures for the functioning of regional economic systems and their support is an important issue in the analysis of the modern banking system. It is noted that the problem of developing criteria for identifying systemically significant banks for specific regions has been repeatedly raised and discussed in scientific research. It is concluded that for the practical assessment of the systemic significance of regional banks, modification and refinement of currently existing methods are required. The article offers the author's methodology for calculating the indicators used in assessing the systemic significance of a regional credit institution for a subject of the Russian Federation. The indicators of assessing the degree of systemic significance of regional commercial banks registered in the regions of the Arctic zone of the Russian Federation are calculated, and their score assessment is performed. The directions of support for regional systemically important credit organizations are presented.

Аssessment of financial stability of regional commercial banks

Аssessment of financial stability of regional commercial banks

Bank green lending and credit risk: an empirical analysis of China's Green Credit Policy

AbstractThis study empirically investigates the relationship between banks' green lending and their credit risk, and how Chinese green finance regulations contribute to the solvency of individual banks and the resilience of the financial system. Analysing a sample of 41 Chinese banks from 2007 to 2018, we find that the association between a bank's (relative) green lending as a proportion of its overall loan portfolio, and its credit risk, depends critically on the size and structure of state ownership. While the implementation of China's Green Credit Policy reduces credit risk for the major state‐controlled banks, it increases credit risk for the city and regional commercial banks. This performance difference appears largely due to information and expertise asymmetries, with the city and regional commercial banks having less access to information and expertise necessary to evaluate the credit risk of green lending. Understanding this phenomenon can help policymakers tailor green finance policies according to banks' characteristics. It also suggests that mechanisms and platforms for the city/regional commercial banks to learn from the major state‐controlled banks could be beneficial.

Развитие региональных коммерческих банков в условиях цифровой экономики: риски и возможности

The article is devoted to the analysis of the activity of regional commercial banks. The purpose of this article is to identify risks and prospects for the development of regional commercial banks in the digital economy. The author explores the concept of a regional bank, analyzes the peculiarities of the activities of regional banks in modern conditions of increasing banking competition. The article analyzes the state and trends of the development of the banking regional sector from the point of view of efficiency increase of their activities. It is shown that the number of regional banks is constantly declining, and a number of constituent entities of the Russian Federation do not have any longer in the structure of their regional banking system banking credit organizations chartered in their territory as a legal entity. The authors concluded that the development of regional banks can be efficient only through the qualitative growth of each individual regional bank, since in quantitative terms this sector of the Russian banking systems will only decrease. As an example the activity of Rostov bank Tsent-Invest and the regional bank of the Republic of Tatarstan Ak Bars Bank are shown, which occupied certain niches in the Russian banking system and fully compete with foreign banks. To identify and assess the current risks of the activity of regional banks specific characteristics of the digital transformation of the banking industry are determined. As the main risks of development, the authors identified the following ones: risk of increased banking competition, on the one hand, and the risk of monopolization of the banking market, on the other; risk of underfunding of financial technologies; information risks and cyber risks; risks of insufficient financial literacy of consumers of banking products and services; risks of customer base reduction. As opportunities for the development of regional banks the use of remote banking services, allowing to attract new customers, expansion of participation in the state programs, emergence of opportunities for the introduction and development of new business models, in particular ESG-banking are identified. The Bank of Russia can provide certain support for the development of regional banks in the context of digital transformation and increasing banking competition by creating and developing nationwide banking infrastructure platforms.

Efficiency in China’s Banking Sector: A Comparative Analysis of Pre- and Post-Basel II Eras

This study investigates the effects of Basel II and Basel III capital adequacy rules and the regulatory framework adopted by Chinese banking regulators on the efficiency of the banking sector in China during the post-Basel II era (2007–2017) and compares the results with that of the pre-Basel II era (1996–2006). The study finds that both cost and profit efficiency of the banking industry have improved significantly from the pre-Basel II era (1996–2006) to the post-Basel II era (2007–2017). Subperiod analyses show that the risk-based capital ratio (Tier 1 capital ratio) is significantly positively associated with profit efficiency during both pre- and post-Basel II eras. Overall, the “Big Four” national banks and regional commercial banks signal higher profit efficiency during the post-Basel II era.

ФОРМИРОВАНИE КРЕДИТНОГО ПОРТФЕЛЯ КОММЕРЧЕСКОГО БАНКА

In modern economic conditions, the formation of an optimal and high-quality loan port folio is the primary goal of a commercial bank, since the loan portfolio, on the one hand, generates the income of a commercial bank, and on the other, causes risks. This study substantiates the need to assess the formation of the loan portfolio, defines the methodological aspects of its implementation and analyzes the structure and dynamics of the loan portfolio of a regional commercial bank. The paper considers the method of sectoral diversification of corporate loans as a tool for reducing portfolio credit risk, since diversification involves the distribution of loans across various sectors of the economy. Based on this method, the calculation of the industry risk load of the credit portfolio of a commercial bank was carried out, which showed that to a greater extent the credit portfolio of the bank under study consists of industries with high credit risk. These circumstances are due to the fierce competition from the larger players in the banking market, so in the struggle for market share, regional banks are pursuing a risky credit policy, issuing loans to economically vulnerable borrowers. Their loan portfolios are diversified, but they are characterized by a high concentration of investments in such high-risk segments as trade and services, which is a risk-aggressive credit strategy. Based on the analysis of the profitability and risk of the loan portfolio, we conclude that there is a direct relationship between them. The yield of the loan portfolio has a negative trend, the level of risk of the loan portfolio is characterized by the percentage of the reserve for possible losses on loans, the value of which also decreased during the analyzed period.

Peer effects of bank loan portfolio on systemic insolvency risk: evidence from China

ABSTRACT By empirically analysing the panel data of Chinese commercial banks, we find that regional city commercial banks significantly mimic their peers in multiple lending parts of loan portfolio, while large nationwide commercial banks behave oppositely to their peers. In addition, by using a Euclidean distance way to measure bank interconnectedness, we reveal that the overlap of loan portfolios between banks is significantly correlated to the similarity of insolvency risk between them. It implies that peer effects of bank loan portfolio are likely to be sources of systemic insolvency risk in the bank system. These results help deepen the understanding of peer effects of bank activities, and provide insights into the correlation between peer effects and systemic risk in banks.

ПРАКТИЧЕСКИЕ АСПЕКТЫ ОЦЕНКИ РИСКОВ КРЕДИТНЫХ ОРГАНИЗАЦИЙ РОССИЙСКОГО БАНКОВСКОГО СЕКТОРА

The article reflects the results of a study of the Russian banking sector on the subject of prevention and protection of credit institutions from risks, a separate place is given to risk management and risk assessment of a regional commercial bank. The main characteristics of the activities of a commercial bank are presented, a study of its risk management system is carried out and the main directions of its improvement are high-lighted. The positive experience of introducing ESG factors into the business model is considered to increase the efficiency of risks and obtain strategic advantages. ESG banking is an effective business model for re-gional banks that expands the number of considered banking risks and the vector of their management.

Bank Green Lending and Credit Risk

This study empirically investigates the relationship between banks’ green lending and their credit risk, and how Chinese green finance regulations contribute to the solvency of individual banks and the resilience of the financial system as a whole. Using a sample of 41 Chinese banks for the period 2007-2018, we find that the association between a bank’s (relative) green lending as a proportion of its overall loan portfolio, and its credit risk, depends critically on the size and structure of state ownership. While the implementation of China’s Green Credit Policy reduces credit risk for the major state-controlled banks, it increases credit risk for the city and regional commercial banks. This performance difference is largely due to information and expertise asymmetries, with city and regional commercial banks having less access to information and expertise necessary to evaluate the credit risk of green lending. Understanding this phenomenon can help policymakers tailor green finance policies according to banks’ characteristics. It also suggests that mechanisms and platforms for city/regional commercial banks to learn from major state-controlled banks could be beneficial.

APPLICATION OF MACHINE LEARNING METHODS TO THE CALCULATION OF BANK'S RETURN ON EQUITY UNDER A LOAN AGREEMENT

The requirements for a more accurate assessment of the individual risk of a borrower became more complicated with the introduction of Basel II and IFRS 9. Such risk assessment is more and more often carried out using the construction of scoring models, however, as a rule, the Gini coefficient acts as a quality criterion for the constructed models, and the influence of modeling on financial component, namely on the return on equity, which acts as the basis for doing business in the field of lending, is not investigated at all. In this regard, the article proposes a methodology for assessing the return on equity without taking into account risk and its complication by taking into account the individual risk of a borrower. The construction of a dynamic model for assessing credit risk in the article is considered on the basis of survival models constructed by machine learning methods. The problem of accounting for censored data is solved using specific construction of variables for the model and methods that take into account censorship: logistic regression, Cox proportional risk model, random survival forest model. On the example of the data of a regional commercial bank, the return on equity is estimated and compared, depending on the choice of a risk assessment model. The result of the study is the conclusion that it is necessary to apply the methodology for calculating the return on equity taking into account risk assessed by the machine learning method.

Partnership Relations in the Development of Regional Commercial Banks

Partnership Relations in the Development of Regional Commercial Banks

Trends in the development of the banking system in the Far North of the Russian Federation

In this paper, the author summarizes the main problems that have to be solved by regional commercial banks and, in particular, banks in the Far North and equivalent territories in the current political situation and conditions of economic sanctions. The country's banking system is not adequate to the needs of the national economy and is unable to provide resources for the country's modernization. The ability of banks to finance the needs of the real sector is significantly constrained by the lack of long-term and cheap financial resources from the banks themselves.

Implementation of lean manufacturing technologies as a resource for sustainable development of a commercial bank

The tough regulatory requirements of the Central Bank of Russia, competition with transnational banks and a reduction in the volume of issued loans made it necessary to develop measures aimed to increase the efficiency of a regional commercial bank. In this regard, search for new management methods, implementation of analysis tools and improvement of a financial organization activity are relevant. The article proposes to optimize business the processes of the management system of the regional commercial bank by using lean manufacturing tools. The advantages and usefulness of a value stream map for business processes analysis and optimization are considered and substantiated. The tool was implemented in relation to the business process of the commercial bank «Lending to individuals». The time of operations and interoperation intervals was determined, risk analysis was made, and measures were proposed to improve the process. The economic efficiency of corrective measures was calculated.

A Multicriteria Approach for Modeling Small Enterprise Credit Rating: Evidence from China

ABSTRACT As the engine of China’s economy, small enterprises have been the central to the country’s economic development. However, given the characteristics of the small enterprises loan (i.e., short borrowing period, large volume, small amount and incomplete information), it is extremely challenging for financial institutions to assess their creditworthiness. Thus, it seriously delays and restricts the financing access for small enterprises. In an attempt to relieve the financing difficulty of small enterprises, this article makes use of 687 small wholesale and retail enterprises in a regional commercial bank in China, to establish a credit rating indicator system composed of 17 indicators by using both partial correlation analysis and probit regression. It then utilizes TOPSIS together with fuzzy C-means to score the credit ratings of our sample of small enterprises. With the dual test of default discrimination and ROC curve, the prediction accuracy of the established indicator system has reached 80.10% and 0.917, respectively, indicating the robustness and validity of our credit rating system.