Risk Of Commercial Banks Research Articles

Research on the Impact of Fintech on Liquidity Risk of Chinese Commercial Banks

This paper investigates the liquidity impact of fintech development on commercial banks with a sample of 18 Chinese commercial banks over the time interval from 2013 to 2022. This paper constructs a basic regression model, three models with the introduction of mediating variables, and a model for heterogeneity analysis. An empirical analysis in this paper begins by analyzing the overall trend of data by conducting a descriptive statistical analysis of the selected variables; in the second step, it is determined whether the selection of the variables is reasonable through the test of multiple covariance; in the third step, regression analysis is carried out on the data to determine the relationship between the variables; in the fourth step, it is determined through the mediation effect model whether FinTech will have an impact on the liquidity of commercial banks through the selected intermediary variable impact; subsequently, a heterogeneity analysis is conducted to determine whether there are differences in the nature of ownership and regions in the impact; finally, a robust-type test is conducted to determine whether the results of the regression analysis are credible. The results show that the liquidity risk of commercial banks is significantly reduced as fintech companies strengthen their interconnection with commercial banks. In addition, the net interest margin cannot be used as a mediating variable for FinTech to affect the liquidity of commercial banks, but the results of the empirical analyses of the non-interest income share present significant, i.e., there is a mediating effect. Finally, the heterogeneity analysis shows that the liquidity of urban commercial banks and joint-stock banks is more sensitive to the development of fintech, meanwhile, the liquidity of commercial banks in the southern region is more susceptible to the development of fintech. The article concludes with some recommendations to the Chinese government and relevant commercial banks regarding the promotion of FinTech development.

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.

CREDIT RISK DETERMINANTS OF COMMERCIAL BANKING

Studies on non-performing loans in banking provide mixed results regarding the bank-specific factors that influence them. This research aims to analyze the determinants of credit risk in commercial banking in Indonesia. Testing was conducted on 32 banking companies listed on the Indonesia Stock Exchange for 2019-2021 with 96 observations using panel data regression. The research results show that increasing bank diversification and external audit quality significantly reduce the risk of credit non-performing loans (NPL). Other findings of this research show that credit growth, operational efficiency, and bank size do not significantly affect credit risk. To overcome the problem of endogeneity and dynamic panel bias, a series of robustness tests were carried out using the 2SLS, LIML, and GMM approaches provided significant results. The results of this research imply that bank risk management plays a role in reducing problem loans, which must align with the business entity's efforts to increase profits.

Nghiên cứu thực nghiệm các yếu tố tác động đến rủi ro phá sản của ngân hàng thương mại cổ phần tại Việt Nam

The research aims to identify the factors affecting the bankruptcy risk of the joint-stock commercial banks (JSCB) in Vietnam in the period 2010-2021. The research uses regression methods for panel data with a sample of 30 commercial banks, using secondary data collected from audited financial statements of banks. Through the system GMM (SGMM) method for panel data, the results show the operating expenses (OE), inflation (INF) have the impact on the bankruptcy risk. In addition, the combining research results after the robustness check of R language and SGMM also show that the size of commercial banks (SIZE) and return on assets (ROA) have an opposite impact on the risk of bankruptcy. These suggest important policy implications for commercial banks in Vietnam in controlling bankruptcy risks, ensuring to curb the uncertainty of the commercial banks in Vietnam.

Financial Openness, Bank Systematic Risk, and Macroprudential Supervision

International experiences have underscored the dual implications of financial openness. Given China’s unique circumstances and its escalating level of financial openness, it is crucial to assess potential impacts on the country’s bank systemic risk. This paper uses the quarterly data of 37 listed banks in China from 2010 to 2022 to explore the relationship between financial openness and systemic risk of the banking system, the mechanism of action, and the moderating effect of macroprudential policy on the two. The findings indicate an inverted “U”-shaped correlation between financial openness and bank systemic risk. On one side of this shape, financial openness primarily exacerbates funding mismatch, thereby increasing the systemic risk of banks. Conversely, on the other side, it primarily alleviates systemic risk by optimizing capital management. Moreover, with the help of macroprudential supervision, the inverted “U”-shaped relationship between financial openness and bank systemic risk leads to a lower level of systemic risk and, at the same time, promotes the early arrival of the inverted “U”-shaped inflection point between financial openness and bank systemic risk. Notably, the impact of financial openness on the systemic risk of joint-stock commercial banks, urban commercial banks, and rural commercial banks is more significant. The above research results provide a regulatory reference for effectively preventing and resolving systemic risk while achieving high-quality openness to the outside world. In deepening financial openness, the banking industry needs to pay attention to the funding mismatch and the efficiency of capital management and implement differential risk supervision and prevention mechanisms for banks with different ownership, which is conducive to the reduction of bank systematic risk.

A Study of the Impact of ESG Investments on the Liquidity Risk of Commercial Banks

ESG investment promotes the high-quality development of China's economy, and at the same time brings risks and challenges to the market. there is a certain contradiction between the long-cycle nature of ESG investment and the liquidity of commercial banks. In this context, how to stimulate commercial banks to take the initiative to improve ESG investment, and how ESG investment will have an impact on the liquidity risk of commercial banks has become an urgent issue to be considered. This paper selects the annual panel data of 37 commercial banks in China from 2009 to 2022, empirically tests the theoretical research hypotheses, and empirically investigates the impact of ESG investment on the liquidity risk of commercial banks by using the dynamic panel system generalised moment estimation (GMM), finally, after the above theoretical analyses and empirical studies, this paper draws the following conclusions: from the medium and long term perspective , ESG investment reduces the liquidity risk of commercial banks. Based on this, it is recommended to improve the information disclosure system and rating system of ESG investment, to promote the benign development of ESG investment in the banking industry, and to facilitate the realisation of China's "dual-carbon" goal.

Analysis of the impact of the COVID-19 lockdown on financial technology (FinTech), interest rate liberalization (IRL) and commercial banks’ risk-taking: Chinese empirical evidence

ABSTRACT Financial Technology (FinTech), which drove changes in the financial business landscape during COVID-19 May 2001also contribute to Interest Rate Liberalization ( IRL ) and increase risk-taking by commercial banks. Therefore, it is important to analyse the impact of FinTech and IRL on risk-taking behaviour, and to examine whether the development of FinTech will hinder IRL. To analyse the complex relationship between FinTech and commercial banks under the COVID-19 lockdown, reduce the possibility of systemic risk outbreak in the banking industry, based on the data of 34 commercial banks in China from 2008 to 2022, this paper empirically tests the impact of FinTech and IRL on risk-taking of commercial bank under the COVID-19 lockdown. Under the impact of the COVID-19, IRL has pushed up the risk of commercial banks, which is not conducive to the stability of the asset-liability structure of commercial banks. Second, there is a U -shaped relationship between FinTech and risk-taking, that is, the risk-taking level is reduced at the beginning of the development of FinTech, and then increased. Third, under the impact of COVID-19, the development of FinTech has accelerated the process of IRL , intensified the price competition of commercial banks, and further pushed up the risk-taking levels.

Empirical Analysis of the Impact of Chinese Commercial Banks on Financial Market Risk Based on the CoVaR Method

The paper conducts an empirical analysis using the CoVaR model and data sourced from weekly individual stock returns of listed Chinese commercial banks to examine the impact of individual commercial banks on the entire financial system. Overall, the stock price risk of Chinese commercial banks exhibits a negative spillover effect on the financial market. Based on dCoVaR values from 2006 to 2023 and in conjunction with financial events related to the market over the 17-year period, it is evident that significant events lead to notable negative spillover effects by commercial banks stock price risk on the entire financial system, highlighting their crucial influence on financial market risk.

Short Communication: Indian Public Sector Commercial Banks: An Empirical Analysis of Bank-Specific Determinants of Credit Risk

The public sector banks dominate India’s financial sector and play a crucial role. Commercial banks are indispensable in the processes of capital circulation, capital integration, capital resource allocation, and overall societal demand and supply adjustment. But performing these vital roles, the commercial banks are associated with different risks out of which credit risk hampers them a lot. This risk attacks the major pillar of the banking industry i.e., solvency on which the industry survives. In this paper, a modest attempt is made to identify the bank-specific determinants of credit risk in the public sector commercial banks in India. Data was collected from the RBI database for the period 2005 to 2020 for 13 banks. Variables pertaining to credit risk, bank size, capital adequacy ratio, profitability, liquidity and diversification were taken. These variables were analysed with the help of different panel data analytical tools. The size of the bank, represented by the log of total assets, and diversification, measured as the ratio of non-interest income to total income, were found to positively and significantly influence credit risk in public sector commercial banks. The Return on Asset, Loan-deposit ratio, and Capital adequacy ratio were found to be negatively correlated with credit risk.

Risk governance and bank risk of public commercial banks of OECD

This study investigates the impact of risk governance on bank risk within the Organisation for Economic Co-operation and Development (OECD) public commercial banks. Utilizing Knight’s (1921) distinction between risk and uncertainty, it emphasizes the roles of key figures like bank directors, the chief risk officer (CRO), and the chief financial officer (CFO) in risk management. The research employs multivariate regression analysis and principal component analysis (PCA) to reveal a positive correlation between risk governance and the Tier 1 capital ratio, indicating that effective governance leads to reduced bank risk and increased financial stability. This finding is consistent with Aebi et al.’s (2012) study on risk management and bank performance. These results underscore the crucial role of robust risk governance in banking, suggesting that enhanced governance practices can significantly mitigate risks. The study contributes to the existing literature by providing empirical evidence supporting the quantification of risk through governance mechanisms, aligning with, and enriching current theoretical frameworks. While highlighting the importance of these findings, the study also acknowledges its limitations, such as potential endogeneity issues, and suggests directions for future research to expand the understanding of risk governance’s impact on bank behavior, including the exploration of additional variables and the integration of qualitative methodologies. This research holds significant implications for banking institutions and regulatory bodies, advocating for a deeper examination of risk governance strategies in banking.

An analysis of the effect of asset securitization on the credit risk of Chinese commercial banks

An analysis of the effect of asset securitization on the credit risk of Chinese commercial banks

Examining the moderating effect of bank size on the financial risk and performance linkage of Islamic commercial banks

Financial performance is very important for Islamic banks to ensure the sustainability of their business in providing banking products and services according to Sharia principles or Islamic law. This research examines the impact of financial risk on the financial performance of Indonesian Islamic commercial banks (ICBs), with bank size as a moderating variable. The research was conducted on all Indonesian ICBs from 2017–2021. Fixed effects models are employed to account for potential heterogeneity across banks and control for time-invariant unobserved factors. These models allow for estimating the within-bank variation over time, capturing constant bank-specific characteristics over the study period. The results of this research state that financing and operational risks significantly negatively impact financial performance. In contrast, liquidity risk does not significantly negatively impact financial performance. Furthermore, from testing the moderation hypothesis, the results of this study state that total financing reduces the significant negative effect of financing risk and operational risk on ICB Indonesia’s financial performance. However, total financing does not reduce the significant negative effect of liquidity risk on the financial performance of Indonesian ICBs.

Research on the Impact of Financial Technology on the Liquidity Risk of Commercial Banks

Research on the Impact of Financial Technology on the Liquidity Risk of Commercial Banks

Research on ESG score impacted on credit risk of commercial banks

Research on ESG score impacted on credit risk of commercial banks

Factors Affecting Credit Risk in Nepalese Commercial Banks

This study analyzes the factors affecting credit risk in Nepalese commercial banks. The study comprises data from 27 commercial banks from 2002 to 2020 A.D. For analysis, the Least Square Dummy Variable (LSDV) Regression for model I and Random Effect (RE) Regression Analysis for model II were performed. The effect of the independent variables on credit risk, using loan loss provision and non-performing loans, as proxies of it was examined. While comparing both models, the loan loss provisioning was found to better explain the credit risk. The growth rate of GDP, a macroeconomic variable, had a significant and positive effect on credit risk, which was unexpected whereas the control variable, the interbank interest rate, had a negative and significant effect on credit risk. Furthermore, the year dummy showed a relatively high requirement for loan loss provision, especially in the years 2019 and 2020, which may be due to COVID-19. The bank-specific variables like size, and government banks had significant and positive effects on credit risk. This implied that the merging of banks was not fruitful as it caused an increase in the total assets of banks, which would lead to an increase in the size of commercial banks. That increase in the size of commercial banks was found to increase credit risk. In addition, government-owned banks were found to have higher credit risk than other banks. The government should think about reforms through private sector participation in government-owned banks as another alternative to reduce credit risk.

A Study on Macro Measurement Methods and Volatility Characteristics of Interest Rate Risk of Commercial Banks under the New LPR Mechanism

Abstract The interest rate risk of commercial banks is closely related to the effectiveness of the LPR mechanism. In this paper, the interest rate market is divided into three stages according to the process of interest rate marketization, and a six-sector New Keynesian MS-DSGE model is constructed by adding monetary regulation variables. The parameters in the model that are influenced by interest rate marketization and the new LPR mechanism are transformed by Markov zone transformation. The interest rate risk of commercial banks is measured by the impulse response functions of uncertain interest rate shocks to the interest rate sensitivity gap and the duration gap, and the volatility characteristics of interest rate risk in different stages of interest rate marketization are compared and analyzed. The results show that in the third stage (2019-present), the LPR mechanism is transformed from old to new. Under the δR = 0.5 shock, the commercial lending interest rate tends to stabilize around 0.00038, and the borrowing interest rate tends to 0 in all 3 differentiated target parameters in the 10th period. For this reason, the differentiated interest rate pricing behaviors of commercial banks should be considered comprehensively, and the LPR target should be set reasonably so as to get the optimal policy effect.

The inverted-u-shaped impact of fintech development on bank risk: A study of liability structure and economic uncertainty

In the evolving landscape of financial digitization, the implications of fintech development on commercial bank risk are increasingly vital. This research rigorously examines the depth and breadth of fintech's influence, particularly emphasizing the interplay between liability structures and periods of economic flux. A methodical econometric analysis was undertaken, analyzing panel data from 2011 to 2021, spanning 281 commercial banks. This research encompasses 15 national banks, 266 regional banks, 52 listed entities, and 229 unlisted institutions. Analysis leveraged the capabilities of Stata 17.0 software. The findings depart from a linear interpretation. Instead, fintech's impact on bank risk follows an inverted "U-shaped" trajectory—initially escalating risk, then mitigating it. The liability structure emerges as a consequential intermediary in this dynamic. Moreover, the influence of fintech varies depending on the bank type and equity composition. In times of economic volatility, this relationship is further accentuated. These insights hold paramount significance for commercial banks amid the current digital revolution. They provide a roadmap for judiciously balancing risk in a time when fintech innovations are dominating, ensuring resilience and adaptability in an unpredictable financial domain.

Research on Risk Avoidance of Commercial Bank Investment

Commercial banks play a critical role in the economy by collecting deposits and extending loans to businesses and individuals. However, they face various investment risks that can have a significant impact on their financial stability and performance. This paper aims to study the strategies and methods of investment risk avoidance in commercial banks, including risk identification, assessment, and mitigation. The paper proposes effective avoidance measures such as diversification, hedging, and insurance, which contribute to the existing literature on commercial bank risk management. The study also highlights the importance of regulatory compliance and the impact of external factors such as economic cycles and investor behavior on risk management practices. The findings have important implications for regulators, investors, and banks to improve risk management practices and enhance their profitability and reputation while protecting them from severe financial losses. The paper concludes by recommending further research in areas such as developing more sophisticated risk management models and assessing risks in the new situation.

Risk contribution to deposit insurance: Evidence from commercial and cooperative banks in the Eurozone

This paper analyses how the risk of commercial and cooperative banks may affect the European Deposit Guarantee Scheme (EDIS) to assess the appropriateness of a differentiated contribution regime. Evidence shows that these institutions have different objectives, ownership structures and operational approaches that impact their risk profile. As a result, a single regulatory approach may not be appropriate and may place an additional burden on cooperative banks. Using a simulation model and a sample of banks representing 81% of deposits in the Eurozone between 2018 and 2021, we analyse risk, deposit insurance losses and financial coverage needs. We find that cooperative banks are less risky, generate fewer losses and should provide fewer resources compared to commercial banks. These findings are important to achieve a more equitable and efficient funding policy in the future development of the EDIS as the third pillar to complete the Banking Union.

Capital market opening and commercial bank risk: Evidence from “Shanghai–Hong Kong Stock Connect”

Based on the implementation background of the “Shanghai–Hong Kong Stock Connect” policy, this paper explores the impact of capital market opening on the commercial banks risk. The results show that the capital market opening has a positive impact on the commercial banks risk. Financial information quality and external information environment are important transmission mechanisms for the capital market opening to affect the commercial bank risk. The impact of capital market opening on the commercial bank risk is heterogeneous, and it has a stronger effect on the risk reduction of commercial banks with larger asset size and capital flow ratio. This study objectively presents the effect of the implementation of the “Shanghai–Hong Kong Stock Connect” policy, and provides empirical evidence for commercial banks to avoid the capital market risks they may face.