Stability Of Commercial Banks Research Articles

Stability of Commercial Banks in Nepal

The goal of this study is to identify the most important factors affecting the financial stability of Nepalese commercial banks. The financial data of selected Nepalese commercial banks was analyzed by using a panel data regression model (Fixed Effect Model). The findings of the study suggest that bank efficiency, profitability, and capital base are important internal variables, whereas banking sector development, GDP growth, inflation, and exchange rate are important external determinants in determining the financial stability of Nepalese commercial banks. Furthermore, the size of the bank, loan loss provision, and bank concentration are found to be minor determinants influencing the financial stability of Nepalese commercial banks. Key words: Bank Stability, Stability Factors, Panel data model, Nepalese Banking, Commercial Banks GEL Code: C330, E440, G210

Competition, risk-taking behavior and stability of commercial banks: evidence from Kenya

PurposeThis study analyzes the effects of competition and risk-taking behavior on the stability of commercial banks in Kenya.Design/methodology/approachAn unbalanced panel dataset of 36 licensed commercial banks in Kenya for 2001–2020 was extracted from the published financial statements. A dynamic panel data analysis model, a two-step system generalized method of moments (GMM), was employed.FindingsThe results indicate that competition reinforces bank stability, whereas banks’ risk-taking behavior has an inverse relationship with strength.Practical implicationsThe study confirms the competition-stability nexus, implying that measures may be implemented to foster competition among banks with reduced concentration. These measures may include, but are not limited to, reduced entry barriers and optimal capital requirements. Second, efforts should be made to ensure excessive risk-taking by banks. Employing an elaborate exposure monitoring system with clear warning signs is recommended.Originality/valueThis study is unique in several ways. First, it employs structural and nonstructural measures of competition and ex post standards of banks’ risk-taking behavior. Second, contrary to past studies, this study uses various firm-level measures of bank stability. Lastly, it provides essential empirical evidence from the context of a developing economy, whose institutional and macroeconomic environments differ significantly from those of a developed economy.

Capital adequacy ratio and a bank’s financial stability in Vietnam

The objective of this study is to provide more empirical evidence on the impact of the capital adequacy ratio, as well as control and micro variables, on the financial stability of commercial banks in emerging markets such as Vietnam. The study analyzes the impact of the capital adequacy ratio on the financial stability of 18 Vietnamese commercial banks in the period 2010–2020 using the Generalized method of moments (GMM) model. Empirical research results show that the capital adequacy ratio has a positive correlation with the financial stability of Vietnamese commercial banks during the study period. Besides, the study also uses control variables such as Profitability through ROA and ROE, Bank Size (SIZE), Loans to Assets Ratio (LTA), Deposits to Assets Ratio (DTA), and Loan Loss Ratio (LLR), to analyze their impact on the financial stability of Vietnamese commercial banks. Based on the above results, the study proposes some policy implications to enhance the financial stability of Vietnamese commercial banks using the capital adequacy ratio and the control variables from the GMM model that are statistically significant. The paper also pointed out four limitations of the study in terms of data, research samples, methods and research models, so that further research can be more complete. AcknowledgmentThe author wishes to acknowledge support from the Banking University of Ho Chi Minh City. This research was made possible thanks to all valuable support from relevant stakeholders.

Main Determinants of Banks’ Stability: Evidence from Commercial Banks in Ghana

This study focuses on the main determinants of the stability of commercial banks in Ghana. The work was guided by three objectives, namely investigating the firm-specific, board characteristics and macroeconomic variables that determine bank stability in Ghana. This study used panel data, sourced from 8 banks over 2008-2017, constituting 80 observations. Firm-specific and board-characteristic data were sourced from the selected banks through their audited financial statements. Data on macroeconomic variables were sourced from World Development Indicators, 2018 and Bank of Ghana. The study, through Hausman specification test, selected appropriate models for estimations. STATA 13.0 was used for the data analysis. From the findings, bank size and net profit margin had significant positive effects on bank stability whilst interest cover had a negative significant effect on banks’ stability. Also, characteristics, gender of CEO, board size and frequency of board meeting there was a significant positive effect on bank stability. With regards to macroeconomic variables effect, inflation and growth of gross domestic product had significant positive impact on banks’ stability. Bank rate had a significant negative impact on bank stability. The study therefore recommends that, the commercial banks in Ghana should embark on reasonable expansion. They should also ensure effective and efficient utilization of all banks' assets. The banks should further constitute a reasonably board size, made up of different expertise. Government of Ghana should consciously embark on accelerated economic growth, supported by sound economic fundamentals.

Устойчивость российского банковского сектора: тенденции и риски

In the modern conditions of functioning of the banking system, the issues that arise with the assess¬ment of the stability of a commercial bank individually and the banking sector as a whole in connection with the aggravation of the negative impact of many risk-forming factors associated with the manifestation of the pandemic are updated. In this regard, a comprehensive systematization of the existing Russian and international practice of implementing a qualitative assessment of the stability of banking organizations becomes important. The purpose of the study is to identify trends in the development of the Russian banking sector and the manifestations of banking risks that have a negative impact on its stability, as well as to identify practical opportunities to reduce the impact of these risks. The following general scientific and special methods were chosen as scientific tools for conducting this study: the method of system analysis, the method of retrospective analysis, as well as the methods of statistical survey. The information base of the study was the statistical data of the Bank of Russia. The theoretical and meth¬odological basis of the study was the works of such researchers as Fetisov G. G., Lavrushin O. I., Tarkhanov E. A., Muraviev A. K. Ovchinnikov O. P., Betz A. Yu., Peresetsky A. A. Kromonov V. S., etc. The study is based on the basic definitions of the stability of banking organizations and the regulatory framework for assessing the stability of the Russian commercial bank, as well as methods, mechanisms and procedural components for assessing the stability of the Russian banking sector. The results of the study are aimed at identifying trends and risks that affect the stability of both the Russian banking system as a whole and individual commercial banks. As practical recom¬mendations, the directions for further sustainable development of the Russian banking sector in the context of the negative impact of the pandemic on the national economy are presented.

TECHNIQUE OF ASSESSMENT OF THE IMPACT OF A REPUTATIONAL RISK ON STABILITY OF COMMERCIAL BANK

At present, in Russia, when the revocation of licenses from credit organizations continues, the significance of reputational risks is growing sharply. In connection with this subject of research, reputational risk and its influence on maintaining the stability of a credit institution are presented in this article. The aim of the work is to develop a new methodology for assessing the impact of reputation risk on the stability of commercial banks, as well as the practical application of the method using data from a credit institution. As a result of the study, a specific methodology was compiled, which allows you to directly assess the reputation risk in a commercial bank; the relationship of this type of risk and the stability of the credit institution is determined; the methodology has been applied in practice using data from several commercial banks; It is shown how reputation risk can affect the stability of a credit institution. The presented article allows one to determine what is necessary to understand as reputational risk, why the assessment of reputational risk is of the same importance as the assessment of the stability of a credit institution, and what attention should be paid to the leaders of a credit institution so that their bank has a satisfactory level of reputational risk, and therefore , and level of sustainability

Effect of Camel Variables on Financial Stability: A Dynamic Panel Analysis of Commercial Banks in Kenya

A stable banking sector is significant in ensuring economic growth as well as sound, efficient and stable financial system. However, the banking sector in Kenya has been considered fragile and this is evident from the increasing trend of non-performing loans, fluctuating deposit trend of some commercial banks and fluctuations of foreign liabilities in commercial banks in Kenya, which is associated with financial stability. Furthermore the collapsing of some commercial banks and some being put under receivership is of great concern to the financial stability of the commercial banks in Kenya. The general objective of the study was to establish the effect of CAMEL variables on financial stability of commercial banks in Kenya. The specific objectives of the study were to determine the effect of operational efficiency, capital adequacy, bank liquidity, profitability and asset quality on financial stability of commercial banks in Kenya. The study was carried out in 17 fragile commercial banks in Kenya between 2011 and 2018. Generalized Method of Moments (GMM) model guided by dynamic panel regression results revealed that operating efficiency had a statistically significant positive effect on financial stability (β= 0.3104109, p=0.037) of commercial banks in Kenya. The study also established that capital adequacy had a statistically significant negative effect on financial stability (β= -0.1560403, p=0.050) of commercial banks in Kenya. The study further revealed that bank liquidity had a statistically insignificant negative effect on financial stability (β= -0.0073553, p=0.881) of commercial bank in Kenya. In addition, profitability had a statistically significant negative effect on financial stability (β= -0.1064231, p= 0.036). Finally, the study revealed that asset quality had a statistically significant positive effect on financial stability (β= 0.0987029, p= 0.032). Based on these findings, the study recommends for mergers and acquisition among the fragile commercial banks as per the fragility index, adoption of internal economics of scale, limits on insider loans to be established and credit to borrowers should not exceed 15% of the capital. This would ensure a sound and vibrant economy towards achieving the Vision 2030 that advocates for well-functioning, efficient and stable financial system. Keywords : Camel Variables, Firm characteristics, Financial Stability, Dynamic Panel Regression. DOI: 10.7176/RJFA/11-18-10 Publication date: September 30 th 2020

Moderating Effect of Exchange Rate on the Relationship Between Firm Characteristics and Financial Stability of Commercial Banks in Kenya

The study sought to determine the moderating effect of exchange rate on the relationship between firm characteristics and financial stability of commercial banks in Kenya. The study sought to establish the effect of exchange rate on financial stability of commercial banks in Kenya. The study further sought to determine the effect of firm characteristics as a composite index on financial stability of commercial banks in Kenya. Positivism research philosophy was employed. Causal research design was utilized in this study. The study targeted 17 commercial banks from which secondary data was collected from the published financial reports for the study period between 2011 and 2018. Generalized method of moments (GMM) model guided by dynamic Panel regression analysis was utilized. Data analysis was run on the Stata 13 package and findings presented in tables while deriving conclusions and recommendations from the study findings. The study found out that exchange rate had a significant moderating effect on the relationship between firm characteristics and financial stability (β= 0.422519, p= 0.095) of commercial banks in Kenya. The study also found out that firm characteristics as a composite index had a significant negative effect on financial stability (β= -1.006024, p= 0.063) of commercial banks in Kenya. The coefficient of exchange rate at (β= 0.0177881, p=0.000) shows a statistically significant positive effect on financial stability of commercial banks. To deal with issues of exchange rate fluctuations, the study recommends that commercial banks in Kenya should adopt a unified exchange rate. The study further recommends that commercial banks should focus on streamlining their internal firm characteristics in order to ensure financial stability is achieved collectively since they are associated with variability in the exchange rate. Keywords: Moderating Effect, Exchange Rate, Firm Characteristics, Financial Stability. DOI: 10.7176/EJBM/12-25-07 Publication date: September 30 th 2020

STABILITAS BANK: SEBUAH PENGUJIAN BERDASARKAN TEORI RESOURCE BASED VIEW

This study aims to examine banking service technology and intellectual capital to the stability of the bank. The results of panel data regression analysis on 81 commercial banks in Indonesia with observations in 2013 - 2015 obtained from the results of financial service technology and intellectual capital have a significant effect on the stability of commercial banks in Indonesia. Likewise, with each component of intellectual capital consisting of VAHU, STVA has a significant effect on bank stability in a positive direction, while VACA has an influence on bank stability in a negative direction. Both analyzes show that financial service technology and intellectual capital both calculated with VAIC and each component of VAIC show no difference in effect on bank stability. The findings of this study strengthen the RBV theory where tangible resources and intangible resources are the main capital that must be owned by the company in order to achieve competitive advantage in the era of industrial development 4.0.

Disclosure Regulation in the Commercial Banking Industry: Lessons from the National Banking Era

ABSTRACTI exploit variation in the adoption of disclosure and supervisory regulation across U.S. states to examine their impact on the development and stability of commercial banks. The empirical results suggest that the adoption of state‐level requirements to report financial statements in local newspapers is associated with greater stability and development of commercial banks. I also examine which political constituencies influence the adoption of disclosure and supervisory regulation. I find that powerful landowners and small private banks are associated with late adoption of these regulations. These findings suggest that incumbent groups oppose disclosure rules because the passage of such rules threatens their private interests.

Financial Inclusion, Bank Competitiveness and Credit Risk of Commercial Banks in Kenya

This paper provides an empirical analysis of the synergies and trade-offs between financial inclusion and credit risk of commercial banks in Kenya. The paper analyzed the effect of financial inclusion on credit risk and the mediation effect of bank competitiveness of commercial banks in Kenya. Financial inclusion was measured using three dimensions of bank availability, bank accessibility and bank usage, bank competitiveness used (HHI) while credit risk was represented by the non performing loans ratio. The study was anchored on financial intermediation theory supported by finance growth theory and asymmetry information theory. The target population was all the 43 commercial banks in Kenya. The study used secondary data collected from Central Bank of Kenya annual reports; commercial banks of Kenya published audited financial statements and annual data from Central Bureau of statistics of Kenya for the period of 2007-2015. Data was analyzed using descriptive statistics and panel multiple regression analysis. The results obtained found that bank availability, bank accessibility and bank usage had significant effect on credit risk of commercial banks in Kenya. Bank competitiveness was found to partially mediate the relationship between financial inclusion and credit risk. From the findings the study concluded that financial inclusion has a significant effect on stability of commercial banks in Kenya. The study recommends that commercial banks to formulate policies to ensure they remain stable and competitive while accommodating their activities to ensure financial inclusion, hence forming an all inclusive and stable financial sector over time.

Automated Information System for Complex Evaluation of Financial Stability of Commercial Banks

Automated Information System for Complex Evaluation of Financial Stability of Commercial Banks

MACROECONOMICS INDICATORS AND BANK STABILITY: A CASE OF BANKING IN INDONESIA

This paper provides new empirical evidence of the bank stability in relation to the macroeconomic indicator of Indonesia. The bank stability is first calculated using Z-score, and then regressed using Autoregressive distributive lag (ARDL) model on the macroeconomic variables i.e. Gross Domestic Product (GDP) in US dollar, Interest rates (IR) in percentage and Consumer Price Index (CPI). To analyse further the long run relationship and the impact of bank stability, Cholesky standard deviation shock to the model, ARDL and Impulse Response Function (IRF) are used. These ARDL and IRF are carried out independently and repeated over data for three different models: (i) the commercial banks model, (ii) Islamic banks model, and (iii) the overall banking industry model. The empirical findings suggest long run relationship between the stability of commercial banks and macroeconomic factors. The findings also suggest the long run relationship between the stability of overall banking industry and macroeconomic factors. However, there is no evidence of long run relationship between the stability of Islamic banks and macroeconomics factors. Nevertheless, this finding is subject to the limitation of data, on the number of Islamic banks included in the test. The sample of Islamic banks was 5 banks from a total of 10 Islamic banks, due to insufficient data, as compared to the larger number of commercial banks taken into, as the sample.

Teoretické základy současné bankovní regulace

Článek je zaměřen na teoretickou a praktickou dimenzi třetí generace regulačních standardů Basilejského výboru. Implementace nových pravidel se ukazuje složitější, než se původně předpokládalo. Výzkum soudobé teorie bankovní regulace se zaměřuje především na čtyři oblasti, kterými jsou: faktory určující cenu bankovního kapitálu, kanály přenosu bankovních krizí, design záchranné sítě a optimální míra regulace. Praktický vývoj regulace není vždy v souladu s doporučeními ekonomické teorie, protože podoba regulatorního rámce podléhá lobbistickým tlakům různých zájmových skupin, včetně samotných bank. Cílem tohoto článku je upozornit na hlavní směry současného teoretického výzkumu a výzvy, které před vývojem bankovní regulace stojí. Hlavní pozornost je věnována kapitálové přiměřenosti, morálnímu hazardu a daňovému zvýhodnění dluhového financování. Je zkoumán dopad změn kapitálové přiměřenosti, daňové politiky a deregulace na stabilitu obchodních bank.

Developing Crisis Management Model for Second-Tier Banks in the Post-Crisis Period of Economy Development in the Republic of Kazakhstan

In the context of an ineffective crisis management system, the development of the banking sector of Kazakhstan in the post-crisis period is characterized by the impaired financial stability of second-tier banks. This situation creates the threat of systemic risk in the national banking system as a result of the critical slowdown in economy crediting by 49.5% and a reduction in bank assets by 47.2% of GDP. The article develops a diversified model of anti-crisis management aimed at increasing the financial stability of commercial banks. In contrast to other studies, the author’s approach is based on the argumentation of cause and effect links of financial, social and technical anti-crisis measures, the subordination of tactical objectives, which will provide an optimal level of financial stability of banks. Achieving the optimal level of financial stability of banks will determine the maximum rate of development of the national banking system in the post-crisis period. The objectivity and accuracy of the results is an advantage of this approach, it takes into account the specificity of the post-crisis period of the banking system functioning and is consistent with the international practice of strategic management.

Disclosure Regulation in Commercial Banking: Lessons from the National Banking Era

I exploit variation in the adoption of disclosure and supervisory regulation across U.S. states to examine their impact on the development and stability of commercial banks. The empirical results suggest that the adoption of state-level requirements to report financial statements in local newspapers are associated with greater stability and development of commercial banks. I also examine which political constituencies influence the adoption of disclosure and supervisory regulation. I find that powerful landowners and small private banks are associated with late adoption of these regulations. These findings suggest that incumbent groups oppose disclosure rules because their passage threatens their private interests.