Stability Of Financial System Research Articles

Capital Adequacy Ratio — a Panacea for Indian Banks during COVID-19 Pandemic

A stable financial system acts as a catalyst for the economic growth and development of a country. The healthy banking sector is the core of a sustainable economy as banks act as intermediaries between depositors and lenders of money. In the surge of the COVID-19 pandemic, the financial sector witnessed significant transitions in terms of digital transformation. In India, the banking sector has remained resilient throughout the pandemic due to government and regulators’ policy efforts and the maintenance of capital adequacy requirements. Banks have maintained higher capital buffers, better liquidity requirements, and lower leverage, cushions against pandemic shock. In the present paper, the researcher provides a conceptual elucidation of Basel norms, analyzes the component-wise Capital to Risk-Weighted Asset Ratio (CRAR) of Indian Scheduled Commercial Banks (SCBs) and examines the CRAR position of SCBs during the COVID-19 pandemic. The study also evaluated the distribution of SCBs by CRAR and examined the capital ratios of public, private, and foreign sector banks from 2016 to 2022. The ANOVA analysis output revealed a significant difference in the CRAR of public, private, and foreign banks. The study concludes that adequate CAR levels help banks mitigate the risks that arise during pandemic crises and aid them in conducting their banking operations effortlessly. Further, it concludes that public sector banks (PSBs) still lag behind their counterparts in maintaining adequate CRAR, and hence, they need to reduce the accumulation of risk-weighted assets (RWA).

Assessing resilience to systemic risks across interbank credit networks using linkage-leverage analysis: Evidence from Japan

The banking crisis started in March 2023 was triggered by disproportion of deposit liability and assets. Applying balance sheets from 1999 to 2022, from the Japanese Bank Association, this study scrutinizes the durability of high-priority banking systems against damaging events in that industry. Eyeing the unique high-level savings in Japanese banking, this study investigates the impact of disproportion of deposit liability and assets on the financial stability of interbank credit networks through a linkage-leverage analysis. This study presents a novel framework that combines actor-network theory, network optimization, and bilateral risk exposure approaches into linkage-leverage analysis. The results in this study show that the bilateral risk exposure during a subset of years is smaller than other years, which indicates that Japanese banks minimize the risk exposure by shifting the network relationship. Finally, this study provides supporting evidence to the new paradigms on developing more stable financial systems.

Monetary Policy Challenges and Strategies in the Globalization: An Analysis of the Federal Reserve's Approach to the Trilemma

This study explores the Federal Reserve's (Fed's) approach to the financial trilemma in the era of globalization, emphasizing the trade-offs between monetary policy autonomy, exchange rate flexibility, and open capital markets. It delves into the challenges posed by increased global financial integration and the effectiveness of traditional and innovative monetary tools. The paper advocates for the adoption of a macroprudential policy framework to enhance financial system stability without compromising policy objectives. The findings highlight the Fed's strategic use of macroprudential measures alongside conventional tools to navigate the trilemma, illustrating the importance of flexibility and innovation in central banking practices amidst global financial complexities.

Energy-related uncertainty and international stock market volatility

This paper predicts the daily return volatility of 28 advanced and developing stock markets using monthly metrics of the corresponding country and global energy-related uncertainty indexes (EUIs) recently proposed in the literature. Using data in their “natural” frequencies to avoid aggregation bias, the results show that country-specific and global EUIs have predictive powers for stock returns volatility for the in-sample periods, with increased levels of EUIs exhibiting the tendency to heighten volatility. This predictability also withstands various out-of-sample forecast horizons, implying that EUI is a statistically relevant predictor in the out-of-sample analysis. The forecast precision of the GARCH-MIDAS model is improved by incorporating global EUIs relatively more than country-specific EUIs. The robustness of the findings with respect to the choice of EUI and sample definition is further confirmed. The outcomes have important policy implications for the concerned stakeholders who are concerned with stability in the global financial system and economy.

The impact of inflation on bank stability: evidence from the MENA banks

PurposeSerious concerns about the stability of the international financial systems have arisen recently, resulting from the mounting inflation rates and the accompanying procedures to control them. Consequently, this study aims at examining empirically the impact of inflationary pressures/shocks on the stability of banking sectors.Design/methodology/approachThe study adopts a dynamic GMM models and exploits a sample of 188 banks operating in 14 MENA economies, over the period 1999–2021.FindingsThis research finds that high inflation does indeed harm bank financial stability and deteriorates banks credit risk. Furthermore, the examination of the impact of interaction terms between inflation and bank-specific and institutional quality variables shows that better capitalisation levels, higher liquidity buffers, larger asset size, greater market power, foreign ownership and overall political stability, all can counterbalance the impact of inflationary pressures on MENA banks financial stability.Originality/valueIn addition to empirically revealing how inflationary shocks can deteriorate financial stability, the main novelty of this research is examining how the interactions between inflation on one hand, and bank-specific and institutional quality on the other, affect bank stability.

How do Financial Development and Stability Shape Human Development?

Abstract The crucial role of financial systems in sustainable development has become the center of global and national interest and development strategies, and more developed and stable financial systems are the cornerstone for development finance and achieving the sustainable development goals. This research aims to examine the impact of financial development and stability on human development firstly in a sample of 185 countries worldwide, and secondly in a sample of 21 MENA countries, over the period 1990–2019. This study adopts the Panel Data Econometrics (Fixed Effects and Random Effects Methods) and proxy for human development by exploiting the UNDP’s Human Development Index and its three subindices (Education, Income, and Life expectancy), while it adopts broad money, credit to the domestic private sector, and banking sector deposits (all as a percentage of GDP) to proxy for financial development. Moreover, it represents financial stability by the banking sector Z-score and a dummy variable representing crises. The empirical results reveal the prevailing role of development and stability in the financial systems on human development and its three subcomponents, regardless of the country’s economic development level.

ПЕРСПЕКТИВИ ВИКОРИСТАННЯ ВБУДОВАНИХ ФІНАНСІВ : ІННОВАЦІЇ FINTECH ЛАНДШАФТУ

Formulation of the problem. Noting the rapid development of innovative technologies in the financial sphere, especially in the context of FinTech, today embedded finance is becoming an increasingly important element of the financial ecosystem. Given the diversity and depth of embedded finance's impact on the financial landscape, the challenge lies in understanding the potential of these tools and determining their prospects in the context of innovative FinTech development. The purpose of the study is to analyze the technological, economic and regulatory aspects of the use of embedded finance, as well as to identify their impact on the financial landscape and innovative strategies in FinTech. This research aims to deepen understanding of the potential of these innovative tools and to contribute to the development of the modern financial sector. The object of research is technological platforms, tools and services based on embedded finance, as well as their impact on the economy, business models and the regulatory environment. Scientific publications and monographic editions, magazine articles and materials of scientific and practical conferences became the methodological basis of the research. During the research, content analysis of scientific periodicals was used; comparative critical analysis of existing approaches and methods of analysis of financial stability and tax burden; statistical methods of analysis. The main hypothesis of the study was the assumption of the possibility of integrated finance to become a key catalyst of changes in the financial sphere, ensuring greater efficiency, accessibility and competitiveness of financial services in the future. Presenting main material. Innovative technologies and platforms based on the concept of embedded finance and their potential to change and transform the financial sphere are highlighted. The technological, economic and regulatory aspects of the use of embedded finance are analyzed, and the key challenges and opportunities associated with their application are identified. As a result of the study, it is established that integrated finance can become a significant factor in accelerating the innovative development of the financial sector, improving the quality of financial services, and ensuring greater accessibility and efficiency in the provision of financial products and services. Originality and practical significance. Investigating the impact of innovative technologies on the financial sector, the article draws attention to the underestimated potential of embedded finance as a critical element for the development of innovative strategies in FinTech. The originality lies in the approach to the analysis of embedded finance as a key catalyst of changes in the financial sphere, which opens up new opportunities for improving the quality of financial services and ensuring greater accessibility for users. The analysis of the challenges facing the implementation of embedded finance is shown and indicates ways to overcome them, which makes it a valuable resource for developers of strategies in the financial sphere and regulatory authorities who seek to stimulate innovation and ensure the stability of the financial system. Conclusions and prospects for further research. The performed analysis confirms the great potential of integrated finance for the transformation of the financial sphere, ensuring greater availability, efficiency and quality of financial services. It was revealed that there are certain challenges on the way to the implementation of embedded finance, in particular, related to the regulatory environment, data security and privacy. These obstacles must be overcome in order to fully realize the potential of embedded finance and ensure the sustainable development of the financial sector. Further research could focus on a detailed study of specific aspects of the use of embedded finance, such as their impact on financial inclusion, financial system stability, and the effectiveness of regulatory oversight. In addition, the possibilities of using embedded finance in specific industries such as international payments, micro-finance and investment management can be explored. It is also important to explore the relationship between embedded finance and other innovative technologies such as artificial intelligence, blockchain and the Internet of Things.

What is the insolvency regime applied under Shariah for Islamic banks?

Purpose This study aims to develop a comprehensive insolvency model tailored to Islamic banks, ensuring alignment with Shariah principles throughout pre-insolvency, bankruptcy and post-bankruptcy stages. Design/methodology/approach The research adopts a qualitative research method, using a desktop research approach. Primary sources and secondary sources are examined to gather information and draw conclusions. Findings This study presents a comprehensive insolvency model designed for Islamic banks, rooted in Shariah principles. The model covers pre-insolvency, bankruptcy (taflis) and post-bankruptcy stages, incorporating key Shariah parameters to ensure adherence to Islamic finance principles. It addresses challenges such as adapting to dynamic financial landscapes and varying interpretations of Shariah principles. Notably, the model recognizes the separate legal personality of Islamic banks and emphasizes transparency, fairness and compliance with religious obligations. In the post-bankruptcy stage, directors are urged to voluntarily settle remaining debts, aligning with ethical and Shariah-compliant standards. Originality/value The study contributes to the stability and growth of Shariah-compliant financial systems by extending insolvency principles to Islamic banks, providing a foundation for future research and policymaking specific to this context.

Quintessence and imperatives of strengthening the financial security of the country in the conditions of the digital economy

The paper addresses the issues of strengthening Ukraine's financial security in the context of the formation of the digital economy. An overview of the main scientific approaches to interpreting the concept of 'National Financial Security' was conducted, and the author proposed a definition. The paper primarily focuses on the quintessence of strengthening the financial security of the country as a set of fundamental principles and approaches that should be implemented to ensure the stability and reliability of the domestic financial system, the creation of favorable conditions for economic development, and the protection of the country's financial interests. The imperatives of strengthening the financial security of the country in the context of digitalization were systematized, aiming to minimize threats such as cyber-attacks, financial fraud, and external risks. To mitigate these risks, the authors propose implementing measures such as the development of effective information protection technologies in the financial sphere and the introduction of a financial monitoring system to enhance the transparency of financial transactions. It has been demonstrated that the financial security of the country is a key element of its economic security, as it ensures the reliability and stability of the financial system and safeguards the financial interests of the country and its citizens. The paper also presents a set of proposals to enhance domestic financial security by enhancing the resilience of the financial system to new risks and threats associated with the digitalization of the domestic economy.

An improved BiGAN model for anomaly detection in finance

Financial systems play a pivotal role in shaping contemporary society, and the detection of financial anomalies holds immense significance in mitigating the adverse repercussions of market uncertainties on the global economy. In this context, this study presents an innovative LSTM-GANs model, specifically crafted to enhance the detection of anomalies in financial stock markets. The model introduces an "Anomaly Score" as a pivotal metric, which is computed through a combination of factors such as Reconstruction Loss, Latent Space Distance, and Discriminator Score. This composite score provides a quantitative assessment of the anomaly level within the financial data. By applying a predefined threshold to this Anomaly Score, the model efficiently identifies and flags anomalies. In a world where financial markets are increasingly complex and prone to unexpected events, the ability to detect and respond to anomalies swiftly is paramount. This novel LSTM-GANs model offers a promising approach to bolster the accuracy and effectiveness of financial anomaly detection, thereby contributing to the stability and resilience of global financial systems.

Stability of the Roman Catholic Church Financing System Based on Germany

To effectively carry out its tasks, the church needs a stable financial system. The aim of this article is to present issues related to ensuring the stability of the Catholic Church financing system in times of significant demographic and socio-cultural changes. This study identifies and characterizes the main sources of income and directions of expenses of the available financial resources. The challenges faced by church authorities in this regard are also described. State authorities finance places of prayer for social, cultural, and psychological reasons. Churches have been places of support in difficult times for centuries as well as places of survival and mental support for society.

Financial stability of the federal budget and budgets of the Russian constituent entities subjects under Western sanctions

According to the definition of the European Commission, public finances financial stability is the ability of a state to maintain current expenditures, conduct tax and social policy in the long term without the threat of loss of the country’s solvency to fulfill its obligations and stipulated expenditures. The subject of the study is the state of revenues and expenditures of the federal budget and budgets of the Russian constituent entities under the Western sanctions. The choice of the Ural Federal District regions (hereinafter – UFD) as the objects of the study is due to the significant share of oil and gas revenues in the federal budget revenues, the export-oriented regions place and role in the oil and gas revenues formation in the federal budget. The purpose of the study is to assess the budget system financial stability on the example of the federal budget and budgets of the Russian constituent entities, in particular, the UFD regions. The article uses generally accepted research methods, such as analysis and synthesis, generalization, grouping, tabular, etc. It has been established that the imposed sanctions have a negative impact on oil and gas revenues. Under such conditions, the budget system stability is supported by a low level of debt, especially at the federal level. The UFD export-oriented regions budget stability indicators exceed similar indicators of the Russian constituent entities budget. The budget stability risks remain the highest at the regional and local levels.

Stabilitas Sistem Keuangan dan Pertumbuhan Ekonomi Melalui Kebijakan Makroprudensial di 5 Negara ASEAN

The objectives of the research include efforts to explore the macroprudential impact on financial system stability (FSS) and economy in 5 (five) ASEAN member countries during the period 2013 to 2019. The methodology of this study is based on the application of the Mutant Method, VAR, and Ardl Panel. Analysis of the research results revealed that the variables Rii Interest Rate (SBR), Money Supply (JUB), Exchange Rate, and Loan to Depocit Ratio (LDR) simultaneously have a significant influence on Gross Domestic Product (GDP). In addition, SBR and JUB have also proven to have an impact on the inflation rate. The results also produced a panel of leading indicators, consisting of the Inflation Index (INF) and currency exchange rates, as a marker of the effectiveness of control variables on economic stability in ASEAN countries. This indicator shows that INF and exchange rates play an important role in controlling economic stability, with controls in the short to long term. These findings provide significant insight into key factors affecting economic stability in the ASEAN region, providing the basis for more effective policy formulation in the future.

A Microstructure Study of Indian Corporate Bond Market: A Review

This Review study explores various dimensions of the Indian capital market, encompassing both equity and bond markets. It delves into the influence of equity market factors, macroeconomic variables, and corporate bond market growth on the overall financial landscape. The relationship between equity market returns, equity market volatility (VIX), and the rupee-dollar exchange rate on bond yields. They highlight that increasing volatility in the equity market leads to a higher demand for fixed income securities, subsequently reducing bond returns. The underscores the significance of a robust corporate bond market for financial system stability, credit availability, and mitigating corporate sector crises. It reviews the growth of the Indian corporate bond market and its implications for monetary, fiscal, and economic variables. The results indicate that a comprehensive corporate bond market does not exhibit a significant positive or negative association with these variables. However, GDP emerges as a crucial factor for India's bond market development, particularly in terms of foreign participants. Lastly, the influence of macroeconomic variables on the Indian corporate bond market over a 23-year period. They reveal a significant correlation between corporate bond market issuance and foreign exchange reserves. Through multiple regression analysis, they found that all selected variables, except GDP and trade openness, significantly explain the volumes of corporate bonds. Collectively, their findings contribute to a comprehensive understanding of the interplay between equity market dynamics, corporate bond market growth, and macroeconomic factors in the Indian capital market. The study provides valuable insights for policymakers and investors, aiding in informed decision-making regarding investment strategies, market stability, and economic growth.

A Comprehensive Methodology for Evaluating Economic Security in the Digitalization of Investment Processes

Purpose: This article aims to present a methodology for evaluating economic security within digitalized investment processes, addressing the evolving financial landscape's demands for innovative assessment approaches.
  
 Methods: The methodology developed integrates key components, indicators, and measurement techniques to offer a holistic evaluation of economic security. Case study countries are analyzed to identify common patterns, trends, and best practices, enriching the methodology's robustness.
  
 Results and discussion: The methodology provides valuable insights into maintaining economic security in digitalized investment environments, emphasizing factors such as legal and regulatory frameworks, technological infrastructure, data security, and investor protection. The analysis facilitates a nuanced understanding of economic security dynamics in digital transformation.
  
 Implications of the research: This research has significant implications for policymakers, researchers, and industry practitioners by offering a comprehensive tool to navigate the complexities of economic security in the digital era. It enables stakeholders to adapt effectively to digitalization challenges and opportunities, ensuring investor protection and financial system stability.
  
 Originality/value: This research contributes to the discourse on economic security and digital transformation by presenting a reliable and efficient evaluation methodology. It fills a critical gap in current methodologies, enhancing the ability of stakeholders to address the intricacies of digitalized investment processes and safeguard economic security.

Loopholes in the Indian Banking System concerning Non-Performing Assets (NPAs) – A Case Study of “Axis Bank and HDFC Bank”

Abstract -The paper presents a comparative case analysis of two leading banks, Axis Bank and HDFC Bank. The rising tide of Non-Performing Assets (NPAs) in the banking sector is a major threat to financial stability and economic progress. The case study uncovered severe deficiencies in risk management, credit evaluation, and regulatory compliance, which have resulted in a considerable accumulation of Non-Performing Assets. The banks' exposure to economically sensitive sectors amplifies the impact of downturns on asset quality. The limitations in credit risk assessment underline the necessity for increased due diligence. Regulatory frameworks, such as the Insolvency and Bankruptcy Code, and prompt corrective action have a significant impact on NPA responses. The findings highlight the complicated interplay between internal banking practices, regulatory frameworks, and economic conditions that affect a bank's financial performance. Addressing discovered weaknesses inside both these banks is important to the stability of India's financial system. The implications, as indicated by rising NPAs, are felt throughout the sector, jeopardizing overall resilience. Addressing these problems is crucial for reducing systemic risks, preventing a credit crisis, and rebuilding trust in the financial industry. A better banking system is critical for India's financial stability, economic growth, and stakeholder trust. As major private sector players, Axis Bank and HDFC Bank’s successful remediation set a precedent, emphasizing the need for excellent risk management, regulatory compliance, and strategic adaptation. Key Words: Axis Bank, HDFC Bank, Non-Performing Assets, Risk Management, Regulatory Compliance, Financial Stability, Economic Impact

The Effect of Emergency Monetary Policy on Liquidity and Financial System Stability in Property Sector Companies in Indonesia

Through a quantitative study utilizing Structural Equation Modeling with Partial Least Squares (SEM-PLS), this research examines the impact of emergency monetary policies on liquidity and financial system stability within Indonesian property sector enterprises. The study takes into account company size, regional distribution, and financial performance by using a broad sample of property sector firms. The validity and reliability of indicators for liquidity, financial system stability, and emergency monetary policies are guaranteed by the measurement model analysis. Contrary to popular belief, the structural model shows that emergency monetary actions have a substantial negative influence on liquidity levels. Complexity can be seen in the relationship between financial system stability and certain policy factors, which can have both positive and negative effects. The robustness of the model is verified by cross-validation and bootstrapping. The results provide sophisticated perspectives to the body of literature by highlighting the necessity of customized methods for formulating policies and devising action plans in the real estate industry amid financial downturns.

Impact of China on commodity exporters

AbstractWe compare the effect of a domestic shock in China and the US on the real economy and financial markets of various commodity‐exporting countries. To obtain a reliable indicator for China's macroeconomic conditions, we estimate a Bayesian dynamic factor model using block‐exclusion restrictions to identify a China factor and a US factor from monthly macroeconomic data for China and the US. We, then, assess the implications of a negative shock to both factors on the macroeconomy of a commodity‐exporting nation using Bayesian FAVARs based on recursive identification. A negative China shock leads to output loss and a fall in stock prices in these countries. China shock affects the output of only a subset of countries in our sample compared to the US shock, which affects all countries. China shock has a larger, quicker and more persistent impact on the stock markets of commodity‐exporting countries compared to the US shock. Countries with weaker institutional or business environments experience a larger negative real effect of the China shock, whereas countries with less stable financial systems demonstrate stronger financial effects. Using historical decomposition, we establish a growing role of the China factor over time, in particular for large emerging economies such as Brazil and Russia.

Concepts of Money Laundering Resulting Destroy the Structure of Financial Policy

Money laundering is the technique used to make significant sums of money earned illegally through drug trafficking, terrorism, or other major crimes that appear to have come from legitimate sources. Money laundering has a negative influence on the nation's economic and political stability, hence it must be strictly prohibited. As one of the most significant components of the financial system, it serves as the backbone of the money market and plays a vital role in raising funds for beneficial investments that advance economic growth in a nation. An effective and stable financial system is a requirement for the nation's overall growth.

The Impact of Macroeconomic Indicators and Bank Spesific Factors on Comercial Bank NPLs in the Province of South Sumatera

Non-Perfoming Loan or non-performing loan is a ratio that can affect the stability of the banking financial system if NPLs are not managed properly, it will cause chaotic financial conditions and will cause economic problems.The purpose of this research is to examine the impact of macroeconomic indicators and bank-spesific factors on the Non Perfoming Loan ratio of commercial banks in Lampung Province. The study made use of time series data from 2010QI – 2022QIV. The type of data used is secondary data obtain from the Central Bureua of Statistics and Bank Indonesia. The independent variabeles are macroeconomic indicators such inflation, exchange rate, BI rate, as well as bank-spesific factors such as LDR, with Non-Perfoming Loan serving as the dependent variable. This study employs multiple liniear analysis methods as well as traditional assumptions. The findings revealed that macroeconomic variables and bank specific indikators both affect NPL, with LDR having a partially negative effect on NPL. The exchage rate has a positive effect non-perfoming loans, while inflation and the BI rate have no effect.