Stability Of Financial System Research Articles

Beneficiary Ownership in Financial Services Sector Conglomerates in Indonesia

This research aims to explore the implications of beneficiary ownership in financial services sector conglomerates in Indonesia on financial system stability. Because financial services sector conglomerates can obscure the true beneficiaries within the conglomerate in Indonesia. This can pose risks to the financial system. If one financial institution within the conglomerate fails, it can have cascading effects on other institutions within the conglomerate. This can lead to systemic crises, which can harm the overall economy. Therefore, the problem lies in how to uncover the true beneficiaries within a financial services sector conglomerate in Indonesia. This is a normative legal research, prescriptive in nature, employing a legislative and legal comparison approach. Secondary data used includes legislation such as the Limited Liability Company Law, Banking Law, Financial Sector Development and Strengthening Law, as well as the Financial Services Authority Regulation on Financial Conglomerates. Additionally, international journals and legal dictionaries are used as references, supported by empirical data in the form of interviews with the Financial Services Authority. Data is analyzed qualitatively, with conclusions drawn using deductive-inductive reasoning. An individual or legal entity as a primary entity that can control changes in the Articles of Association, Share Ownership Structure, replacement of directors, board of commissioners, control the company's finances, but the individual/legal entity is not listed in the company's articles, then can be categorized as a beneficial owner of a limited liability company. Similarly, in a financial services sector conglomerate existing in Indonesia, it can be proven by finding out who controls the conglomerate.

The Influence of Digital Payment Implementation on Banking Stability in Indonesia (A Study on Conventional Banks in Indonesia Listed on the Indonesia Stock Exchange)

This study aims to investigate the influence of digital payments on the stability of conventional banks listed on the Indonesia Stock Exchange (IDX). Additionally, the research will delve into the role of banking asset quality and liquidity as control variables that may regulate the relationship between digital payments and financial stability. In examining the relationship between digital payments for MSMEs and financial system stability within the conventional banking system listed on the IDX from 2012 to 2022, the research begins by measuring digital payments and banking system stability. Sampling is conducted using purposive sampling, resulting in a collection of 27 conventional banks. The data analysis method for this research includes descriptive analysis, instrument tests, classical assumption tests, t-tests, F-tests, and hypothesis testing using multiple regression analysis. The research findings indicate that ZScore, return on assets, and return on equity have a positive effect on the stability of conventional banks in Indonesia, using Non-Performing Loans and Loan to Deposit Ratio as control variables. Thus, this study supports and strengthens previous research.

The Impact of Monetary Policies on the U.S. Financial Crisis

This paper examines the role of monetary policy in addressing economic crises by analyzing four significant events in U.S. history: Great depression, stagflation in 1970-198, the 2008 financial crisis and the COVID-19. The monetary policy in the country's economic management has been highlighted in order to resist the decline in financial activity, inflation, large-scale unemployment, and economic recession. History evaluation of policy responses and the results can be employed to assess the efficacy of monetary measures, such as quantitative easing and interest rate adjustments, in achieving financial stability and economic recovery. Nevertheless, this paper points out that it is paramount for the monetary policy adjustment to different economic conditions, and stresses that financial supervision should have the power to avoid speculative activities and guarantee the stability of financial system. The outcomes contribute to deeper knowledge of monetary policy as a tool in managing the crises and provide valuable insights for the policymakers for strategy formulation in future challenges.

The basis of Russia's financial sovereignty

Subject. The article investigates the policy of the largest Russian financial institutions and countering the international sanctions. Objectives. The purpose is to analyze indicators that determine the stability of the Russian financial system. Methods. The study draws on methods of statistical analysis. Results. The paper determined that the basis of Russia's financial sovereignty is made up of enterprises, the production costs of which are reimbursed at the expense of proceeds from goods and services. Conclusions. The findings can be taken into account when determining the main directions of Russia's monetary policy.

Creation and Legal Status of a Specially Authorized Body of Non-Banking Financial Services

The article is devoted to the peculiarities of state regulation in the market of non-banking financial services. At the same time, attention was paid to the creation of a specially authorized state body in the form of the National Commission for Control of the Market of Non-Banking Financial Services. The purpose of the article is to reveal the legal status, the order of formation, and clarify the main principles of the National Commission's activity. Achieving the outlined goal became possible thanks to the use of a complex of methods of scientific knowledge, in particular, the dialectical method (for comprehensive knowledge of the nature of the National Commission for Control over the Market of Non-Banking Financial Services), the formal-legal method (for establishing the content of legal norms), the formal-logical method (for identification of shortcomings in national legal regulation), comparative legal method (for studying the experience of other countries and determining the prospects for implementing their principles of activity in the national legal field). It has been studied that the special status of the commission is that it ensures the stability of the entire non-banking financial system of Ukraine, establishing the requirements that such institutions must meet, namely requirements for: liquidity, solvency, capital, asset quality, risk level of operations, profitability. The work examines the relationship between the commission and the National Bank of Ukraine, their cooperation in the market, which consists in the development of regulatory and legal acts and their approval. The need for the National Bank of Ukraine to delegate its powers to the National Commission for Control of Non-Banking Financial Services in relation to: registration of market participants, licensing of non-bank financial institutions, determining the procedure for issuing and canceling a license, approving the terms of operation of such institutions. In view of this, a new model of state regulation on the market of non-banking financial services was proposed in the form of concentration of all control functions on the market in a single operationally independent regulator - the National Commission for Control of Non-Banking Financial Services, which is in close cooperation with the National Bank of Ukraine and by the National Securities and Stock Market Commission. Also, the article emphasizes that regulation by the National Commission for Control of the Market of Non-Banking Financial Services should be complemented by a system of self-regulating participants in the market, which are an additional tool to state regulation.

How do financial inclusion and bank stability explain agricultural productivity in Sub-Saharan Africa?

PurposeThis study aims to examine the impact of financial inclusion and bank stability on agricultural productivity in Sub-Saharan Africa (SSA).Design/methodology/approachThe study used 38 countries in the SSA with data spanning between 2004 and 2021. The data were analyzed using the two-step system generalized method of moments (GMM) and the panel-corrected standard error (PCSE) model.FindingsThe study found a positive effect of financial inclusion and bank stability on agricultural productivity. The study also discovered that while the access component of financial inclusion has a negative influence on agricultural productivity, the usage dimension has a positive impact.Research limitations/implicationsThe study suggests to policymakers that an inclusive and stable financial system improves agricultural productivity. The findings recommend that policymakers should empower farmers to leverage financial inclusion.Originality/valueThis study provides insightful discussion on the impact of financial inclusion and its various dimensions and bank stability on agricultural productivity in SSA.

International aggregate risk: Effects on financial stability

The increasing interconnectedness of financial and economic systems has led to the emergence of global risks that can impact financial stability. In this paper, we explore how aggregate risk on a global scale can affect the stability of financial systems. We present a simple model that considers an exogenous parameter indicating the concentration of international credit risk in both domestic and foreign banking systems. When this parameter is high, the model is vulnerable to aggregate risk. Our research shows that if multiple countries are impacted by the same shock, diversification of risk becomes impossible.In the event of a global economic downturn, international lenders may become scarce, or the real interest rate may substantially increase, perhaps leading to an economic crisis.

Relevansi Single Presence Policy dalam Menjaga Kesehatan, Ketahanan, dan Daya Saing Perbankan Indonesia Menghadapi Resesi

Abstract. The Single Presence Policy (SPP) was implemented in Indonesia since 1998 with the aim of maintaining the stability and resilience of the national financial system. Amid the threat of a predicted global recession, the relevance of SPP in maintaining the health, resilience, and competitiveness of Indonesian banking becomes important to be studied. This research uses a normative juridical legal research method with a qualitative approach. Data was collected through library research and analyzed descriptively. The purpose of this research is to analyze the relevance of SPP in maintaining the health, resilience, and competitiveness of Indonesian banking in facing a recession. The research results are expected to provide input for regulators and banks in formulating appropriate policies to maintain the stability and resilience of the national financial system. Keywords: Single Presence Policy, bank health, bank resilience, bank competitiveness, recession).

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.

(COVID) CRISIS IN A FINANCIALIZED ECONOMY AND ALTERNATIVE REGULATION

Drawing upon the 2007-2008 global crisis and the current Covid pandemic, this article aims to show that since the 1980s, the organization of the economy in a liberal way transformed public financial regulation into market-relying self-regulation that led to persistent crises. The article maintains that the financialized accumulation regime generates endogenous inconsistencies and proves to be unable to ensure systemic stability and long-term viability of society. An alternative financial regulation resting on preventive collective action seems to be a relevant way to provide society with a sustainable and progressive financial system. The ill-management of the Covid crisis is related to the socio-economic framework that rules societies and economies around the world since the 1980s. The evolution of capitalism rests on speculation-led accumulation process that deepens inequalities and puts collective projects and goals on the back burner. This evolution, also known as financialization, is based first and foremost on the primacy of short-term profitability. Relying on individual (micro) rationality, it is unable to conduct market activities from a macroeconomic perspective to ensure the development of society. Although individual market strategies can be regarded as rational actions, the systemic financial stability cannot be achieved by market mechanisms. In a capitalist economy, financial stability is to the viability of society what public health is to the lives of citizens. Both require the oversight of a visible public hand. Drawing upon institutional economics this article then shows that systemic dysfunction of capitalist finance does reflect the dysfunctional organization of society in which collective action has been abandoned in favor of the doctrine of efficient, self-regulating markets. Recurrent crises, caused by the imbalances generated by laissez-faire economics, are the main threats to the sustainability of an open, innovative and progressive society. From this perspective, the regulation of financial systems is of paramount importance and calls for alternative models of collective action that should determine the conditions of exercise of private financial institutions according to the goals of a sustainable economy respectful of both people and the environment beyond the conservative individualistic doctrines.

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.

The role of bank governance in managing the risks associated with banking institutions

This study explores the crucial role of bank governance in maintaining financial system stability by managing risks within banks. It differentiates from prior research by not solely focusing on the 2008 financial crisis. Data from a survey of 220 bank employees were analyzed using structural equation modeling. Key findings include the necessity of well-informed boards and robust governance structures that adhere to regulations for effective risk management. Open communication with stakeholders and stringent control over technological risks are also vital due to the banking sector's increased technology reliance. These insights underscore the complexities of risk management in banking governance, stressing the need for a comprehensive, adaptable strategy. This research contributes new evidence to the importance of strong governance in risk management, with significant implications for bank and corporate governance fields. The study's model demonstrates high predictive accuracy and explanatory power.

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.

Risk Assessment of Banks and Financial Institutions under COVID-19 Crisis

Systemic risk refers to risks that have a broad and severe impact on the entire financial system or economic system. There are similarities in the definition of systemic risk in China and abroad, which usually refer to threats to the entire financial system or economic system, which can trigger a chain reaction and lead to a systemic collapse. In terms of characteristics and measurements, there may be some differences in views and methods at home and abroad. While foreign countries usually pay more attention to the interconnectedness of financial institutions, market liquidity, macroeconomic factors, etc., China may pay more attention to factors such as the stability of financial markets and the role of state-owned enterprises and governments in the economy. The shortcomings of systemic risk abroad may lie in the fact that the unique circumstances of some characteristic countries or regions are sometimes overlooked, because these factors are not universally applicable on a global scale. Due to its unique environment of large economic size, complex financial system, government intervention, and the influence of state-owned enterprises, the study of systemic risk is particularly important for China. This particular situation may require unique methods and metrics to measure and address risks to ensure the stability and sustainability of China's financial system. It is precisely in view of the lack of foreign research on China's specific context that it is of great significance to study the systemic risk of China's banking industry under China's financial system.