Stability Of Financial System Research Articles

Legal consciousness and the crypto phenomenon: property ideologies, innovations and potential ramifications on financial system stability

Abstract How does the understanding of law among individuals involved in the crypto phenomenon originate, and how does it impact the trajectory of this innovation? This article examines the legal consciousness of crypto industry participants and state actors, exploring their ideologies on law, property and innovation through extensive document and archival research. It highlights the interplay between the crypto industry’s perception of crypto-assets’ possessing dynamic and self-regulating qualities beyond traditional legal boundaries and the increasing willingness of state actors, despite their reservations, to utilise law as a flexible tool to embrace innovation and promote economic competitiveness. By employing Minsky’s financial instability hypothesis, this article contextualises such legal consciousness within the financial system and contends that collective legal consciousness and associated behavioural dynamics substantially shape state–industry interactions, with the potential to destabilise the financial system. This article sheds light on the challenges presented by crypto-assets and the intricate interplay between law and technological advancements.

China's Real Estate Market: Issues and Countermeasures

The real estate sector plays a vital role in China's economy and is a crucial engine of economic growth. The massive investment and construction activity has promoted the upgrading of infrastructure and the development of manufacturing, construction, and related services, thus strongly supporting the expansion of the overall economy. However, with the rapid growth of the real estate market, some problems that cannot be ignored have also been exposed, including rising housing prices, intensified real estate "speculation," and the environmental impact of real estate projects. These problems may threaten the financial system's stability and negatively impact social equity and the ecological environment. This article aims to delve into the main issues facing the real estate industry today, explore their causes, and propose practical countermeasures, aiming to promote the development of the real estate industry in a healthier and more sustainable model to promote long-term stable economic growth.

Impact of digital transformation on financial stability in emerging markets: evidence from Ethiopia

This insightful study delves into the intricate relationship between key digital finance adoption indicators and the stability of the banking sector in Ethiopia, an emerging economy undergoing rapid digitalization. Covering annual data from 1991 to 2022 and utilizing an autoregressive distributed lag (ARDL) approach alongside Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) techniques, the researchers uncover thought-provoking findings that challenge conventional wisdom. Contrary to expectations of a positive long-term association, the analysis reveals a statistically significant negative relationship between both internet usage and mobile phone subscriptions and Ethiopia's banking system's financial stability. This robust result, validated through rigorous robustness checks, suggests that the breakneck pace of digital transformation may outpace the development of robust regulatory frameworks and risk management practices, ultimately undermining the overall stability of the financial sector. Interestingly, the short-term analysis presents a more nuanced picture, with mobile phone subscriptions exhibiting a stabilizing effect in the immediate aftermath. This intriguing dichotomy highlights the complex and evolving dynamics at play, where the challenges of integrating digital finance with the traditional banking infrastructure and the persistence of informal financial activities potentially offset the benefits of enhanced financial inclusion and transaction efficiency. These thought-provoking findings carry crucial implications for policymakers and industry stakeholders navigating the digital revolution. Policy implications emphasize the need for robust regulatory frameworks, enhanced cyber security measures, and improved financial literacy. The findings underscore the importance of a nuanced approach to digital finance in emerging economies, advocating for continuous adaptation of policies to address the evolving landscape of financial technology. Continued inquiry can better guide policies that foster digital transformation while safeguarding stability, especially in rapidly developing regions like sub-Saharan Africa.Graphical

Periodic information enhancing and controlling stability of complex corporate financial systems

We explore the mechanism and control behavior of how periodic information affects the stability of complex corporate financial systems from two viewpoints: the corporate life cycle and the stability of financial leverage risk. A complex corporate financial system model with correlated noise and periodic driving is proposed. Furthermore, two stability indicators are proposed to measure the stability of the corporate life cycle and the risk of corporate financial leverage. Stochastic simulation results show that enhancing the intensity and frequency of controllable periodic information can improve system stability. The stability of complex corporate life cycles and financial leverage risks exhibits opposite behaviors in terms of noise correlation. In addition, it is observed that there are specific threshold values of system parameters, and the relationship with the intensity of periodic information shows non-monotonic characteristics, manifesting peculiar phenomena and transition behaviors. Finally, by comparing with actual financial data, the proposed model is verified to be superior to the benchmark model.

Evaluating The Role Of International Financial Institutions In Maintaining Financial Stability

This paper examines the functions of IFIs specifically the IMF, World Bank, and BIS in relation to balance of payments in the international financial system. Employing a cross-sectional research methodology, the study analyzes IFI interventions during the Asian Financial Crisis (1997), the Global Financial Crisis (2008), and the COVID-19 pandemic. It evaluates data related to GDP growth, capital flows, and systemic risk measures, and finds that IFIs have a highly positive impact on economic recovery and financial system stability. The study also highlights the importance of advanced technologies, such as big data, machine learning, and artificial intelligence, in improving IFI capacities for evaluating and forecasting financial stability. However, it reveals issues with data quality, methodological limitations, and policy-data gaps, particularly from developing countries where IFIs are crucial. Recommendations are provided for enhancing data acquisition, openness, and the use of big data analytics, along with directions for further research in prognostic modeling and crisis anticipation.

FINANCIAL CRISIS AND INSTABILITY

Financial crises and instability are common occurrences in the world economy, and they have significant effects on both developed and developing nations. The numerous causes of financial crises and the ensuing instability in the financial markets are thoroughly examined. It explains the theoretical foundations of financial crises, going over important ideas including market bubbles, excessive leverage, and regulatory shortcomings The paper also looks into how regulations and governmental actions can either exacerbate or lessen financial crises, how financial institutions contribute to systemic risk propagation and how interconnected they are. It looks at how the spread of crises across borders and asset classes can aggravate their severity through the contagion effect. It also covers the socio-economic fallout from financial crises, such as social unrest, income inequality, and unemployment. The summary concludes by highlighting how crucial it is to have strong regulatory control and proactive risk management to avert and lessen future financial disasters. It promotes a comprehensive strategy that blends international collaboration, regulatory changes, and responsible risk-taking to promote long-term economic growth and stability in a global financial system that is becoming more linked.

Dynamics Analysis and Adaptive Synchronization of a Class of Fractional-Order Chaotic Financial Systems

It is of practical significance to realize a stable and controllable financial system by using chaotic synchronization theory. In this paper, the dynamics and synchronization are studied for a class of fractional-order chaotic financial systems. First, the stability and dynamics of the fractional-order chaotic financial system are analyzed by using the phase trajectory diagram, time series diagram, bifurcation diagram, and Lyapunov exponential diagram. Meanwhile, we obtain the range of each parameter that puts the system in a periodic state, and we also reveal the relationship of the derivative order and the chaotic behaviors. Then, the adaptive control strategy is designed to achieve synchronization of the chaotic financial system. Finally, the theoretical results and control method are verified by numerical simulations.

PENGARUH KOMPETISI BANK TERHADAP STABILITAS SISTEM KEUANGAN PERBANKAN (STUDI KASUS PADA KBMI IV TAHUN 2019-2022)

The emergence of banking as an intermediary institution plays a very important role in the economy because it is the heart that must pump "money" and distribute it to all organs that need the money. Therefore, it is very important to maintain the stability of the banking financial system. The development of the banking system can trigger competition in the banking industry which can affect banking stability. This research was conducted to determine the effect of bank competition on the stability of the banking financial system. This research focuses on KBMI 4 data which is a large bank HHI index, market share and Loan to Deposit Ratio (LDR) used as a proxy for competition and Non-Performing Loans (NPL) as a proxy for banking financial stability. The analysis technique used is Panel Data Regression with KBMI 4th ​​quarter data for 2019-2022. Of these three variables, the HHI index and Loan to Deposit Ratio (LDR) variables have a significant effect on Non-Performing Loans (NPL). Meanwhile, the market share variable has no significant effect on Non-Performing Loans (NPL).

RISK PROCESS MANAGEMENT: A CASE STUDY IN A FINANCIAL INSTITUTION

Purpose: The purpose of this study is to propose a new method for controlling the product "Financial Risk Management" in a multiple bank. The focus is on addressing Model Risk, particularly in the context of financial institutions, where reliance on incorrect statistical models can pose serious problems. Theoretical framework: Model Risk is the possibility of losses due to models with flaws, deficiencies or inadequacies in the development, implementation or use process. Model Risk is considered one of the main problems for financial institutions. With the advancement of technology and the use of more robust models, dependence on incorrect statistical models can cause serious problems for institutions, increasing the need for studies in the area. Methodology/Approach: To conduct the research, the institution's own survey was used, being applied to the analysis of the main financial models built in the last six months in the organization. As a result, the structure of this process was evaluated, action plans and control indicators were proposed, dividing them into the areas of: Data Governance, Systems, Data Quality and Reporting. With this categorization, it was also possible to create a Control Panel for each Area or Department, improving the management necessary to control Risk. Findings: The findings of the study involve the evaluation of the structure of the risk management process, with a particular focus on addressing Model Risk. The research proposes a new method for risk assessment within the context of "Financial Risk Management" in a multiple bank setting. Research, practical & social implications: In terms of research implications, the study contributes by proposing a novel method for controlling financial risk in a banking environment. The practical implication is the potential improvement in risk management processes within financial institutions. Socially, this research may contribute to the overall stability and reliability of financial systems. Originality/ Value: The originality of this study lies in its proposition of a new method for risk assessment within the domain of "Financial Risk Management" in a multiple bank setup. The value of the research is evident in addressing the critical issue of Model Risk, which can have substantial consequences for financial institutions. Keywords: Financial Institution, Financial Risk, Process Management.

CURRENT STATE AND DIRECTIONS OF FINANCIAL ARCHITECTONICS DEVELOPMENT

The article presents an analysis of the evolution of financial architectonics in the context of globalisation, identifying the principal avenues for its advancement in order to guarantee the stability and efficacy of financial systems. The topic is of great relevance in light of the necessity to reform the extant financial system in the context of economic globalisation and the interdependence of countries. The global financial crisis of 2008 and the crisis caused by the pandemic of 2019-2021 have demonstrated the deficiencies of the extant financial architecture and the necessity of modernising it to guarantee the stability and resilience of financial systems. The research methodology employed a combination of monographic, comparative, and content analysis techniques to examine a substantial corpus of scientific literature. This approach facilitated an in-depth investigation of the predominant methodologies for interpreting financial architectonics and a comprehensive analysis of the diverse experiences of countries in developing financial systems. The findings of the study indicated that the efficacy of financial architectonics is contingent upon the presence of active and stable risk markets that facilitate access to essential financial data and investor protection mechanisms. It was determined that contemporary financial systems frequently fail to satisfy the requirements of a globalised economy, thereby necessitating their reform. The development of new regulatory mechanisms for financial markets and institutions, as well as the creation of international standards and codes of conduct, have become the primary avenues for achieving financial stability. The practical value of this article lies in its capacity to inform the development of novel approaches to the management of financial systems at both national and international levels. The proposed recommendations for the development of financial architectonics can assist governments and financial institutions in responding in a more effective manner to global financial crises and ensuring stable economic development.

THE IMPACT OF WAR ON THE INSURANCE MARKET OF UKRAINE: ANALYSIS OF OBSTACLES AND RESTRUCTURING OF THE FINANCIAL LANDSCAPE

The purpose. The aim is to analyze the condition, structure, and dynamics of the financial sector of Ukraine, identifying key trends. It also involves determining the major problems and growth opportunities for the financial sector as a significant factor affecting the national economy. Method. The study is based on the examination of statistical and empirical data from the National Bank of Ukraine, as well as the analysis of changes in regulatory acts governing financial services. Additionally, the author reviewed expert opinions on market issues related to specific entities. Using a comprehensive approach, the author was able to formulate general trends characteristic of the market as a whole. The results. This research presents the impact of martial law on the structure and dynamics of the financial sector in Ukraine, analyzes the causes of these changes, and identifies factors influencing the financial sector of Ukraine. Scientific novelty. The scientific novelty of the article lies in exploring the relationship between military-political factors and the transformation of Ukraine's financial sector. The proposed study highlights the unique experience of the impact of military-political factors on the country’s financial system, which is relevant and significant for further research and practical applications. Practical significance. The practical significance of this article is that the research results will provide analytical information to financial institutions regarding the needs and opportunities for adapting to military-political risks. This will enable them to develop more effective risk management strategies and maintain stability in conflict conditions. Studying the impact of military-political factors on the stability of Ukraine's financial system can help identify key risks and ways to strengthen the resilience of financial institutions and national infrastructure.

Financial intermediation and informational efficiency: Predicting business cycles

Theory posits that financial intermediation (FI) spurs economic growth and supports financial system stability by reducing informational asymmetries and agency problems. Most of this literature focuses on bank lending and has limited success in capturing changes in macroeconomic aggregates. We consider a large set of different financial intermediaries to show that aggregate FI assets contain leading information about real GDP, investment, consumption, industrial production, and unemployment. Bank and shadow bank assets alone contain only limited information about future states of the economy. Overall, FI improves informational efficiency of the markets by providing transparent leading signals of the future economic conditions.

The impact of liquidity risk and credit risk on bank profitability during COVID-19.

The COVID-19 outbreak caused a massive setback to the stability of financial system due to emergence of several other risks with COVID, which significantly influenced the continuity of profitable banking operations. Therefore, this study aims to see that how differently the liquidity risk and credit risk influenced the banking profitability during Covid-19 (Q12020 to Q42021) than before COVID (Q12018 to Q42019). The study employs pooled OLS, and OLS fixed & random effects models, to analyze the panel data on a sample of 37 banks currently operating in Pakistan. The results depict that liquidity risk has a positive and significant relationship with return on assets and return on equity, but insignificant relationship with net interest margin. Credit risk has a negative and significant relationship with return on assets, return on equity, and net interest margin. The study also applies quantile regression to address the normality issue in data. The quantile regression results are consistent with pooled OLS, and OLS fixed and random effects results. The study makes valuable suggestions for regulators, policymakers, and others users of financial institutional data. The current study will help to set policies for efficient management of LR and CR.

The role of Islamic banks in promoting economic growth and financial stability: Evidence from Saudi Arabia

The aim of this study is to provide a suitable empirical framework for the interaction between Islamic finance, financial stability, and economic development. Additionally, it is an attempt to empirically evaluate how the levels of financial system stability and economic growth in an oil-rich nation are affected by the financing provided by Islamic banks. The study employs the fully modified ordinary least squares (FMOLS) and quantile regression (QR) based on quarterly data from 2013 to 2022. The findings indicate strong evidence that Islamic banking finance supports economic growth and improves financial system stability. Moreover, the study highlights that this positive relationship is negatively affected by inflation rates and levels of economic policy uncertainty. Financial inclusion has an important positive impact on both dependent variables, reinforcing this link. Furthermore, oil rents in Saudi Arabia (KSA) have contributed to improving economic development and supporting the financial sector’s development to achieve economic diversification as outlined in the Saudi Vision 2030. These findings confirm the necessity of paying attention to developing Islamic banking and increasing its market share by creating products and services that achieve economic efficiency in accordance with suitable policies for making the financial sector a strategic sector that supports economic development in KSA. AcknowledgmentThis work was supported and funded by the Deanship of Scientific Research at Imam Mohammad Ibn Saud Islamic University (IMSIU) (grant number IMSIU-RPP2023024).

PENGARUH PERTUMBUHAN EKONOMI, INFLASI, KREDIT, DAN UANG ELEKTRONIK TERHADAP STABILITAS SISTEM KEUANGAN

Unstable economic growth such as during the economic crisis and inequality in the financial inclusion system will have significant implications for financial system stability. Financial instability is characterized by a decline in public welfare, social instability, and broad economic losses. This study aims to examine the effect of economic growth, inflation, and financial inclusion on financial system stability. The analysis technique used is ECM. The dependent variable of financial system stability is measured by the Financial System Stability Index (ISSK) while the independent variables are economic growth, inflation, and the ratio of general banking credit to GDP and the volume of electronic money transactions to measure financial inclusion. The research data is secondary data with a quarterly period of 2012-2022. The empirical results of this study found that in the short term an increase in bank credit to GDP will increase stability. Meanwhile, an increase in economic growth, inflation, and the volume of electronic money transactions will reduce financial system stability.

Impact of Strengthened Financial Regulation on Commercial Banks' Asset Risk: A Case Study of China CITIC Bank

As an integral part of China's economic system, the financial market plays a crucial role. In recent years, China has attached increasing importance to the financial market and intensified efforts to improve financial regulatory systems, with a particular emphasis on banking supervision. Banks, as vital components of the financial market, have a significant impact on the stability of the entire financial system due to their level of risk exposure. In order to better explore the changes in bank asset risk under the trend of strengthened regulation, this paper conducts a case study on China CITIC Bank. The case of China CITIC Bank being penalized serves to illustrate the inherent risks in the assets of China CITIC Bank. Furthermore, through this penalty, China has sent a signal to financial institutions to strengthen regulation, thereby compelling banking institutions to enhance their risk management capabilities. Under the trend of intensified regulation, it can be inferred that central oversight of banking institutions will gradually strengthen.

Financial Inclusion, Economic Growth and Macroeconomic Stability in Nigeria

This study investigated the impact of financial inclusion on economic growth and macroeconomic stability in Nigeria (1980 – 2022). Using secondary data obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin (various years) and World Development Indicators (WDI, 2023), the study employed the Autoregressive Distributed Lag (ARDL) technique in analysing the data. It was found that financial inclusion may not necessarily improve economic growth in the short run; it may not provide macroeconomic stability in the short run; financial inclusion enhances the growth of the economy in the long run, but the growth rate is slow; and financial inclusion can stabilise the macroeconomy (price level) in the long run. It was recommended, amongst other things, that a robust, stable and sustainable financial system be developed to deepen financial inclusion (like expanding credit and money supply, amongst other things) to encourage economic growth and stabilise the economy.

Digital economy, financial development and energy transition in Africa: Exploring for synergies and nonlinearities

The transition to sustainable energy for all is a crucial aspect of the sustainable development goals, particularly Goal 7, which underscores the need for clean and affordable energy. This requires the development of digital infrastructure and a strong financial system. As a result, this study contributes to knowledge by exploring the synergies and nonlinear effects of the digital economy and financial development on renewable energy, which remains underexplored. To this effect, this study recruits the dynamic panel threshold and the generalised method of moments estimations to evaluate the linear, synergies and nonlinearities among these factors using a panel of forty-seven African countries. The key empirical results are stated as follows: (1) renewable energy is positively impacted by the digital economy; (2) the impact of the digital economy on renewable energy is moderated by financial development. This suggests that to ensure the propelling effect of the digital economy on renewable energy, there is a need for a stable and robust financial system; and (3) the study further found nonlinear effects of the digital economy and financial development on renewable energy, which takes a U-shaped relationship, implying that low level of digitalisation and financial development may hinder the transition to renewable energy, while high levels of these factors are essential to expedite the transition to a more sustainable energy system. Hence, African countries must embrace digitalisation and commit significant financial resources to developing their digital infrastructure to facilitate the achievement of the net zero agenda.

Building Stable Financial Systems through Cloud-Driven Digital Transformation

Building Stable Financial Systems through Cloud-Driven Digital Transformation

Analytic Network Process on Early Warning Indicators for Financial System Stability

The purpose of this research is to find out the leading indicators of financial crisis from the perspective of expert practitioners, micro and macroeconomic sides; Based on the results of interviews with banking practitioner experts, related to the most important indicators of financial system stability in Indonesia, both microprudential and macroprudential criteria, both aspects are equally considered important and priority. However, from the practitioners' perspective, the microprudential aspect is a more important factor (0.506) than the macroprudential aspect (0.494). Macroprudential and Microprudential policies issued by Bank Indonesia as the central bank with full authority play an important role in maintaining Financial System Stability. The presence of the Financial System Stability Coordination Forum (FKSSK) which consists of several financial authorities is expected to be able to save the economic conditions of the Indonesian nation in the financial sector. For future research, this study is expected to be an initial step. For example, by further expanding the number of expert respondents who are not only from banking practitioners, but also from academics and policy makers.