Theory Of Banking Research Articles

The Impact of Loans to Deposit Ratio (LTD) and Return on Assets (ROA) on the Capital Adequacy Ratio of the Tehran Stock Exchange and OTC

Objective: Capital is one of important and essential factors in evaluating healthy and sustainability in banking system and in order that adequate capital basis can address wide range of risking which every bank faces. Methodology: A brief review of banking theory implies empirically that all different aspects of banking organization were influenced by available capital and expected possible return directly or indirectly. Capital operates as a shield against decreasing of asset value or increasing bank debts. The relation between capital adequacy and banking and also economic factors has a considerable importance. A plenty of universities and financial institution have tried to identify the main factor of determining capital adequate ratio.in this term, in recent studies these questions have been issued to determine as is there any positive and meaning relation between fund ratio to depositing on legitimate banking capital adequacy in Tehran commercial paper and Iranian over the counter (OTC)? And also any positive or meaning relation between banking asset return on capital adequacy ratio in commercial paper exchange market? Therefore in terms of finding a solution for issued matter, some assumptions were implied based on determined relations. Results: Considering static population was included all acceptable bank in exchange market in during of 1388 to 1392 and any sampling haven’t been determined. So 15 acceptable bank were selected as a sample in this article.it is better to mention a cross multi – factors model was designed to be examined codified assumption by using synthetic data. And achievable results shows there aren’t any positive or meaning relation between paid fund on depositing and acceptable banking capital adequacy in Tehran exchange commercial paper and OTC. Conclusion: And the observable result also showed that there are positive and direct relation between asset return and acceptable banks capital adequacy in exchange commercial paper market and OTC.

The effect of the ratio of lending to deposits with capital adequacy ratio the banks listed on the stock market in Iran

Objective: Capital is one of important and essential factors in evaluating healthy and sustainability in banking system and in order that adequate capital basis can address wide range of risking which every bank faces. Methodology: A brief review of banking theory implies empirically that all different aspects of banking organization were influenced by available capital and expected possible return directly or indirectly. Capital operates as a shield against decreasing of asset value or increasing bank debts. The relation between capital adequacy and banking and also economic factors has a considerable importance. A plenty of universities and financial institution have tried to identify the main factor of determining capital adequate ratio.in this term, in recent studies these questions have been issued to determine as is there any positive and meaning relation between fund ratio to depositing on legitimate banking capital adequacy in Tehran commercial paper and Iranian over the counter OTC)? And also any positive or meaning relation between banking asset return on capital adequacy ratio in commercial paper exchange market? Therefore in terms of finding a solution for issued matter, some assumptions were implied based on determined relations. Results: Considering static population was included all acceptable bank in exchange market in during of 1388 to 1392 and any sampling haven’t been determined. So 15 acceptable bank were selected as a sample in this article.it is better to mention a cross multi – factors model was designed to be examined codified assumption by using synthetic data. Conclusion: And achievable results shows there aren’t any positive or meaning relation between paid fund on depositing and acceptable banking capital adequacy in Tehran exchange commercial paper and OTC.

The Reluctance Phenomenon of Islamic Banks to Offer Profit-Loss Sharing Financing

This study contributes to the existing literature on the phenomenon of lower valume of Profit-Loss Sharing (PLS)-based products offered by Islamic banks by comprehensively discussing and analyzing the issue from the internal, external, and regulation perspectives, taking the case of PT. Bank Aceh Syariah (BAS) in Indonesia. Using a grounded theory approach, this study interviews selected informants who are knowledgeable in Islamic economics, banking, and financial theories and practices, including experts, practitioners, customers, and regulators. Viewed from three aspects, namely: internal, external, and regulation, the study found that, from the internal aspect, the problem of the low volume of PLS-based financing products is caused by six factors, namely: high risk, lack of quality and quantity of human resources, complicated handling, lack of banking product innovation, asymmetric information, and lack of socialization. Meanwhile, from the external aspects, it is caused by three factors, namely: moral hazard, lack of community's knowledge of Islamic banking products, and low demand. Finally, from the aspect of the regulation, it is caused by a lack of supportive regulation. By tackling these issues, it is believed that the Islamic bank could offer more PLS-based products that finally contribute to the prosperity of the public.

Determining the Impact of Intangible Assets on Intellectual Capital and Competitive Advantage in Banking

This paper carries out the empirical tests in order to validate the hypothesis that resource intangibility, in the form of intangible assets, contributes towards the intellectual capital, and the competitive advantage in the banking sector. Furthermore, it also determines whether the intangibility of a banks' resources contribute towards the sustainability of the competitive advantage. Finally, it determines which aspects of the banking performance, the intangible assets actually contribute to. In this context, this research utilizes the secondary data, which is extracted from the annual reports of commercial banks that are listed on the primary stock exchanges of Pakistan. The sample that is taken into consideration is divided into two main categories in order to carry out the analysis. These categories include the classification into the Islamic banks and the conventional banks. The Islamic window operations have not been included in the analysis,as the details required for the variable calculations are not consistently available. Moreover, this bifurcation in the sample is also a unique aspect of this research,as the prior literature primarily focuses on the determinants of the intellectual capital in the banking sector. However though, there is no direct study regarding the differences in the resource intangibility in the Islamic banks and the conventional banks, and their subsequent impact on the intellectual capital and competitive advantage. The time frame for the analysis is taken from the year FY2008-FY2018 .Also,the findings of this study lead to striking implications for both the Islamic banking theory and the managerial practices in the banking sector of Pakistan. The resource intangibility is to be managed very differently across both categories. Where the intangible assets represent a significant contribution to both the intellectual capital and the competitive advantage for Islamic banks, the yal sore present a negligible impact on the intellectual capital,and the competitive advantage for conventional banks. This holds true for the conventional performance measures that are taken for the banking sector as well, as shown in the robustness analysis.

Modern money and Islamic banking in the light of Islamic law of riba

AbstractTheory of Islamic banking is based on neoclassical theory of money and banking which assumes that money is a neutral lubricant that facilitates exchange while bank is an intermediary institution that equates savings and investments in the economy. Endogenous money supply has demonstrated the fallacy of these assumptions by showing that it is not the deposits that create loans, rather the other way round. Unlike commodity money, modern money is credit, generated by the central and commercial banks in the process of advancing reserves and loans. When this correct version of money and banking is evaluated in the light of the correct understanding of riba, it becomes evident that modern money involves riba and this result is equally valid for Islamic banking. Genuine Islamic monetary and banking systems require commodity money, which may include gold and silver, such that its face value is equal to its intrinsic value and it does not represent credit. Riba is not merely a matter of eliminating the institution of interest from economic system, it is about eliminating credit‐based monetary or financial system because credit creation is as much riba as is charging interest.

The Impact of Credit Diversification on Credit Risk and Performance of Indonesian Banks

This study aims to identify the effect of credit diversification in the economic sector on credit risk and performance of commercial banks in Indonesia. Multiple linear regression is used to determine the effect of credit diversification on credit risk and banking performance. The data used in this study is the aggregated financial statements of commercial banks inIndonesia during the 2015-2018. The results indicate that credit diversification based on the economic sector has a significant effect on increasing the profitability of commercial banks in Indonesia. The credit diversification based on the economic sector also has a significant effect in reducing credit risk. Two control variables, namely company size and banking liquidity have a significant negative effect on profitability respectively. In the case of credit risk, the company size hasapositive effect, while the banking liquidity has no effect. These findings support the traditional banking theory which states that banks that diversify their credit portfolios can reduce the credit risk and increase profitability.

The Development of National Islamic Foreign Exchange Bank in Indonesia

Stagnation is a challenge faced by Islamic banking. Inadequate capital, small scale industries and banks, and low efficiency are the main obstacles to sharia banking in Indonesia. Therefore, the arrangement of various aspects needs to be done, so that national Islamic foreign exchange banks can compete with conventional commercial banks in terms of the effectiveness and efficiency of business activities. This study uses primary and secondary data with qualitative descriptive analysis. This study uses banking theory to determine the development of national Islamic foreign exchange banks in Indonesia. The data used are assets, liabilities, equity, and profit and loss. The total number of active national Islamic foreign exchange banks in Indonesia is 6 banks. The regulator encourages an increase in the role of national Islamic foreign exchange banks to carry out merger and acquisition strategies, hence they are strong in the capital, in BUKU IV category, can compete for business with conventional commercial banks, and can play an important role in the advancement of the Indonesian economy.

Sensing Fractional Power Spectrum of Nonstationary Signals with Coprime Filter Banks

The coprime discrete Fourier transform (DFT) filter banks provide an effective scheme of spectral sensing for wide-sense stationary (WSS) signals in case that the sampling rate is far lower than the Nyquist sampling rate. And the resolution of the coprime DFT filter banks in the Fourier domain (FD) is 2π/MN, where M and N are coprime. In this work, a digital fractional Fourier transform- (DFrFT-) based coprime filter banks spectrum sensing method is suggested. Our proposed method has the same sampling principle as the coprime DFT filter banks but has some advantages compared to the coprime DFT filter banks. Firstly, the fractional power spectrum of the chirp-stationary signals which are nonstationary in the FD can be sensed effectively by the coprime DFrFT filter banks because of the linear time-invariant (LTI) property of the proposed system in discrete-time Fourier domain (DTFD), while the coprime DFT filter banks can only sense the power spectrum of the WSS signals. Secondly, the coprime DFrFT filter banks improve the resolution from 2π/MN to 2π sin α/MN by combining the fractional filter banks theory with the coprime theory. Simulation results confirm the obtained analytical results.

Book Review: Central Bank Policy: Theory and Practice

I would like to praise the authors for filling in a significant literature gap about central banking, tailored to emerging market context, especially Indonesia. The book has two main contributions. First, it provides a comprehensive literature review of central banking theory and practice. Second, it discusses contemporary challenges in monetary management. In structure, the book is comprised of fifteen chapters, grouped into five parts.

Inflation Targets Regime and global financial cycle: An assessment for the Brazilian economy

In light of the global financial cycle (GFC), this paper investigates the effectiveness of monetary policy in Brazil since the adoption of the inflation targeting regime. The theoretical section analyses monetary policy from the New Macroeconomic Consensus perspective, emphasizing the implications of the GFC. It also contrasts central bank theory with the post-Keynesian critique. For the empirical investigation, a Markov-switching vector autoregressive model is estimated from January 2000 to December 2017, combining the common variables from the empirical literature with the proxy for the GFC. The main results suggest that greater financial instability has a direct effect on domestic inflation . JEL codes : C14, E12, E42

Big Bank Theory: A Study of Amalgamation Plan of 10 Public Sector Banks into 4 Entities

The Indian government on 30th August 2019 unveiled a plan to merge 10 public sector banks (PSBs) into four, reducing the number of state-owned banks from 18 to 12, in a bid to create “next-generation” financial institutions with stronger balance sheets and bigger risk appetite. Having done two rounds of bank consolidation earlier, this is what Government wants to do for a robust banking system and a $5-trillion economy. Punjab National Bank will take over Oriental Bank of Commerce & United Bank of India to become the country’s largest lender after State Bank of India in terms of business. Canara Bank will subsume Syndicate Bank; Andhra Bank and Corporation Bank will merge with Union Bank of India; and Allahabad Bank will become part of Indian Bank. The key factors for the mergers were: Technological platform, customer reach, cultural similarities, and competitiveness. In 2017, India had 27 PSBs, but the National Democratic Alliance government implemented two rounds of mergers in its previous tenure. One was the merger of five associate banks and Bharatiya Mahila Bank with SBI (from April 2017); second, Dena Bank and Vijaya Bank merged with Bank of Baroda to create the country’s third-biggest lender, which came into effect from April 1 this year. The present paper is based on the study of Public Sector banks total business, deposits and Non-Performing Assets (NPA). The paper also studies the Government’s plan to amalgamate the 10 public sector banks into four large institutions as a part of its attempt to bolster the capital base of these lenders. The paper in the end, studies the impact of PSBs Merger and how customers are likely to be impacted.

Determining Factors of Banking Performance in Indonesia

Motivated by the large number of banking studies in Indonesia that have not included NOP (Net Open Position) in profitability modeling, our research aims to realize this. As for the reason for the importance of the Net Open Position (NOP) variable, it is almost certain that all banks will use foreign currency items in their asset and liability management activities. All commercial banks in the BUKU level 1, 2, 3 and 4 will definitely be involved in demand deposits as a consequence of continuing financial market activities to safeguard the economic activities of a country. By referring to previous research models from Al-Omar, et.al. (2008), Albulescu (2015), Muhmad & Hashim (2015), Menicucci & Paolucci (2016) and Saputri & Oetomo (2016) then identified four determinants of bank profitability variables, namely CAR, NPL, NOP and LDR. These four variables will then be defined conceptually and formulas referring to banking theory applicable in Indonesia, namely CAMEL (Capital, Management, Asset, Earning and Liquidity). Each variable will function as a bank specific factor that will determine the profitability of the bank both grossly as measured by ROA and net measured by ROE. Results of the test with panel data regression show that the NOP variable is always a determining factor in the ROA and the ROE models. This also provides evidence that NOP is indeed very important in determining ROA and ROE for bankers. With the proven NOP as the main determinant, the argument is supported that commercial banks must pay attention to the foreign exchange items in their asset and liability management. In addition to NOP, NPL is also important for determining ROA and ROE of banks.

Book Review: The Bitcoin Standard: The Decentralized Alternative to Central Banking

Treating bitcoin from the point of view of Austrian economics, Saifedean Ammous' _The Bitcoin Standard_ relates bitcoin to the theory of the market economy as a whole. Bitcoin is not necessarily an alternative to gold, but can function as a global reserve currency and disrupt the role of central banks. Though the book is entertaining and enlightening, there are some aspects of monetary theory, monetary history, and the theory of banking that warrant critique. Overall, Ammous has succeeded in producing a book that clearly demonstrates the possible usefulness of bitcoin under present conditions.

A general equilibrium theory of banks' capital structure

We develop a general equilibrium theory of the capital structures of banks and firms. The liquidity services of bank deposits make deposits a “cheaper” source of funding than equity. In equilibrium, banks pass on part of this funding advantage in the form of lower interest rates to firms that borrow from them. Firms and banks choose their capital structures to balance the benefits of debt financing against the risk of costly default. An increase in the equity of a firm makes its debt less risky and that in turn reduces the risk of the banks who lend to the firm. Hence there is some substitutability between firm and bank equity. We find that firms have a comparative advantage in providing a buffer against systemic shocks, whereas banks have a comparative advantage in providing a buffer against idiosyncratic shocks.

Does Network Economics Allow To Enlighten Banking Organization?

Free banking theory aims at showing that competition is the most efficient system as far as compensation between banking institutions is concerned. Private moneys could then exist simultaneously. Such a point of view seems to be at variance with a general tendency consisting in concentrating payment systems under the authority of a Central Bank. It also contrasts with the creation and development of centralized electronic payment systems resting upon new communication means in order to prevent systemic risk. Four main aspects are thus developed to understand the way monetary systems are organized. The first one consists in examining in what extent central money has to be considered as a specific good, whose existence rests upon the security of transfer mechanisms in which irrevocability appears to be an important element. We demonstrate how the technical organization of inter-bank payment system may limit the potentially disruptive contagion effect of an individual failure leading to collapse of other banks when nothing is done to prevent it. The second section gives a presentation of compensation mechanism resting upon network economics. From the typology established by Katz and Shapiro (1985) we demonstrate that talking about externalities is pertinent whenever a quite small number of agents are involved in the same payment system. We then wonder if one compensation system is preferable or not to several ones. The third section presents a model resting upon the so-called club-goods, i.e. intermediate goods that are neither public goods, nor private goods. We then focus on the club's or network's size owing to the idea according to the utility that an agent receives from its consumption depends on the number of other persons with whom he must share its benefits. We show that pure competition is not an optimal solution but that monopoly can be sub-optimal too for reasons dealing with congestion more than with cost. In the last and conclusive section we present normative considerations concerning compensation systems and the way to regulate them using technical means. We thus demonstrate the need for monetary authorities to have at their disposal several means of action in order to grant the security and durability of the payment systems.

Типологизация рисков экономической безопасности банковской системы и методические подходы к их оценке

The aim of the study is to identify the advantages and limitations of the system of standards used in modern Russia as threshold values of indicators of threats to the economic security of the banking system. During the study, we developed the conceptual apparatus of the theory of economic security management, determined the composition of risks of the sustainable development of the banking system and analyzed indicators of threats to its functioning. In accordance with the goal, we presented interpretation of the conceptual structures “economic security of the banking system” and “banking security”. We carried out scientific research using the gnoseological potential of the theory of economic security, the theory of credit and banking, and the theory of risk management. To solve the research problems, we used methods of economic grouping, economic comparison (comparison), abstract-logical method, etc. The use of these methods made it possible to present a typology of risks and threats to the economic security of the banking system, as well as to analyze the methodological approach adopted by the banking segment of the Russian economy to determine threshold values of economic security indicators based on the use of standards. These standards are based on the accounting of indicators of capital adequacy level and indicators of return on capital. We formulated the advantages and disadvantages of this approach taking into account the interests of owners, managers and clients of banks and non-bank credit organizations. It is necessary to develop a methodology for determining the level of risks of the sustainable development of the banking system, taking into account the increase in the level of uncertainty of environmental factors. The obtained conclusions are a starting point for further study of indicators of threats to the economic security of the banking system and justification of their thresholds.

Between Independence and Impunity: The Theory of Proto-Central Banking After the Crisis of 1720

Between Independence and Impunity: The Theory of Proto-Central Banking After the Crisis of 1720

Economic Security Threat Modelling of a Commercial Bank in a Globalized Economy

In the paper, one develops a set of models for diagnosing threats to the economic security of a commercial bank, which allows improving the quality of decisions forming and making on managing the safe functioning and development of the bank. The bank's economic security research system has been developed, it includes 3 main blocks: research information space creation; assessment and analysis of the security of a commercial bank; generalization, and formation of decisions on the economic security of a commercial bank. The research made it possible to draw an inference of a theoretical, methodological, and applied nature that reflects the solution of the tasks set following the purpose of the study. A set of models has been built with modern tools of economic and mathematical modelling to improve the quality of decisions made to manage the bank's security and reduce the risks of threats. A model for calculating the bank's economic security indicator has been developed, which includes the following main stages: the construction of a structural scheme taking into account the rules of the theory of banking functioning security, then the terms and their membership functions are set for each input and output variable of the fuzzy inference system under consideration. Results of the response surface for the model are shown in the figure on the graphs of the dependence of the bank's economic security indicator on various input components. The paper requires that it is convenient to diagnose the state of economic security of a bank using fuzzy logic, this allows getting a clear quantitative representation of economic security state of the bank, as the indicators used for diagnostics may be indistinct and approximate and this a priori cannot give an adequate result when accurately calculated.

Digital banking in the age of virtual business

The article discusses the main trends of the transition period in the development of the banking sector, the functioning of which is undergoing significant changes in the emerging ecosystem of the digital economy. The necessity of making significant adjustments to the theory of banking is substantiated, the promising directions of moving credit institutions to the virtual space are highlighted, a description is given of new banking products emerging as part of a decentralized management system. The most important aspects of creating a model of a digital bank and the key elements of its business strategy are revealed.

Beyond LIBOR: Money Markets and the Illusion of Representativeness

Money market benchmarks are important indicators for economic agents. They are also crucial for central banks in assessing the functioning of the interest rate channel of the monetary transmission mechanism. However, whereas the unsecured interbank money market conventionally has been seen as encompassing instruments with maturities up to one year, it appears as if it consists of two markets. The ultra-short-term money market (typically just one day) is large, liquid and traded regularly. The term money market (one, three or six months), by contrast, is small, illiquid and rarely traded. This paper explores the feasibility of creating and maintaining a money market benchmark which does not represent an underlying liquid market. From a sociological perspective, it addresses two critical aspects of financial benchmarks: i) that they are related to but separate and distinct from the objects determining them and ii) that they are measurements and as such cannot be bought or sold (Stenfors and Lindo 2018). By doing so, the paper also reflects upon the desire by financial regulators following the LIBOR manipulation scandal to replace estimation-based by transaction-based benchmarks, as well as some challenges and contradictions in conventional central banking theory.