Universal Banks Research Articles

Nationalisation, Corporatisation, Disinvestment and Privatisation: The Four Stages of Engagement with the Markets in the Context of Financial Inclusion

The article looks at four phases of state engagement in financial inclusion. The first phase of involvement is classified as nationalisation, where the state takes control of both the strategic and operational control of a significant part of the market. The second phase is where the state can test the viability by retaining control but distinguishing between the departmental approach and a special purpose vehicle, which works on market principles. The third phase comes when the state is convinced that the market principles operate and therefore a part of the pie could be occupied by the market players, and the final phase is where the state can theoretically operate through policy and regulation without active participation in the market. The article looks at the evolution of the Indian banking sector through these four phases and concludes that we have passed the nationalisation phase. The state-owned Regional Rural Banks and the entire cooperative and community-owned structures are in the corporatisation phase that needs recapitalisation backstopping from time to time. The state-owned commercial banks have reached the disinvestment phase, and commercial banking in India, including the universal banks and the small finance banks, is in the privatisation phase. JEL Codes: D63, G18, G20, G21, G28, L32, L38

Do Bank Governance Mechanisms and Financial Report Lag Affect Audit Quality?

ABSTRACT In the aftermath of banking failures in Africa, the survival of firms has thus been placed with the application of good corporate governance practice and the oversight role of internal and external auditors. This study examines whether audit quality is related to corporate board of directors and financial reporting timeliness in the context of developing countries. Using sample data from 21 universal banks in Ghana and 31 commercial banks in Kenya for the periods 2010 to 2019. The study employs the Generalized Least Square(GLS), using fixed effect to estimate the relationships. The empirical results document that board size, average 9, and board independence, 59% on average, increase audit quality in Africa. However, the relationship between board gender and audit quality is not significant. Financial report lag is not significant to audit quality in Africa. However, financial report lag in Kenya is negative and significant to quality audit. Our findings recommend that commercial banks in Africa should implement policies that would increase the size of their boards and the number of independent directors to enhance maximum benefits from good corporate governance practices.

Antecedents of Compliance with Anti-Money Laundering Regulations in the Banking Sector of Ghana

This study examines factors influencing Ghanaian banks’ compliance with anti-money laundering (AML) legislation. Drawing upon institutional, compliance, and dynamic capability theories, the study identifies the interplay of organisational, regulatory, and employee factors influencing compliance outcomes. A mixed methods approach was used to collect data from 23 universal banks, 9 local and 14 foreign, in Ghana, focusing on experienced managers and employees in risk, legal, operations, compliance, and business development departments. The findings show that employee characteristics like due diligence and moral involvement have a positive relationship with compliance with AML regulations; however, contrary to expectations, effective AML/CFT programs did not significantly impact banks’ adherence to these regulations. The association between moral engagement, an innovative culture, and AML compliance is weakened by normative power and an innovative culture acting as negative moderators. This study contributes empirical evidence to the literature on AML compliance in emerging markets and offers practical implications for policymakers, regulators, and banking professionals seeking to boost regulatory effectiveness and mitigate financial crime risks. This study provides a foundation for targeted interventions and strategic initiatives aimed at strengthening the AML regulatory landscape in Ghana and other countries.

THE The impact of capital adequacy and corporate governance on financial performance of universal banks in Ghana

THE The impact of capital adequacy and corporate governance on financial performance of universal banks in Ghana

Banking on innovation: Listed and non-listed equity investing, evidence from société générale de Belgique, 1850–1934

Société Générale de Belgique was the world's first universal bank. It pioneered another innovation: investing in non-listed equity. We use hand-collected data to show that the bank earned significant positive risk-adjusted returns from 1850 to 1934. This offset its flat return on the listed equity portfolio and underperforming bond portfolio. Other Belgian universal banks followed this strategy. As such, we argue that this innovation laid the groundwork for other financial institutions to invest in listed and non-listed assets.

Assessing the Nexus between Social Responsibility, Environmental Initiatives, and Profitability: A Sustainable Finance Perspective of the Universal Banks in the Philippines

This study examines the impact of social responsibility and environmental projects on the profitability of 10 Universal Banks in the Philippines within the context of the Bangko Sentral ng Pilipinas (BSP) through sustainable finance framework. The research adopts a quantitative approach and analyzes data from 2019 to 2021 using exploratory data analysis and regression analysis was used to capture any evolving trends or shifts in the relationship between banks' engagement in these projects and their financial performance. The study found that the number of social responsibility and environmental projects undertaken by Universal Banks did not exhibit a statistically significant impact on their profitability during this period (2019-2021). However, the study emphasizes the broader value of these initiatives, as they contribute to sustainability, promote corporate social responsibility, and align with global trends towards a more environmentally conscious and socially responsible business landscape. The research suggests that banks should continue to invest in social and environmental projects for their substantial societal and ecological impacts, aligning with the evolving needs and expectations of customers, investors, and the broader community.

Universal banking powers and liquidity creation

Universal banking powers and liquidity creation

Do total quality management and external factors matter? The effect of innovation behaviour on innovation performance in banks

PurposeAlthough total quality management (TQM) is an innovative management philosophy, how it connects innovative behaviour (INB) to innovation performance (INP) has gone unnoticed. Also, the external factors (technological turbulence [TUR], competitive intensity [CMP], market dynamism [MKD] and government regulation [GOV]) under which the INB–TQM connection may grow are yet to be understood. In spite of the various evolutions that have occurred in the banking industry, there remains a necessity to enhance the quality of service offered to clients. This paper aims to address these issues in the total quality management literature.Design/methodology/approachThis study constructs and analyses a research framework by analysing the replies of 260 executives in senior and intermediate positions across 21 quality-certified universal banks in Ghana, using the Smart PLS methodology.FindingsTQM played a partial mediating role between INB and INP (variance accounted for = 46.85%, p = 0.000). TUR (β = 0.023, p = 0.000), CMP (β = 0.043, p = 0.000), MKD (β = 0.056, p = 0.000) and GOV (β = 0.068, p = 0.000) positively and significantly moderated the INB–TQM connection.Research limitations/implicationsFuture research may examine the proposed framework in various environments and sectors.Practical implicationsPractical insights for industry players in the sector are discussed.Originality/valueTo the best of the authors’ knowledge, this study is the first to show how innovation serves both as an antecedent and consequence of TQM. It is also the first to explicate the boundary conditions under which the INB–TQM relationship may flourish.

Business Models of Ukrainian Banks: the Impact of the Revolution of Dignity, the COVID–19 Pandemic, and Russia’s Military Aggression

The purpose of the article is to identify key banking activity models in Ukraine and show how they changed under the influence of the Revolution of Dignity, the COVID–19 pandemic, and the imposition of martial law. The proposed method uses cluster analysis of the main indicators for banking activity (concerning assets, liabilities and income) based on Ward’s agglomerative hierarchical clustering algorithm and the Tau index in the NbClust package as the criterion for evaluating the optimal number of clusters. The research covers all Ukrainian banks, spanning the period 2013–2022. In 2014 (after the Revolution of Dignity), the actions of the National Bank of Ukraine (NBU) had a positive impact on the models of Ukrainian banks: there was no opaque model of banks and banking models became more transparent and more resilient to financial shocks. Between 2021 and 2022, five banking models were identified: universal banks, wholesale funding banks, corporate‑investment banks, retail banks, and commission banks. The negative impact of COVID–19 on the Ukrainian economy was reflected in all banking models by the following: (1) a significant increase in the role of securities in assets, which was caused by a decrease in lending due to an increase in their riskiness; (2) the use of central bank funds to liabilities management, which was evidence of a deterioration in financing conditions in the deposit market. The following main changes in Ukraine’s banking system at the end of 2022 (during the war) were identified: (1) a decrease in the number of banks that mainly use funds from the NBU to support their activities; (2) the closure of only four banks by the NBU (including two with majority shareholders from Russia) during the year; (3) an increase in the share of the non‑government debt securities portfolio in banks’ assets; (4) declines in ROE and ROA for all banking models during the war, and three banking models became unprofitable; (5) the significantly higher share of non‑performing loans in the credit portfolio for all banking models, especially for the retail banking model. The value‑added of this research is the analysis of how banking models in Ukraine have changed at the micro level (reflected in the financial statements) inter alia in wartime.

How Does Cashless Payment Influence Consumer Spending Behaviour

India, like many societies, recognizes the need to move away from cash-based transactions. The decision to prioritize this transition nationally is driven by complex factors, including the challenges associated with cash circulation such as tracing difficulties, inconvenience, high printing costs, and the need for frequent currency replacements. These challenges are more pronounced in India compared to other countries. The transition aims to eliminate frictions by removing intermediaries, directly transferring benefits to beneficiaries, ensuring universal banking access, and reducing corruption. A comprehensive plan has been developed to propel India's 1.3 billion population towards a "paperless," "people-less," "frictionless," and "cashless" banking environment. The positive response from the Indian populace indicates potential success for the initiative. A cashless economy is expected to boost GDP through e-commerce and digital payments, enhancing economic openness and credibility, attracting more investments. This move aligns with Prime Minister Modi's vision of Digital India and promises significant success in the future.

The financial inclusion agenda: Examining the role of conventional banks in deepening access to formal credit

Using a unique district-level panel dataset, we investigate the effect of banking system penetration on financial inclusion in Ghana. To purge potential endogeneity bias in the underlying relationship, we exploit a change in the policy environment of the Ghanaian banking system to instrument for bank branch expansion. We show, first, that the switch from the compartmentalized system of banking to the universal banking system in Ghana has resulted in an expansion of banks’ branch network, which has benefited hitherto financially less developed districts. Second, our instrumental variable evidence suggests that banking system penetration promotes financial inclusion—notably, access to bank credit and to formal credit. The results of this paper provide important insights into the role of policy in enhancing financial inclusion.

Bank capital and liquidity creation in Sub-Saharan Africa: the role of quality institutions

PurposeThis study investigates the relationship between bank capital and liquidity creation and further examines the effect that institutional quality has on this relationship in Sub-Saharan Africa (SSA).Design/methodology/approachThe data comprise 41 universal banks in nine SSA countries from 2010 to 2022. The study employs the two-step system generalized methods of moments and further uses alternative estimators such as the fixed-effect and two-stage least squares methods.FindingsThe empirical results show that bank capital has a direct positive and significant effect on liquidity creation. In addition, the positive effect of bank capital on liquidity creation is enhanced, particularly in a strong institutional environment. The results imply that nonconstraining capital regulatory policies bolster bank solvency, improve risk-absorption capacity and increase liquidity creation.Practical implicationsThis study has several policy implications. First, it provides empirical evidence on the position of banks in SSA on the financial fragility and risk-absorption hypothesis of bank capital and liquidity creation debates. This study shows that the effect of bank capital on liquidity creation in SSA countries is positive and supports the risk-absorption hypothesis. Second, this study highlights that a country's quality institutions can complement bank capital to increase liquidity creation. In addition, this study highlights that nonconstraining capital regulatory policies will bolster bank solvency, improve risk-absorption capacity and increase liquidity creation.Originality/valueThe novelty of this study is that it introduces the country's quality institutional environment into bank capital and liquidity creation links for the first time in SSA.

Enhancing Financial Stability in Ghana's Universal Banking Sector: A Governance Perspective and Practical Insights

Purpose: This study investigates the impact of corporate governance structures on financial distress within the universal banking sector in Ghana.
 Methodology: The research systematically gathers data from 19 banks spanning 10-year period. Financial distress indicators were extracted from financial statements, while corporate governance measures were obtained from annual reports. The data was analysed through regression analysis and counterfactual analysis through an endogenous switching regression model.
 Findings: Key findings reveal that profitability, liquidity, and effective risk management are critical factors influencing financial distress in both strong and weak governance environments. The results also showed that improving the strength of Corporate Governance has a positive influence on Altman Z Scores, contributing to a potential reduction in financial distress.
 Unique contributor to theory, policy and practice: The study provides valuable insights for policymakers, regulators, and banking institutions in Ghana, emphasizing the need to prioritize and strengthen governance practices for a resilient banking sector. Limitations include data unavailability, reliance on unbalanced panel data, and a narrow focus on board characteristics.

Consequential effects of leading technology-driven offensive strategy in a universal bank

Consequential effects of leading technology-driven offensive strategy in a universal bank

Consequential effects of leading technology-driven offensive strategy in a universal bank

Consequential effects of leading technology-driven offensive strategy in a universal bank

Pradhan Mantri Jan Dhan Yojana and Financial Inclusion of Female Domestic Workers in Mumbai

The Pradhan Mantri Jan Dhan Yojana, launched in 2014, is an initiative toward 'Universal Banking Access,' to ensure that every household in the country has access to basic banking services. The paper discusses the effect of the PMJDY on the 'financial inclusion' of female domestic workers in Mumbai, who remain on the periphery of regular banking services. The study considers financial literacy, access to financial services, and the ability to make good decisions as metrics of financial inclusion based on a cross-sectional survey conducted among the population. Though the majority of the respondents have opened bank accounts either under PMJDY or traditional banking systems, financial literacy remains a huge challenge to the effective utilization of those accounts. While there is an increase in savings and a shift towards more formal means of financial management, low confidence in managing financial matters and social barriers get in the way of the empowerment of such women. Special interventions in terms of targeted financial literacy programs and social interventions are needed to fill such gaps if economic stability and autonomy are to be enriched for urban female domestic workers, as seen in Mumbai.

The recapitalisation of universal banks and SME development in Ghana

The recapitalisation of universal banks and SME development in Ghana

The recapitalisation of universal banks and SME development in Ghana

The recapitalisation of universal banks and SME development in Ghana

The effect of bank-specific dynamics on profitability under changing economic conditions: Evidence from Ghana

Analysts continue to demand explanations for the continuous flow of depositors’ and investors’ funds to persistently underperforming banks, while universal banking is premised on the ability to outperform the market. This study examines the effect of bank-level factors on the profitability of banks under changing economic conditions, using a dynamic panel system Generalized Method of Moments (GMM) technique for panel data collected from 18 universal banks in Ghana. The data collection period was from 2007 to 2021. The analysis revealed that lagged return on assets, capital adequacy ratio, and deposit to total asset ratio have a positive influence on bank profitability, whereas lagged return on equity, bank size, expenditure, and asset quality negatively impact profitability. While the effect of these variables on profitability is expected considering the literature, the evidence obtained for asset quality is inconsistent with the explanations in the literature as an increase in asset quality is expected to drive an impressive trend in profitability. Furthermore, a negative relationship was found to exist between economic growth and bank performance when economic expansion exerts a deteriorating effect on the returns on bank assets. This can be linked to the dispersion of investors’ and customers’ funds to other investments, which limits the amount of funds available to the banks to grant credits for interest income. Based on the findings, it can be concluded that bank-specific dynamics adapt to changes in economic conditions which can be explained by the normative guidelines of the Adaptive Market Hypothesis.

Neuer Aufbruch ins globale Bankgeschäft: Die Personal- und Steuerungsprobleme der Deutschen Bank beim Einstieg ins internationale Investmentbanking

Abstract The article examines the genesis, perception and handling of the staffing and governance problems of Deutsche Bank, which stemmed from its entry into international investment banking in the mid-1980s and which have remained virulent into the bank’s recent past. Why was it not possible to prevent the blatant, extremely costly and permanently reputation-damaging breaches of rules by many investment bankers in this business area? An important explanatory factor seems to be the only half-hearted adherence to the concept of a global universal bank with integrated investment banking, while investment banking – which expanded strongly through the acquisitions of Morgan Grenfell (1989) and Bankers Trust (1998) – was de facto granted extensive autonomy within the group and a continuous but not precisely recorded transfer of resources by the parent company.