Jochen Mankart, Alexander Michaelides, Spyros Pagratis
We estimate a dynamic structural banking model to examine the interaction between risk-weighted capital adequacy and unweighted leverage requirements, their differential impact on bank lending, and equity buffer accumulation in excess of regulatory minima. Tighter risk-weighted capital requirements reduce loan supply and lead to an endogenous fall in bank profitability, reducing bank incentives to accumulate equity buffers and, therefore, increasing the incidence of bank failure. Tighter leverage requirements, on the other hand, increase lending, preserve bank charter value and incentives to accumulate equity buffers, therefore leading to lower bank failure rates.
{"title":"Bank Capital Buffers in a Dynamic Model","authors":"Jochen Mankart, Alexander Michaelides, Spyros Pagratis","doi":"10.2139/ssrn.2532875","DOIUrl":"https://doi.org/10.2139/ssrn.2532875","url":null,"abstract":"We estimate a dynamic structural banking model to examine the interaction between risk-weighted capital adequacy and unweighted leverage requirements, their differential impact on bank lending, and equity buffer accumulation in excess of regulatory minima. Tighter risk-weighted capital requirements reduce loan supply and lead to an endogenous fall in bank profitability, reducing bank incentives to accumulate equity buffers and, therefore, increasing the incidence of bank failure. Tighter leverage requirements, on the other hand, increase lending, preserve bank charter value and incentives to accumulate equity buffers, therefore leading to lower bank failure rates.","PeriodicalId":405783,"journal":{"name":"PSN: Financial Institutions (Topic)","volume":"96 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123860738","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The credit risk poses a significant exposure not only to the banks but also to the entire economy, which is evident in east Africa financial crises. This is because of the fact that the banking is a vital industry of any economy. There has been a dramatic loss in the banking industry and suddenly announced large losses due to credit exposures that turned sour. This emphasizes the importance of managing the credit risk within the banking sector. Lending is a very profitable activity of the bank since customer pays interest on the amount borrowed. But this profitable activity also has problems which arise as a result of delayance or default in loan repayments which can be so extended and interconnected. The general objective of this study was to evaluate the influence of credit risk monitoring on lending performance of commercial banks in Nairobi County, Kenya. This study used descriptive survey research design and the target population for this study was at two levels. The target population was employees of the 42 commercial banks in operation in Kenya as at 1st January, 2018. Primary data was collected using questionnaires that have both structured and unstructured questions. The researcher analyzed the data using descriptive statistics and logistic regression analysis (binary) was used. The results of the study revealed that the combined effect of credit risks monitoring activities influenced bank lending performance positively. The study concludes that credit risk monitoring activities significantly influence the lending performance of commercial banks and this has affected the performance of the entire sector. The study recommended that KBA and CBK should make it a requirement that borrowers should be submitting reports regularly to the bank on changes in the value of collateral which was used to acquire loan.
{"title":"Influence of Credit Risk Monitoring on Lending Performance of Commercial Banks in Nairobi County, Kenya","authors":"John Karanja, J. Bichanga, G. Kingoriah","doi":"10.2139/ssrn.3235582","DOIUrl":"https://doi.org/10.2139/ssrn.3235582","url":null,"abstract":"The credit risk poses a significant exposure not only to the banks but also to the entire economy, which is evident in east Africa financial crises. This is because of the fact that the banking is a vital industry of any economy. There has been a dramatic loss in the banking industry and suddenly announced large losses due to credit exposures that turned sour. This emphasizes the importance of managing the credit risk within the banking sector. Lending is a very profitable activity of the bank since customer pays interest on the amount borrowed. But this profitable activity also has problems which arise as a result of delayance or default in loan repayments which can be so extended and interconnected. The general objective of this study was to evaluate the influence of credit risk monitoring on lending performance of commercial banks in Nairobi County, Kenya. This study used descriptive survey research design and the target population for this study was at two levels. The target population was employees of the 42 commercial banks in operation in Kenya as at 1st January, 2018. Primary data was collected using questionnaires that have both structured and unstructured questions. The researcher analyzed the data using descriptive statistics and logistic regression analysis (binary) was used. The results of the study revealed that the combined effect of credit risks monitoring activities influenced bank lending performance positively. The study concludes that credit risk monitoring activities significantly influence the lending performance of commercial banks and this has affected the performance of the entire sector. The study recommended that KBA and CBK should make it a requirement that borrowers should be submitting reports regularly to the bank on changes in the value of collateral which was used to acquire loan.","PeriodicalId":405783,"journal":{"name":"PSN: Financial Institutions (Topic)","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-08-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132265127","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines how the advent and the expansion of peer-to-peer(P2P) lending platforms affect financial stability, especially the soundness and the stability of banks and the banking system. We analyze the risks of various bank failures by comparing two cases of competition, a benchmark case in which only banks exist and no P2P lending platforms exist and the case in which the credit market is segmented and a P2P lending platform operates only in the low-credit score consumers’ markets. Our findings are as follows: (i) the insolvency risk of individual banks increases when they compete with the P2P lending platform in the low-credit score consumers’ markets, but (ii) the illiquidity risk of individual banks is reduced; and (iii) the systemic risk in the banking system triggered by individual defaults is also reduced. Our results imply that if the role of the P2P platforms and banks are properly differentiated so that P2P lending platforms focus on the provision of credits in the low-credit score consumers’ markets, and the banks concentrate more on high-credit score consumers’ markets and protected deposits business, the impact of spread of P2P lending platforms on the current banking system’s stability may be limited.
{"title":"Peer-to-Peer Lending Platforms and the Stability of the Banking System","authors":"Jooyong Jun, E. Yeo","doi":"10.2139/ssrn.3221966","DOIUrl":"https://doi.org/10.2139/ssrn.3221966","url":null,"abstract":"This study examines how the advent and the expansion of peer-to-peer(P2P) lending platforms affect financial stability, especially the soundness and the stability of banks and the banking system. We analyze the risks of various bank failures by comparing two cases of competition, a benchmark case in which only banks exist and no P2P lending platforms exist and the case in which the credit market is segmented and a P2P lending platform operates only in the low-credit score consumers’ markets. Our findings are as follows: (i) the insolvency risk of individual banks increases when they compete with the P2P lending platform in the low-credit score consumers’ markets, but (ii) the illiquidity risk of individual banks is reduced; and (iii) the systemic risk in the banking system triggered by individual defaults is also reduced. Our results imply that if the role of the P2P platforms and banks are properly differentiated so that P2P lending platforms focus on the provision of credits in the low-credit score consumers’ markets, and the banks concentrate more on high-credit score consumers’ markets and protected deposits business, the impact of spread of P2P lending platforms on the current banking system’s stability may be limited.","PeriodicalId":405783,"journal":{"name":"PSN: Financial Institutions (Topic)","volume":"70 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126241117","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The purpose of this article is to discuss the proper accounting for stock-based compensation. In addition, issues related to other types of financial instruments, such as convertible securities, warrants, and contingent shares, including their effects on reporting earnings per share.
{"title":"Dilutive Securities and Earnings Per Share","authors":"Angel Pramitta Yulianda, S. Thió, Marselinus Asri","doi":"10.2139/ssrn.3210219","DOIUrl":"https://doi.org/10.2139/ssrn.3210219","url":null,"abstract":"The purpose of this article is to discuss the proper accounting for stock-based compensation. In addition, issues related to other types of financial instruments, such as convertible securities, warrants, and contingent shares, including their effects on reporting earnings per share.","PeriodicalId":405783,"journal":{"name":"PSN: Financial Institutions (Topic)","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124608275","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper contains a testing framework for the reliability of systemic risk measurement of banks, using the three leading market-based measures of systemic risk. We test whether the difference within the same category and across dfferent categories of systemic risk of individual banks is signifcant. We find that in general the systemic risk categories defined by the Financial Stability Board are dfferent from those constructed in a full pairwise comparison approach based on the market measures. Moreover, these dfferences were more pronounced during episodes of high market turbulence.To account for model risk we introduce a more robust ranking method based on nonparametric confidence intervals. We show that there is a large number of banks with overlapping confidence intervals of their market-based systemic risk measures.Further, similarity measures indicate that the scoring based rankings are not perfectly aligned with rankings produced by market based systemic risk measures.
{"title":"Testing the Systemic Risk Differences in Banks","authors":"Esa Jokivuolle, R. Tunaru, Davide Vioto","doi":"10.2139/ssrn.3189313","DOIUrl":"https://doi.org/10.2139/ssrn.3189313","url":null,"abstract":"This paper contains a testing framework for the reliability of systemic risk measurement of banks, using the three leading market-based measures of systemic risk. We test whether the difference within the same category and across dfferent categories of systemic risk of individual banks is signifcant. We find that in general the systemic risk categories defined by the Financial Stability Board are dfferent from those constructed in a full pairwise comparison approach based on the market measures. Moreover, these dfferences were more pronounced during episodes of high market turbulence.To account for model risk we introduce a more robust ranking method based on nonparametric confidence intervals. We show that there is a large number of banks with overlapping confidence intervals of their market-based systemic risk measures.Further, similarity measures indicate that the scoring based rankings are not perfectly aligned with rankings produced by market based systemic risk measures.","PeriodicalId":405783,"journal":{"name":"PSN: Financial Institutions (Topic)","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131663096","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Banking industry dominates the financial sector of Bangladesh with an approximate share of 74% of the total intermediation. In recent years, this industry is at high risk due to supervision gaps, overcapacity and market distortions. Therefore, measuring the efficiency of the banking industry is critically important to identify poor banks and bring stability by concentrating on their performance. This study employs single stage stochastic frontier analysis (SFA) to measure the cost efficiency in the Bangladeshi banking sector during the 2011-2015 period. Five different stochastic models are used across the 35 sample banks. Evidence suggests that the mean cost efficiency found in the Bangladeshi banking sector is 88.50%. The mean efficiency is lower among the state-owned banks than conventional (private) commercial banks and Islamic Sariah banks. From the analysis, it seems that there is a low technological advancement in the banking sector during 2011-2015. Further, the analysis indicates that non-performing loans have a significant effect in reducing the overall cost efficiency among the banks.
{"title":"Cost Efficiency of Banking Sector of Bangladesh: Evidence Using the Stochastic Frontier Analysis","authors":"Hashibul Hassan, Mahmudul Hassan","doi":"10.2139/ssrn.3183196","DOIUrl":"https://doi.org/10.2139/ssrn.3183196","url":null,"abstract":"Banking industry dominates the financial sector of Bangladesh with an approximate share of 74% of the total intermediation. In recent years, this industry is at high risk due to supervision gaps, overcapacity and market distortions. Therefore, measuring the efficiency of the banking industry is critically important to identify poor banks and bring stability by concentrating on their performance. This study employs single stage stochastic frontier analysis (SFA) to measure the cost efficiency in the Bangladeshi banking sector during the 2011-2015 period. Five different stochastic models are used across the 35 sample banks. Evidence suggests that the mean cost efficiency found in the Bangladeshi banking sector is 88.50%. The mean efficiency is lower among the state-owned banks than conventional (private) commercial banks and Islamic Sariah banks. From the analysis, it seems that there is a low technological advancement in the banking sector during 2011-2015. Further, the analysis indicates that non-performing loans have a significant effect in reducing the overall cost efficiency among the banks.","PeriodicalId":405783,"journal":{"name":"PSN: Financial Institutions (Topic)","volume":"170 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123050678","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent regulatory initiatives such as the European Deposit Insurance Scheme propose a change in the coverage and backing of deposit insurances. An assessment of these proposals requires a thorough understanding of what drives depositors' withdrawal decisions. We show that Google searches for 'deposit insurance' and related strings reflect depositors' fears and help to predict deposit shifts in the German banking sector from private banks to fully guaranteed public banks. After the introduction of blanket state guarantees for all deposits in the German banking system this fear driven reallocation of deposits stopped. Our findings highlight that a heterogeneous insurance of deposits can lead to a sudden, fear induced reallocation of deposits endangering the stability of the banking sector even in absence of redenomination risks.
{"title":"Fear, Deposit Insurance Schemes, and Deposit Reallocation in the German Banking System","authors":"Falko Fecht, Stefan Thum, P. Weber","doi":"10.2139/ssrn.3180107","DOIUrl":"https://doi.org/10.2139/ssrn.3180107","url":null,"abstract":"Recent regulatory initiatives such as the European Deposit Insurance Scheme propose a change in the coverage and backing of deposit insurances. An assessment of these proposals requires a thorough understanding of what drives depositors' withdrawal decisions. We show that Google searches for 'deposit insurance' and related strings reflect depositors' fears and help to predict deposit shifts in the German banking sector from private banks to fully guaranteed public banks. After the introduction of blanket state guarantees for all deposits in the German banking system this fear driven reallocation of deposits stopped. Our findings highlight that a heterogeneous insurance of deposits can lead to a sudden, fear induced reallocation of deposits endangering the stability of the banking sector even in absence of redenomination risks.","PeriodicalId":405783,"journal":{"name":"PSN: Financial Institutions (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125701266","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sayyed khawar Abbas, H. Hassan, Jawad Asif, Bilal Ahmed, F. Hassan, Syed Salman Haider
The introduction of mobile banking facility has enabled customers to carry out banking transactionswith the use of smartphones and other handheld devices from anywhere. It has become a luxurious and exclusive method of online payments. The recent growth of telecommunication sector and a tremendous increase in mobile USAge has opened new doors for sparking future of banking sector industry. The following research is aimed to find out the mobile banking adoption attitudes with the integration of TTF, UTAUT,and ITM models.
{"title":"Integration of TTF, UTAUT, and ITM for Mobile Banking Adoption","authors":"Sayyed khawar Abbas, H. Hassan, Jawad Asif, Bilal Ahmed, F. Hassan, Syed Salman Haider","doi":"10.22161/IJAEMS.4.5.6","DOIUrl":"https://doi.org/10.22161/IJAEMS.4.5.6","url":null,"abstract":"The introduction of mobile banking facility has enabled customers to carry out banking transactionswith the use of smartphones and other handheld devices from anywhere. It has become a luxurious and exclusive method of online payments. The recent growth of telecommunication sector and a tremendous increase in mobile USAge has opened new doors for sparking future of banking sector industry. The following research is aimed to find out the mobile banking adoption attitudes with the integration of TTF, UTAUT,and ITM models.","PeriodicalId":405783,"journal":{"name":"PSN: Financial Institutions (Topic)","volume":"77 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132677570","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
What role does polyarchy (and thus increased democracy) play in aiding the development of an international financial centre? We find support for decades of theorising that some jurisdictions use autocracy (less polyarchy) to help grow out their financial centres. We look at the growth of these financial centres as the extent to which they attract more funds from abroad (cross-border bank liabilities). Polyarchy decreases as other international financial centres’ centrality in the global financial centre network expands. Polyarchy increases in most jurisdictions over time because some financial centres rely on increasingly polyartic governance as a way to foster financial innovation through increased participation by non-previously powerful sectors. Namely, the growth of an international financial centre’s centrality in global financial networks relies on tapping down on polyarchy. Yet, such polyarchy – when used by some very central jurisdictions to remain central – “spreads.” We model such a relationship between polyarchy and centrality in the global financial network, describing even the most complex quantitative analysis in a way a non-specialist can understand. These results could impact decisions ranging from Brexit to Hong Kong’s autonomy in its post-2047 period.
{"title":"Does Political Participation Change a Financial Centre’s Competitiveness?","authors":"Bryane Michael, B. Candelon","doi":"10.2139/ssrn.3723187","DOIUrl":"https://doi.org/10.2139/ssrn.3723187","url":null,"abstract":"What role does polyarchy (and thus increased democracy) play in aiding the development of an international financial centre? We find support for decades of theorising that some jurisdictions use autocracy (less polyarchy) to help grow out their financial centres. We look at the growth of these financial centres as the extent to which they attract more funds from abroad (cross-border bank liabilities). Polyarchy decreases as other international financial centres’ centrality in the global financial centre network expands. Polyarchy increases in most jurisdictions over time because some financial centres rely on increasingly polyartic governance as a way to foster financial innovation through increased participation by non-previously powerful sectors. Namely, the growth of an international financial centre’s centrality in global financial networks relies on tapping down on polyarchy. Yet, such polyarchy – when used by some very central jurisdictions to remain central – “spreads.” We model such a relationship between polyarchy and centrality in the global financial network, describing even the most complex quantitative analysis in a way a non-specialist can understand. These results could impact decisions ranging from Brexit to Hong Kong’s autonomy in its post-2047 period.","PeriodicalId":405783,"journal":{"name":"PSN: Financial Institutions (Topic)","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122296277","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the impact of market competition on the stability of Islamic and conventional banks in countries where these banks operate alongside one another. To investigate this issue, we use a sample of 100 Islamic and 390 conventional banks from 19 countries. Our baseline result shows that competition in a dual market erodes banks' stability. The heightened competitive pressure in a dual market encourages banks to engage in excessive risk-taking that can jeopardize their stability. However, the effect of competition is missing for Islamic banks, suggesting their superiority in having religious clients. Although our overall results support the 'competition-fragility' hypothesis, we find that competition can be beneficial for banks, especially at a low to medium competition level. Last, we also find that the adverse impact of competition can be reduced by having high capitalization, especially in the case of a conventional bank. Some policy implications are discussed in the paper.
{"title":"Competition in Dual Markets: Implications for Banking System Stability","authors":"T. Risfandy, Amine Tarazi, Irwan Trinugroho","doi":"10.2139/ssrn.3158510","DOIUrl":"https://doi.org/10.2139/ssrn.3158510","url":null,"abstract":"This paper examines the impact of market competition on the stability of Islamic and conventional banks in countries where these banks operate alongside one another. To investigate this issue, we use a sample of 100 Islamic and 390 conventional banks from 19 countries. Our baseline result shows that competition in a dual market erodes banks' stability. The heightened competitive pressure in a dual market encourages banks to engage in excessive risk-taking that can jeopardize their stability. However, the effect of competition is missing for Islamic banks, suggesting their superiority in having religious clients. Although our overall results support the 'competition-fragility' hypothesis, we find that competition can be beneficial for banks, especially at a low to medium competition level. Last, we also find that the adverse impact of competition can be reduced by having high capitalization, especially in the case of a conventional bank. Some policy implications are discussed in the paper.","PeriodicalId":405783,"journal":{"name":"PSN: Financial Institutions (Topic)","volume":"47 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-03-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124514252","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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