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The study verifies the relationship between the audit fee and reporting sentiment in the banking industry. The research adopts panel data from a sample of 490 commercial banks across 43 US states for years 2000-2016. The results indicate that the audit fee is affected by the sentiment and is subject to time development. The research shed light on the nature of auditor relations in the specific economic context of the US. The results add to the science new and robust evidence on attitudes towards asymmetry friction in the supervised market. The Financial Authorities might benefit from the presented results while preselecting the entities for on-site inspection.

Research background: Motivation for this study is the rapid development of conglomerate banking stimulated by the synergy between the traditional and parallel investment activity of banks before the 2007–2008 financial crisis. Existing studies do not answer the question about the positive influence of diversification on bank stability. They state that the combination of lending and non-interest income allows benefits to be derived from risk diversification. However, on the other hand they emphasise that non-interest and interest incomes are strongly correlated, which does not bring positive effects from diversification. Purpose: Scientific problem aimed to be solved is to verify how the diversification of activities in commercial banks into non-interest products (i.e. trading, securities-based investment activities, and derivatives) brings positive effects such as income stabilization and risk reduction. We examine the implications of banks’ risk adjusted ROA that manifest themselves as spreading and growing instability. Research methodology: We use a panel regression model, through a dataset that covers 777 international banks, in 91 selected countries of the world, spanning the period of 1996–2015. Results: We document that the diversification of a bank’s operations is varied and depends on a bank’s characteristics, including asset size. Novelty: The study contributes to the on-going discussion on the separation of retail and investment banks with a view to enhancing their profit stability.

This chapter examines the relation between the changes in the Polish banking sector and European Union (EU) membership. It identifies both similarities and differences among the group of countries which are seemingly homogenous in respect of their banking sector’s efficiency. The chapter discusses key developments in the Polish banking sector following EU accession. It presents a literature review regarding the integration process and banking efficiency. The chapter describes the methodology and look at the data. Major changes occurred in the ownership structure of the Polish banking sector. In terms of assets, banks with a majority of foreign capital dominated in the banking sector in Poland in 2004–2016. The European Union Single Market creates a place without internal regulatory obstacles to financial services and the movement of capital. The objective of maximizing profits not only requires that financial services be produced at a minimum cost, but it also demands that revenues be maximized.

The most recent financial crisis has shown, however, that this form of investment may entail costs: although diversification reduces the bankruptcy chances for an individual bank. This study seeks to verify the importance of non-traditional banking activity for the financial stability of banks, using a sample of 1430 banks on a global scale, in 1995–2015. In particular, it verifies the fluctuations of the stability of commercial banks in the context of their asset levels. The study results have shown that the diversification of commercial banks’ income into non-traditional activities adversely affects their stability, with varying intensity for the different groups of asset volume. The study contributes to the ongoing discussion on the separation of retail and investment banks with a view to enhancing their resilience to losses and bankruptcy risk.

While contemporary systemic risk takes many forms, usually all kinds of wellknown risks overlap in time and space. Considering leverage undertaken by banksas a potential source of systemic risk, the author attempts to discover the factorsintensifying this phenomenon. The article presents the results of a study on datafrom individual banks in 31 European states for the period 2000–2010. The primaryobjective of this study is to verify the diversification of sources of systemicrisk in the banking sectors of developing and developed countries. Evidence ofheterogeneity of systematic risk’s determinants in European countries is provided.

We measure a systemic risk faced by European banking sectors using the CoVaR measure. We propose the conditional value-at-risk for measuring a spillover risk which demonstrates the bilateral relation between the tail risks of two financial institutions. The aim of the study is to estimate the contribution systemic risk of the bank i in the analyzed banking sector of a country in conditions of its insolvency. The study included commercial banks from 8 emerging markets from Europe, which gave a total of 40 banks, traded on the public market, which provided a market valuation of the bank’s capital. The conclusions are that the CoVaR seems to be a better measure for systemic risk in the banking sector than the VaR, which is more individual. And banks in developing countries in Europe do not provide significant risk for the banking sector as a whole. But it must be taken into account that some individuals that may find objectionable. Our results hence tend to a practical use of the CoVaR for supervisory purposes.

The paper presents the concept of a sustainable bank by developing a framework based on performance of different business models. Traditional banking and investment activities, such as trading in securities or securitization, may reduce the risk of commercial banks and provide an attractive approach to sustainable finance. Using the method of assessing the performance of a bank, the study appraises the degree of sustainability of the bank from different stakeholders&rsquo, points of view. The aim of the article is to verify the research question: how does diversification of traditional activities of commercial banks affect their sustainability? The analysis has been extended by the importance of country-specific and macroeconomic factors. The survey was conducted on 368 commercial banks from European countries, using data from the period 1998&minus, 2015. The study contributes to the ongoing discussion on the recognized profitability and sustainability nexus as an important part of sustainable finance that may be a powerful solution to financial crises.

The goal of this study is to identify empirically how country-level development, taking into account the financial and macroeconomic environment, affect the risk profiles of the banking sector in Europe. Through a dataset that covers 3,399 European banks spanning the period 1996–2011, and the methodology of panel regression, the empirical findings document the heterogeneity of banking risk determinants. I examine the implications of bank leverage that manifest itself as spreading and growing instability. The study contributes to and combines the different strands of literature and understanding of the importance of the links between the variables. It also contributes to the literature by focusing on a group of countries from Central and Eastern Europe and the Commonwealth of Independent States that have not been studied before. The extended model provides a causal link between risk in the banking sector and the growth of the financial market and macroeconomy. I apply four measures of country-level development that are available in previous studies: share of foreign ownership in the banking sector; the financial freedom index; the real growth rate; and stock market capitalization. Using these measures, I obtain different results which highlight the fact that the effect of macroeconomic and financial development on banking sector risk-taking is ambiguous.

The aim of this article is to identify systemically important banks on a European scale, in accordance with the criteria proposed by the supervisory authorities. In this study we discuss the analytical framework for identifying and benchmarking systemically important financial institutions. An attempt to define systemically important institutions is specified their characteristics under the existing and proposed regulations. In a selected group of the largest banks in Europe the following indicators ie.: leverage, liquidity, capital ratio, asset quality and profitability are analyzed as a source of systemic risk. These figures will be confronted with the average value obtained in the whole group of commercial banks in Europe. It should help finding the answer to the question, whether the size of the institution generates higher systemic risk? The survey will be conducted on the basis of the financial statements of commercial banks in 2007 and 2010 with the available statistical tools, which should reveal the variability of risk indicators over time. We find that the largest European banks were characterized by relative safety and without excessive risk in their activities. Therefore, a fundamental feature of increased regulatory limiting systemic risk should understand the nature and sources of instability, and mobilizing financial institutions (large and small) to change their risk profile and business models in a way that reduces the instability of the financial system globally.Length: 32 pages

Article aims to demonstrate the significant impact of dynamics of the relationship between financial intermediaries on the level of market volatility. Particularly important are the growing share of the links between hedge funds and other financial institutions. In order to demonstrate the dynamic test was presented Granger causality, which allows the statistical analysis of cause and effect relationships in the risk spread in the financial system. Using multiple regression analysis study was calculated the impact of the hedge fund market development measured in assets, leverage, the price volatility in various financial markets). Due to data availability study has been limited to 10-year period of analysis (2001-2011). The results show a significant correlation between the volatility in the stock market, bonds and CDS, and the activities of hedge funds on financial markets.

The object of the study is the causality analysis of credit and liquidity risk on Treasury bond market in selected European countries, during the crisis of Greece’s public finances from 2010 to 2013. The specific aim of the study is to determine: do we have to deal with so-called contagion effect in Treasury bonds market? Additionally, the survey is designed to identify the causality of the credit and liquidity risk in selected European countries. The analysis was conducted in two trials: 1. for the countries of Central and Eastern Europe, represented by Czech Republic and Poland, 2. for developed countries - Austria and France. For this purpose used Granger causality test, the procedure is based on vector autoregression models - VAR. However, to determine the variation in bond yields was used the GARCH (1.1) model.

Last crisis and instability of financial markets caused considerable interest within public and academic community in measuring and management systemic risk. This article introduces a new framework for measuring systemic risk by using a risk-adjusted balance sheet approach. In this regard, the analysis of 21 largest commercial banks operating in 7 countries from Central and Eastern Europe, shows potential risk which could threaten all the financial system. The paper concludes new directions for measuring systemic risk by using Merton option model. It shows how risk management tools can be applied in new ways to measure and analyze systemic risk in European banking system. The research results is a systemic risk map for the CEE banking systems. The survey finds also instability risk determinants.

The goal of this study is to empirically identify how foreign capital group and financial liberalization affect the risk profiles of the banking sector in Europe. Through a dataset that covers 381 European banks spanning the 1995–2015 period and the methodology of panel regression, the empirical findings document the heterogeneity of banking risk determinants. We examine the implications of banks’ risk adjusted ROA that manifest themselves as spreading and growing instability. It also contributes to the literature by focusing on a group of countries from Central and Eastern and Advanced Europe that have not been studied before. The extended model provides a causal link between the risk in the banking sector and the growth of the financial sector and economy.

The paper explores the concept of global liquidity and its determinants, focusing on the banking system in advanced and emerging markets. We explore the implications of the interaction between liquidity and its local, global and financial markets determinants. We also analyze the global liquidity channels, i.e. whether foreign banks play a significant role in the country’s financial system. The study focuses on the investigation of banks’ liquidity determinants in 42 countries (advanced and emerging/developing countries) over the 2000–2011 period. The results show the significance of the differences in global liquidity depending on the country’s level of development. We find support to the conjecture that globalization and global banks’ leverage may convey some useful information on global liquidity. We also present an important observation that banks’ lending in advanced countries is shielded from the monetary policy because of their ability to freely access alternative sources of funds.

Research background: Increased regulations reducing systemic risk are essentially underpinned by the understanding of the global nature and sources of instability of the financial system. In the economic literature, there are many arguments presented by critical supporters and opponents of measuring and reporting global systemically important entities. Purpose of the article: In response to the requirements of regulators, the article seeks to identify systematically important regulated stock markets for selected global stock exchanges by developing a composite ratio. Additionally, it provides empirical evidence concerning their risk exploration. Methods: The proposed method uses weighted average values of indicators grouped in four categories: (1) market size, (2) cross-jurisdictional activity and interconnectedness, (3) substitutability, (4) complexity. The research covers stock exchanges, reported to WFE, spanning the period 2008–2017. Findings & Value added: The study finds that the problem of systemic risk on global stock exchanges is growing despite numerous prudential regulations. In order to obtain a more complete assessment of market systemic sensitivity, regulators should take into account a wider range of indicators and calculations such as cross-jurisdictional activity and market complexity.