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AbstractRegulators and managers in the banking sector prioritize the banking system’s stability and safety to limit risks, shocks, and potential losses. This study reveals why a bank is more or less stable via bank capital, liquidity creation, and asset diversification. We form a structural model in which bank capital affects stability through liquidity creation, and asset diversification moderates the relationship between liquidity and stability of banks. We employ a moderated mediation model and the Partial Least Squares Structural Equation Modeling (PLS-SEM) with panel data on 27 commercial banks publicly listed in Vietnam from 2014 to 2021. Surprisingly, the empirical results show that raising bank capital reduces liquidity creation while lowering liquidity creation increases bank stability. Thus bank capital has a positive impact on stability via the mediating role of liquidity creation. Moreover, the relationship between liquidity creation and bank stability is moderated by “asset diversification”. Higher asset diversification mitigates the detrimental impact of liquidity creation on bank stability and vice versa. Finally, this study recommends using bank capital, liquidity creation, and asset diversification to bolster bank stability.

Ownership concentration (OC) is important for improving bank stability, but its effect is arguable. Based on a sample of Chinese listed banks, we uncover a positive effect of OC on bank stability captured by Z-score, where the effect can be attributed to higher returns and capital levels of banks with more concentrated ownership. We also find that such banks have higher return volatilities and asset risks. These findings are more pronounced for smaller banks. An important policy implication is that bankers and regulators need to weigh the favourable and adverse effects of OC. [ABSTRACT FROM AUTHOR]

This research analyzes the impact of bank capital, liquidity and funding liquidity on sustainable bank lending in the Middle East and North Africa (MENA) region. An unbalanced panel dataset covering 55 banks using ESG scoring criteria from 2010–2020 was employed for this purpose. Results indicate that higher capital and liquidity ratios hinder the MENA banking sector's ability to improve its sustainable lending capacity. Funding liquidity has a positive and significant effect on sustainable bank lending growth, which suggests that funding liquidity raises sustainable bank lending capacity. Furthermore, the impact of funding liquidity on sustainable bank lending growth remains positive and statistically significant to all capital ratios. It implies that bank capital improves the relationship between funding liquidity and banks' capacity to issue loans in the MENA region. Finally, the results of too-big-to-fail banks indicate that bank lending growth is positively affected by higher capital ratios. Hence, it may help them to increase their capacity to issue sustainable bank loans in the market. Overall the results are robust to principal component analysis and other estimation techniques like bootstrapped-based bias correction fixed effects. [ABSTRACT FROM AUTHOR]

Copyright of Economic History Research / Investigaciones de Historia Económica is the property of Asociacion Espanola de Historia Economica and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Using monthly data from 2005 to 2019, we employ a dynamic heterogeneous cross‐sectionally autoregressive distributed lag (CS‐ARDL) model to examine the impact of higher regulatory capital requirements on the interest rate pass‐through (IRPT) to bank lending and deposit rates in 22 Sub‐Saharan Africa (SSA) countries. Two key findings emerge from the investigation: (i) the average IRPT in SSA is incomplete in the long run, and (ii) stringent (higher) regulatory capital requirements reduce the pass‐through of monetary policy to commercial bank lending and deposit rates. The findings suggest that although higher regulatory capital requirements are an effective macro‐prudential tool for enhancing the stability of the banking sector, they could also have the unintended consequences of limiting economic expansion. This trade‐off calls for a careful analysis and balance in the implementation of monetary and bank regulatory policies in the region. [ABSTRACT FROM AUTHOR]

Borrower drawdowns on credit commitments reduce a bank's capital buffer. Using Austrian credit register data and exploiting the 2008–09 financial crisis as an exogenous shock to bank health, we provide novel evidence that capital-constrained banks manage this risk by cutting credit commitments that are not fully used. Controlling for their capital position, we find that banks also respond to liquidity problems by cutting such commitments. However, banks manage the capital and liquidity risk posed by undrawn credit in a way that limits negative macroeconomic implications: credit cuts are targeted at financially less constrained firms, and we show that borrowers of more-affected banks can substitute lost credit with credit from other banks and do not suffer real effects. Additional findings suggest that voluntary agreements between constrained banks and strong firms to reduce spare borrowing capacity can explain why strong firms experience larger credit cuts. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Research in Economics, Politics & Finance / Ekonomi, Politika & Finans Arastirmalari Dergisi is the property of Journal of Research in Economics, Politics & Finance and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The central role of Value-at-Risk (VaR) within bank market risk regulation received significant criticism from financial media and government investigations into the events of the 2007–2009 financial crisis. Impending reform of bank market risk regulation under the Fundamental Review of the Trading Book (FRTB) demotes VaR, replacing it with a layered framework centred on expected shortfall (ES). However, many of these criticisms assume full integration of internal and regulatory market risk models and further, a linear relationship between risk models and regulatory capital. We examine bank practitioners' perspectives and experienced realities to better understand the operational relationship between internal and regulatory market risk models, and between risk models and capital. This has important policy implications for the efficacy of the reforms to banking regulation, financial stability and navigating the dichotomy of private and public interests. [ABSTRACT FROM AUTHOR]

We show that politically connected banks influence economic activity. We exploit shocks to individual banks' political capital following close U.S. congressional elections. We find that regional output growth increases when banks active in the region experience an average positive shock to their political capital. The effect is economically large, but temporary, and is due to lower restructuring in the economy, not increased productivity. We show that eased lending conditions (especially for riskier firms) can account for the growth effect. Our analysis is a first attempt to directly link the politics and finance literature with the finance and growth literature. (JEL , D72, E65, G21, G28, O43, O51). Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

The Covid-19 pandemic and the war in Ukraine have contributed to a slowdown in banking internationalisation, but the growing trend of emerging markets towards international capital movements, technological innovations in the financial sector, and sustainable trade relations is increasing the relevance of international banking research in Ukraine. Based on an analysis of the historical overview of views on global banking in the last decades of the twentieth and first decades of the twenty-first century, the article defines the definitional features of international banking. The article emphasises the importance of foreign competition for the domestic banking sector. In this sense, a retrospective analysis of the entry of foreign banking capital into the domestic market of Ukraine is carried out and the strategies of foreign banks' penetration and forms of their presence are identified from the point of view of the evolution of the banking system development and transformation of the regulatory environment in Ukraine. The author notes the impact of the European integration vector on the intervention capabilities of international banks in the domestic market and the entry of domestic participants into the European market, and outlines the reaction of the financial system to the resulting internal and external shocks. As part of the overall transformations aimed at bringing Ukraine's accession to the EU closer, the author notes that the entry of foreign banks results in the introduction of new financial products and instruments, with a special focus on the convergence of the regulatory regime based on a harmonised set of prudential requirements and the concept of equivalence. It is noted that the domestic banking sector today, given all external and internal challenges and threats, has significant reserves in terms of capitalisation, and foreign banks are its support, and the author substantiates the need to continue an effective policy of foreign capital attraction in compliance with EU requirements and standards. [ABSTRACT FROM AUTHOR]

Purpose: Lebanon has faced one of the most severe financial and economic crises since the end of 2019. The practices of the Lebanese banks are blamed for dangerously exposing economic agents and precipitating the current financial collapse. This paper examines the patterns of manipulation of the 10 biggest banks before and after implementing the financial engineering mechanism. Design/methodology/approach: The authors apply Benford law for the first and second positions of the reports of condition and income and four out of the six aspects of the CAMELS rating system (Capital Adequacy, Assets Quality, Management expertise, Earnings Strength, Liquidity and Sensitivity to the market) by excluding Management and Sensitivity. The deviations from BL frequencies are tested using Z-statistic and Chi-square tests. Findings: Banks seem to have manipulated their Capital Adequacy, Liquidity and Assets Quality in the pre-financial engineering and considerably in the post-financial engineering periods. Fraudulent manipulations in the banking sector can distort depositors, shareholders and regulating authorities. Research limitations/implications: This study has many implications for governmental authorities, commercial banks, depositors, businesses, accounting and auditing firms, and policymakers. The Lebanese government needs to implement corrective fiscal and monetary policies and apply amendments to the bank secrecy and capital control law. The central bank should revamp its organizational structure, improve its disclosure practices and significantly reduce its ties to the government and the political elite. Practical implications: The study findings suggest that the central bank should revamp its organizational structure, improve its disclosure practices and significantly reduce its ties to the government and the political elite. Originality/value: The study is the first to examine the patterns of fraudulent manipulation in the Lebanese banking industry using Benford Law (BL). [ABSTRACT FROM AUTHOR]

This study examines the determinants of capital adequacy and voluntary capital buffers among microfinance institutions (MFIs). We apply the two-stage least squares (2SLS) with instrumental variables to account for endogeneity. Using quarterly panel data of 439 MFIs in Ghana covering the period 2015–2018, the study found that credit risk, income diversification, size, profitability, lending channel, and equity-to-asset ratio significantly affect capital adequacy. Also, the factors that drive voluntary capital buffers are income diversification, size and equity-to-asset ratio, but size and economic growth are insignificant when the upper limits of Basel III requirements are applied. Generally, the results are insignificant among non-deposit-taking (i.e. Tier 3 like Financial NGOs) MFIs. The findings show that non-performing loans negatively affect capital adequacy. Income diversification increases capital adequacy, especially among deposit-taking MFIs which have the regulatory liberty to engage in additional financial intermediation activities. Size has an inverted U-shape nexus with capital adequacy and there is evidence to suggest that for non-deposit-taking MFIs, size may not matter. Profitability increases capital adequacy while equity-to-asset ratio decreases capital adequacy, especially among deposit-taking MFIs. Additionally, lending channels negatively affect capital adequacy, especially among deposit-taking MFIs. Economic growth reduces capital adequacy but results are insignificant when we control for quarter fixed-effects. These results throw light on the application of the capital buffer theory in the context of MFIs which provides useful insights for practitioners, regulators, policymakers and academia. [ABSTRACT FROM AUTHOR]

This article analyzes the impact of capital structure and bank liquidity on the performance of commercial banks in Vietnam, a transition market in Asia. This research is unique because it is the first study to employ the Bayesian Estimation methods in banking studies. The data includes 463 annual bank-year observations from 37 commercial banks in Vietnam from 2003 to 2020. The Bayesian linear regressions indicate that a higher leverage ratio reduces ROA and ROE while positively empowering EPS. Our findings also document the positive impacts of bank funding liquidity on the performance of commercial banks in Vietnam. Our results are also robust even when employing the Generalized Least Squares estimations. While our results are consistent with the Pecking Order Theory and and prior literature, they do not align with the trade-off theory. Finally, our study contributes implications for policymakers and bank managers to develop the banking system sustainably. [ABSTRACT FROM AUTHOR]

This study looks at mechanisms for improving and stabilising the financial performance of commercial banks in Tanzania. More specifically, this study aimed to assess corporate governance's influence on financial performance regarding asset quality, efficiency use of equity, earning ability, capital adequacy, and liquidity. The study included the board aspect of governance and board control, constructs which have not been studied previously in assessing the influence of corporate governance on the performance of commercial banks. Other constructs included are the board's gender diversity, board size, directors' shareholding, board control, board members' over boarding, board activities, and the existence of important board committees. Panel data were collected from published reports of 15 commercial banks covering a period of 17 and employing multiple linear regression analysis to establish causal-effect relationships among the study variables. The findings revealed that corporate governance (board aspects of governance, board members over-boarding) positively influences the financial performance of commercial banks in terms of their earning ability, asset quality, and capital adequacy. Corporate governance also negatively influences the efficient use of equity and liquidity through board gender diversity, board aspects of governance, and board control. The study recommends that corporate governance principles and mechanisms be enhanced to improve the financial performance of commercial banks. [ABSTRACT FROM AUTHOR]

The study employs a two-step system GMM technique within a panel data framework to investigate the effects of capital buffers on the profitability and risk behavior of Indonesian commercial banks from 2010 to 2020. The findings reveal that capital buffers serve a dual role, acting as a safety net against potential losses while also promoting increased financial stability and stronger shareholder engagement. This ultimately benefits the bank and its stakeholders in the long run. However, the positive effects of capital buffers come at a cost, as they are associated with reduced returns on assets and return on equity. The study emphasizes the importance of managing risk effectively, striking a delicate balance between risk-taking and prudent risk management to achieve optimal profitability. It underscores the need for banks to prioritize robust risk management practices and proper capitalization to avoid pursuing profitability at the expense of these critical factors. The study further highlights the significance of policymakers finding the right equilibrium between promoting financial stability through capital requirements and fostering a competitive banking industry that can generate profits and support economic growth. [ABSTRACT FROM AUTHOR]

One approach to stress testing the amount of capital required by a bank for credit risk is to use parameterised account level models with credit application characteristics, behavioural characteristics and macroeconomic factors as predictors. The standard methodology underestimates the amount of capital required because it fails to include uncertainty over the model parameters, over the future trajectory of behavioural variables and over volatility. We provide a methodology for estimating the magnitudes of these additional losses and so a methodology to gain a more accurate estimate of the amount of capital required. [ABSTRACT FROM AUTHOR]

This study investigates the impact that market discipline mechanisms have on European Union (EU) banks' accounting policy decisions. We investigate the association between the level of loan loss provisions (LLPs) with earnings before provisions and taxes when depositors appear to withdraw their funds and demand higher deposit rates. We examine whether market discipline motivates banks to adjust earnings through accounting accruals. Empirical findings suggest that the demand for higher deposit rates limits management's accounting discretion. By contrast, withdrawals appear to encourage managers to use income smoothing via LLPs. The observed associations appear to be conditioned by banks' systemic importance and capital adequacy levels. [ABSTRACT FROM AUTHOR]

The focus of this paper is placed on shadow banking as a less regulated segment of the financial system recognizable by its increasingly significant presence in the countries of Central and Eastern Europe with a tendency of further accelerated growth in recent years. Despite the significant contribution by providing alternative sources of liquidity and alternative funding to the real economy, shadow banking can be a significant source of systemic risk. The subject of this paper is to examine the relationship between selected macroeconomic and financial variables and the size of the shadow banking system by applying the regression with fixed effects in seven Central and Eastern European countries over the period 2007-2021 with a quarterly dataset. Empirical results confirm that shadow banking positively correlates with traditional banks, complementing the demand for financial products that the banking sector, adhering to strict regulatory requirements, abstains from supporting. Our study aims to highlight the threat, more excellent orientation towards strengthening the bank's capital requirements to cause further expansion of the activities in the nonbanking part of the financial sector beyond the sight of the regulators, as well as the necessity to identify the challenge of making this less regulated part of the financial system more stable and sustainable. [ABSTRACT FROM AUTHOR]

The financial system and its components are of interest to economists, researchers and practitioners in the field of banking finance. In Romania more than 77% of the total assets of the financial system are represented by the banking component. Based on this evidence, the paper is an empirical analysis of the evolution of the volume and structure of banking assets in Romania in the period 2020-2023. By analysing the share of foreign versus domestic capital, we also wanted to draw attention to a possible risk of contagion, as external factors have emerged in recent years and are currently affecting the economic and financial balance. The motivation for this paper comes from the fact that the structure and share of foreign capital in the Romanian banking system shows how sensitive the system is to contagion risk. In the current period, when international events are happening rapidly, the study is timely. [ABSTRACT FROM AUTHOR]

The asset quality of public sector banks in India deteriorated during 2012-2018, which has had multidimensional ramifications. On the one hand, while significant loan loss provisions were required to be kept causing erosion of profitability of these banks, on the other hand, it affected their risk-taking ability and the resources available for onlending to the commercial sector. From a macroeconomic perspective thus, poor asset quality and lower economic growth reinforced each other into a vicious cycle. The government intermittently infused capital in the public sector banks, but most of that was absorbed by the continuing deterioration in asset quality, delaying the revival in the credit growth cycle. This led to the question of how much capital infusion is necessary to kick-start the credit cycle. Using bank-wise data for the period 2008-18, the present study analyses this question in a dynamic panel framework. The findings of the study suggest that the relationship between bank capital and credit growth is non-linear. Any amount of recapitalisation in banks may be helpful in accelerating credit growth. However, the study found that the single threshold level of 13.1 per cent capital to risk weighted asset ratio (CRAR) would be optimal. Above this threshold level, incremental increase in bank capital has positive, but declining marginal effects on lending. [ABSTRACT FROM AUTHOR]

This study has a general purpose to extend a theoretical approach as an attempt to overcome the research inconsistency regarding the influence of capital in banking companies towards the creation of liquidity. In addition, the fact has shown that there was a problem of excess liquidity in Indonesian banks since 1997. To achieve the purpose, the effort is to offer a new concept or proposition derived from the main theory synthesis approach, namely the theory of efficiency and the theory of effectiveness. This study is a causality type observing the sample of conventional commercial banks, which are ranked among the ten banks and have the largest assets in Indonesia as of December 31, 2022. This study succeeded in finding effective managerial ability as a synthesis concept combining both theories. Furthermore, the finding from the research model suggests that effective managerial ability in granting credit is a mediator factor in the relationship between bank capital and the creation of liquidity. This study starts from the existence of various contradictions in the results of empirical research on the causality effect of bank capital on the creation of liquidity. The result shows the significant role of effective managerial ability in explaining the inconclusive findings of previous studies. It confirms that when the effective managerial ability in providing credit is higher, a manager could arrange the capital to create higher liquidity and generate greater revenue. The other results report that the creation of liquidity is influenced positively by the risk of credit and influenced negatively by the volatility of earning and reserve requirements. [ABSTRACT FROM AUTHOR]

The aim of the article is to deepen and further develop the scientific foundations of transformation of management by financial public corporations in the context of post-war reconstruction of the economy of Ukraine in order to improve the efficiency of the State-controlled corporate governance. The article defines the essence, composition and meaning of financial public corporations in ensuring the post-war reconstruction of the economy of Ukraine; the functions of management of financial public corporations are disclosed; the best practice of localization of global mechanisms for the transformation of the State-owned banks is systematized; the directions of institutional changes of the role of the State in public finance for the post-war reconstruction through a combination of global and local approaches to attracting both the public and the foreign banking capital to Ukraine are substantiated. An assessment of indicators of the level of corruption and the shadow economy in Ukraine was carried out in order to identify tendencies in the changes of their dynamics for the period of 2009–2022. It is emphasized that in the current conditions the positive dynamics of these indicators can accelerate owing to changes in the corporate governance of the system of financial public corporations, primarily concerning the State-owned banks. Based on the analysis of the distribution of domestic government bonds by owners, it is proved that the monetization of the budget deficit forces the government to refinance the public debt, thereby shifting the debt burden to future generations, thus indicating the lack of stability of public finances. At the same time, the government’s active use of external sources of borrowing distorts the structure of public debt, as a result of which currency risks raise and the sensitivity of Ukraine’s economy to external shocks increases. Proposals on the need to adopt a law on corporate governance of the State-owned companies at the level of financial public corporations is substantiated, in accordance with the recommendations on the part of the OECD, in order to ensure transparent and impartial nomination, selection and reappointment of highly qualified professionals for the positions of members of the supervisory boards of such companies and introduce a procedure for the annual evaluation of supervisory boards. Prospect for further research in this direction is to find ways to improve the efficiency of management of financial public corporations, reduce the existing excessive concentration of public banking capital, including in the government borrowing market, in order to achieve a synergistic effect at the stage of post-war reconstruction of Ukraine’s economy. [ABSTRACT FROM AUTHOR]

Sukanya Samriddhi Yojana (SSY) is a governmentsponsored savings plan launched by the Government of India to promote financial inclusion and empower the girl child. This present study provides a comprehensive analysis of SSY, exploring its objectives, benefits, impact, challenges and prospects. By examining the scheme's implementation and effectiveness, this study evaluates its contribution to enhancing the socioeconomic condition of girls in India and fostering their education and overall development. To evaluate the effectiveness of SSY, a mixed-methods approach was applied that combined qualitative and quantitative research. This Scheme's intention is admirably good and would undoubtedly give the female child and their parents and guardians, a great deal of financial freedom. The strategy also provides the banks with a significant amount of capital. It is seen as a good programme because the government, which has a long-term outlook, started with a beneficial tagline which is "Beti Bachao Beti Padhao". [ABSTRACT FROM AUTHOR]

Operational risk is one of the most important risks of financial institutions. After the approval of the Basel committee, it has started to be noticed all over the world. The increasing increase in operating losses in various business lines has caused the attention of financial institution managers to be directed to the area of operational risk. In this research, a method for estimating the appropriate threshold for operational loss data and also a method for classifying operational loss data is presented, and the capital required to cover operational risk by combining the intensity distribution function and frequency of operating loss data and Monte Carlo simulation are obtained. Also, the dependence between matrix cells of business lines and loss making events has also been investigated. For this research, operational loss data related to a banking group including several Asian, European and American banks have been used. The research results indicate that the loss distribution approach with the combination of critical value theory and machine learning algorithms (clustering), as well as the loss distribution approach with the combination of machine learning algorithms (classification), is more efficient than other methods. [ABSTRACT FROM AUTHOR]

Basel Committee on Banking supervision (BCBS) has issued Basel which requires the banks to comply with the minimum capital requirement after the crisis. Nevertheless, whether the requirement imposes impact the banking sector which comprises a dual banking system, in a positive manner is still questionable. Given the higher capital costs from the strict capital requirements, banks are being forced to raise bank margins. This study investigates the effect of capital regulations on conventional and Islamic banks' margins covering the ASEAN banking system from 2009 to 2017. The empirical analysis uses dynamic panel data frameworks to reveal several factors affecting bank margins. Overall, the results suggest that the total regulatory capital ratio helps reduce the margins of conventional banks but does not influence the margins of Islamic banks. As for the Tier-1 capital ratio, the variable increases the Islamic bank margins but does not significantly affect conventional bank margins. Based on the analysis results, regulators of conventional banks need to impose capital requirements as suggested by Basel III to reduce bank margins. Meanwhile, as for Islamic banks, the bank margins can be reduced if regulators can introduce a separate set of requirements tailored explicitly for Islamic banks. [ABSTRACT FROM AUTHOR]

PURPOSE: By bridging the funding gap between funding surplus units and deficit units, financial institutions like banks play a crucial role in fostering economic development in a nation. Banks provide the crucial task of organizing individual and institutional resources and directing them to those prepared to engage in business ventures or other productive uses. The aim of this paper is to evaluate the relation between funding liquidity and bank lending growth (BLG). An empirical analysis between bank capital and the funding liquidity ratio on bank lending growth (BLG) using the generalized method of moments (GMM) approach for the sustainable business has been not identified before. Therefore, this study tries to fill this gap. METHODOLOGY: The data was collected from 59 commercial banks in India from 2010 to 2022 which comprises of 21 public sector banks, 18 private sector banks, and 20 foreign banks. The GMM approach was what we employed. This strategy is typically utilized in situations in which the distribution of the data is uncertain and there is a concern with over identification. GMM offers a consistent, asymptotically normal, and efficient estimator in comparison to all of the other estimators that merely use the information presented by the moment conditions. FINDINGS: Findings suggests that there is a significantly negative influence of bank capital and funding liquidity on bank lending. This indicates that higher capital can limit the effect of funding liquidity on the growth of the banks’ loans, therefore the findings are consistent with the hypothesis that higher capital can lower the effect of funding liquidity. This study’s model also reveals the significantly favorable impact that funding liquidity has on the expansion of banks’ loan portfolios, which ultimately results in a more sophisticated increase in the growth rate of bank lending. IMPLICATIONS: This can be an importance piece of information for policy makers in taking accurate decisions to induce the BLG in the presence of an interactive association of funding liquidity and the lending growth rate at different capital levels. We found that the banks’ lending growth rate is significantly influenced by its past values with a significant p-value of less than 1%. The findings imply that capital funds and liquidity funds support the BLG rate in India by strengthening and neutralising the risk involved and absorbing the losses generated by stressed assets. ORIGINALITY AND VALUE: This study makes a significant contribution to the creation of a more in-depth understanding of the potential relationship between banks’ funding liquidity, capital funds, and bankers’ lending behavior, in particular with reference to developing market nations like India.

The current economic situation again emphasizes the need to form a banking system management that is resistant to negative external influences. The development vector of the industrial sector management directly depends on the banking system efficiency, which in turn will lead to an increase in the values of macroeconomic parameters. An important role in improving the stability of the modern banking sector is played by the implementation of the Basel III requirements, developed taking into account the experience of the global financial crisis. The article examines the impact of changes in the capital adequacy requirements of Russian banks from the point of view of the need to ensure the sustainable development of both the banking system and the effective management of industry. Based on the identified patterns, recommendations are formulated for organizing a system for assessing the capital adequacy of a commercial bank. The capital of the bank is the basis of the successful lending process, in particular to industry. And the effective management of industrial enterprises serves as a guarantor of the production development, the creation of jobs, and an increase in the values of the main macroeconomic indicators.

Under the stakeholder theory hypothesis, reputable corporate social responsibility (CSR) banks are expected to attract more loans and deposits, which in turn strengthens their ability to create liquidity. Our findings support this view. Further analyses reveal that the positive effect of CSR on liquidity creation differs depending on bank size, bank capital, and type of financial crisis. In addition, deposit growth, loan growth, lending rate, and funding rate are potential channels through which CSR influences bank liquidity creation. The findings are not driven by an endogeneity issue. [ABSTRACT FROM AUTHOR]

We conduct a bank efficiency comparison among three Chinese regions: Mainland China (CN), Hong Kong (HK), and Macao (MO). Specifically, we investigate the reasons for efficiency differences observed in the three regions from within‐region and cross‐region perspectives. We show that HK and MO maintain stable bank performance over time that lies within the developed‐economy range of efficiency levels. CN used to be well below this range but has been catching up so quickly that efficiency convergence in the three regions seems to be underway. We find that the determinants of bank efficiencies in the three Chinese jurisdictions are similar in some aspects but different in others. Most significant are their similarities in the effects of interest rate differentials, forex reserve accumulations, bank capital positions, interbank financing opportunities, and liquidity mismatch problems. Also important are their differences in the effects of bank size, revenue diversification, government ownership, property, and stock market development. [ABSTRACT FROM AUTHOR]

This paper offers general guidelines for central bank capital management. Capital adequacy is important to be a credible, independent monetary authority over a medium-term horizon. Central banks, however, face several challenges in determining their capital adequacy. Firstly, the amount of capital only plays an auxiliary role in central banks' effectiveness given that they cannot default as long as they have the right to issue legal tender. Secondly, central banks face two types of financial risks: calculable risks from current exposures and latent risks from future exposures. These latent risks, in particular, are difficult to quantify because they stem from contingent policy measures such as quantitative easing and lending of last resort. It is argued that a central bank's target level of capital (1) can be calibrated with a confidence level that is lower than that used for commercial banks and (2) takes latent risks into account that are related to GDP or the size of the financial sector in the economy. [ABSTRACT FROM AUTHOR]

This paper looks at the lessons learned for risk management from two recent events, the default of Archegos Capital Management in March 2021 and the unusually large price jumps in energy markets in summer 2022. The paper finds that the counterparty exposure from margined derivatives transactions exceeded the required initial margin significantly in both cases, so that the exposures were largely uncollateralised when it mattered. In addition, the standardised approach for counterparty credit risk (SA-CCR) resulted in regulatory capital requirements which were insufficient to cover the banks' losses from the unwinding of large and concentrated derivatives exposures. This made it difficult, even for some large banks, to identify the high loss potential of the transactions with a single client. [ABSTRACT FROM AUTHOR]

The outbreak of war in Ukraine raises questions about its impact on the economies and financial systems of countries directly and indirectly involved in the war, but also on the economies of non-participating countries. The article aims to identify the channels through which the war in Ukraine has affected commercial banking in Poland. The original contribution of this paper to the literature dedicated to the impact of the outbreak of war on financial sector consists in the identification of channels of direct and indirect effects of war on commercial bank performance, adoption of unique empirical strategy to point out features of banks determining their sensitivity to the materialisation of geopolitical risk as well as groups of banks whose shares move along similar trajectories during the war. The conclusions emphasize that the long-term negative indirect effects of the war outweigh the short-term indirect ones. The policy implications consist in the benefits of introduction of new reporting standards for banks that focus on the exposure of their clients to the geopolitical risk, augmentation of scope of risks to be covered by regulatory capital by geopolitical risk as well as creation scenarios of stress tests that would include geopolitical risk. Facing war, the implications for commercial banks' managers come down to the necessity to prioritize cyber risk management and implement a new paradigm of credit and market risk assessment, taking into account the impact of geopolitical factors. [ABSTRACT FROM AUTHOR]

Using a panel dataset of 45 banks operating in Malaysia's dual banking system over the period 2001–2017, this paper investigates whether and how the liquidity creation of Islamic banks is determined differently from that of the conventional commercial banks. The preliminary analysis shows that bank capital, size, risk and market power are significant determinants of bank liquidity creation in the dual banking system, whereas macroeconomic factors exert little influence. When banks are differentiated by bank types, the paper finds that bank capital, size and risk are related to more liquidity creation of Islamic banks vis-à-vis conventional banks, particularly in terms of on-balance sheet liquidity creation. Bank market power affects the liquidity creation by Islamic banks negatively, as opposed to the positive effect observed for conventional banks. This paper also finds that the liquidity creation pattern of Islamic banks is pro-cyclical, given that their on-balance sheet liquidity creation is more responsive to changes of economic growth and monetary policy rate. The overall results suggest that the institutional features of Islamic banking and the country's regulatory support for the industry cause Islamic banks to respond heterogeneously from their conventional counterparts. The results offer numerous key policy implications for countries adopting dual banking systems. [ABSTRACT FROM AUTHOR]

The global financial architecture is struggling to facilitate the sustainable investment needed to address climate change. Some argue that if the Basel III global capital rules treated environmentally friendly assets as being safer forms of capital, banks would be incentivized to hold more of these assets on their balance sheets and extend more green debt, promoting sustainable investment. This paper explores the possible impacts of this reform by combining firm-level environmental, social, and governance (ESG) data with a global general equilibrium model. It finds that the reform would result in a significant reallocation of capital, goods, and services across sectors and economies. It finds that while the reform could significantly increase investment, the investment is not necessarily sustainable and not all countries benefit from cooperation. The paper identifies a range of challenges that need to be overcome for these results to hold, including the reliability of ESG data, inconsistencies in taxonomies and methodologies, and further analysis confirming whether green firms are indeed safer borrowers. The paper argues that the G20 is well placed to address these challenges and outlines an agenda to achieve it. [ABSTRACT FROM AUTHOR]

We investigate the effectiveness of the Bank Recovery and Resolution Directive (BRRD) in mitigating the bank-sovereign nexus in the Euro Area. Using CDS spreads to measure bank and sovereign credit risk and a DCC-MIDAS model capturing the long-term component of bank-sovereign interconnectedness, we document that the dynamic correlation between banks and sovereigns has decreased in Euro Area countries since the introduction of the BRRD. Panel data analysis reveals that the decline in interconnectedness is not driven by the banks' capital adequacy, size or holdings of domestic sovereign securities. [ABSTRACT FROM AUTHOR]

The purpose of the Bank for International Settlements regulatory agenda, as implemented by financial regulators globally, has been to make banks safer and reduce the likelihood of systemic events. Using an original model of bank profit maximisation under a regulatory constraint, we statistically examine how market risk exposure has interacted with financial performance and capital structure, to see if the Basel regulatory agenda concerning the quantity, quality and liquidity of capital, has prompted changes in banking behaviour as measured by exposure to market risk. Breaking new ground, we empirically explore how the regulatory agenda has affected the largest banks. We analyse if the regulatory agenda has succeeded in aligning the cost of capital with their exposure to market risk, measured by Value at Risk; or if regulations have induced changes to banking activities. We find rather than regulation inducing changes to the rate at which unchanged risk exposure is capitalised; it leads to changes in the nature of exposures. Risk has declined along with financial performance while the cost of capital is largely unchanged. A consequence of regulation may be to encourage the migration of riskier activities to organisations where it may be borne more cheaply. [ABSTRACT FROM AUTHOR]

To maintain financial stability, banks need to recognize, assess, and mitigate potential losses, thus making risk control critical for long-term profitability as well as avoiding unexpected losses for banks. This research examines the risk mitigating factors and performance of Ghanaian domestic banks in terms of capital adequacy, bank size, bank efficiency, and profitability, along with their association with systemic risk in the bank sector, as measured by the Z-score: Insolvency Risk - (µROA) plus capital asset ratio (equity capital divided by sum of all assets further divided by the standard deviation-(OROA) with a higher score for banks as a measure of bank stability. The study further explores the relationship between this ratio and the explanatory variables for a sample of 11 banks operating in Ghana between 2010 and 2021. Analysis of the data using the fixed effects model shows that, profitability and bank efficiency are significant and affect the stability of banks positively. Bank size, on the other hand, is significant but negatively affect the stability of banks. Bank profitability is critical to stabilizing and protecting the banking sector from external shocks; as a result, this study suggests that, bank management apply prudent practices to profitability-driven indicators and that, the banking sector regulations be congruent with macro-prudential policies. [ABSTRACT FROM AUTHOR]

The purpose of this original study is to critically analyse the emergence and development of the national models of financial regulation, international standards and codes, and regional and national financial regulation and supervision (for the cases of the UK, USA, Sweden, the EU, and Finland). The research raises both academic and regulatory concerns. The relevance and purpose of this research arise from a need for an academic analysis of the economic nature and classification of financial market regulation systems. They represent a theoretical justification for changes in the policies and supervisory practices of national and international regulatory authorities in response to innovations in financial technologies and instruments, digital products, and risks. Secondly, it will stimulate more systematic work on regulatory databases, registration, and reporting procedures in various economies in different financial markets. The author identifies five main systems of national financial regulatory markets: the multi-tiered, multi-agency US system, the twin peaks model (UK), and the mega-regulatory model (Sweden). There is a thorough review of the international standards and institutions that work for the stability of financial systems. The analysis of the regional and national systems of financial regulation and supervision is based on the examples of the EU and Finnish institutions. National macro- and micro-economic regulation and supervision have been examined, with a focus on the US Federal Reserve and the US Treasury. An important result of the study is the systematisation of the directions of the development of national and international regulatory institutions (since the 1980s). First, the minimum capital and credit risk requirements for banks (the 1980s) were complemented in the 21st century by buffer reserves, liquidity, and leverage standards. Second, regulation focuses on ensuring the sustainability of the national economy. The regulatory focus is on ensuring the sustainability of national and global financial systems. Third, there is an increase in the number of supervised institutions. Fourth, there is a division of the functions between central banks (macro-economic regulation) and one or two mega-regulators (micro-economic regulation and supervision). Fifth, there is a division of labour between the international financial institutions (BIS, IMF, and WB) and national regulators. Sixth, the focus is on protecting consumers and investors and countering money laundering and the financing of terrorism. Seventh, there is an understanding based on a common approach by central banks to new financial technologies and cybersecurity. [ABSTRACT FROM AUTHOR]

On implementation, IFRS 9 increases credit loss (impairment) charges and reduces after-tax profits of banks. This makes retained earnings and hence capital resources lower than what they would be under IAS 39. To maintain their capital ratios under IFRS 9, banks may choose to hold higher levels of equity capital. This paper uses a modified version of CAPM, which accounts for the low-risk anomaly (as suggested by Baker and Wurgler (Baker and Wurgler in American Economic Review 105:315–320, 2015)), to estimate the impact of this potential increase in capital levels on the cost of funding of banks in six European countries, the UK, Germany, France, Italy, Spain and Switzerland. Our results indicate that weak low-risk anomaly exists for banks' equity in the six countries, except France. The magnitude of the anomaly varies across countries, but is generally low relative to the long-run cost of equity for banks. Due to the weak anomaly, we find a minor "day 1" impact of IFRS 9 on the cost of funding of banks in the six countries. [ABSTRACT FROM AUTHOR]

This research investigates how financial innovation impacts sustainable development in nine African countries between 2006 and 2020. The study used data from the World Bank Development Indicators and applied the GMM panel estimator to assess the relationship between financial innovation and sustainable development. The findings reveal that financial innovation can have both positive and negative effects on sustainable development, depending on the measures used to gauge financial development. When financial sector innovation is used as a measure, the study found a negative impact on sustainable development. However, when measuring innovation in the banking industry and capital market, the results show a positive effect on sustainable development. Therefore, the study recommends the implementation of policies that promote efficiency in the banking industry, the capital market, and financial innovation to ensure the effective operation of Africa's financial system. This paper contributes to the discussion of SDGs in Africa and further confirm the financial intermediation theory in Africa markets [ABSTRACT FROM AUTHOR]

This study compares ASEAN and EU banking efficiency using Data Envelopment Analysis (DEA) and an intermediary approach. Three input variables (staff expense, fixed assets, total customer deposits) and two output variables (loans to customer and operating income other than interest) are analyzed using RStudio and R. EU and ASEAN banks had efficiency scores of 0.7 and 0.65, respectively, showing opportunity for improvement. Based on cost analyses, ASEAN banks are more efficient than their EU counterparts. Inefficiencies occur when output surpasses input or is much lower than another output variable. However, both regions may improve banking efficiency to do better. The 10-year trends exhibit oscillations, showing that regulatory issues affect banking efficiency. Stricter laws, higher capital requirements, and risk management changes may have hampered ASEAN credit. The dynamics and objectives of the EU and ASEAN economic blocs shape their financial systems. ASEAN is working toward regulatory convergence, while the EU has integrated and harmonized more. To maintain a stable and efficient financial industry, the region's banks must adapt to changing economic landscapes, technological advances, and mounting challenges. [ABSTRACT FROM AUTHOR]

This study investigates whether the ratio of long-term investment to total assets, the ratio of cash on hand to total assets, and the ratio of price-to-earnings are risk indicators for bank failures. Silicon Valley Bank (SVB), Signature Bank, and Silvergate Capital Corp., which experienced bank failure, and banks that are among the 20 largest banks in the USA are analyzed with the panel data method. Analyses were made using quarterly data between 2003Q4 and 2022Q4. It is revealed that the long-term investment to total assets ratio increases the bank failure risk. The risk of bank failure varies negatively with the cash on hand to total assets ratio. Bank failure risk rises as the price-to-earnings ratio rises. In terms of revealing the factors influencing the risk of bank failure and possible consequences, it is expected that the findings obtained could contribute to the literature. [ABSTRACT FROM AUTHOR]

This paper challenges the validity for bank regulation of the Modigliani-Miller (MM) Theorems. We argue that the Modigliani–Miller analysis cannot be applied to banks because when lending creates deposits the asset side of banks varies together with the liability side and equity behaves more like a sticky variable. Hence, from an endogenous money point of view and Minsky's Financial Instability Hypothesis (FIH), much of the debate on bank capital adequacy rules is misleading because: First, it is not at a bank's discretion to decide the mix of its funding when it provides credit. Secondly, bank liability management might have implications for financial stability as far as it reduces the liquidity in the economy. Bank regulation in the lines of MM Theorems misses both points as long as it disregards the endogenous process of money supply and the effects of financial fragility. In this sense, refutation of the validity of MM Theorems for bank regulation lends support to a Minskian cash-flow oriented bank regulation for the detection of Ponzi finances. [ABSTRACT FROM AUTHOR]

This article explores the role of banking fragility for the relationship between private credit and economic growth and bridges two literatures, one on the link between credit and economic growth and the other on the effects of banking fragility on credit dynamics. We consider two types of banking fragility on both the asset and liability sides: nonperforming loans and the ratio of bank capital to assets. Using a standard growth model framework and a dynamic generalized method of moment panel estimator on data for European Union countries, we find that banking fragility has a negative effect on economic growth. A consequence of considering banking fragility is that credit appears to have a positive effect on economic growth only when banking fragility is relatively low. [ABSTRACT FROM AUTHOR]

This study investigates the impact of the enactment of bail-in regimes in 2016 in Indonesia on bank owners' propping behavior. Based on Indonesian banking data for the period 2011–2020, we use the difference-in-differences method to examine whether related party transactions substantially increase or decrease after the introduction of bail-in as an indicator of propping. We find that while the requirement for sufficient capital allocated to shock absorbance increases, bank owners may provide capital via related deposits. These deposits are typically beneficial to bank stability, increase liquidity, and can act as a propping channel. However, the deposits are also more exposed to risks, and consequently decrease. [ABSTRACT FROM AUTHOR]