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We study how banks use "regulatory adjustments" to inflate their regulatory capital ratios and whether this depends on forbearance on the part of national authorities. Using the 2011 EBA capital exercise as a quasi-natural experiment, we find that banks substantially inflated their levels of regulatory capital via a reduction in regulatory adjustments (without a commensurate increase in book equity and without a reduction in bank risk). We document substantial heterogeneity in regulatory capital inflation across countries, suggesting that national authorities forbear their domestic banks to meet supranational requirements, with a focus on short-term economic considerations. [ABSTRACT FROM AUTHOR]

Basel I introduced capital requirements for undrawn commitments, but only for revolvers with an original maturity greater than one year. We use this regulatory discontinuity to estimate the impact of capital regulation on the cost and composition of credit. Following Basel I, short-term commitment fees declined relative to long-term commitments and issuance of short-term facilities increased. Our results highlight the sensitivity of credit provision to capital regulation, particularly for banks with less capital. We are able to infer that low-capital banks are willing to forego twice as much income from fees to reduce required regulatory capital by a dollar. [ABSTRACT FROM AUTHOR]

This paper studies the impact of capital regulatory reform on firm behavior. We develop a portfolio-choice model to investigate how capital regulatory reforms influence the risk-taking behavior of financial institutions with different capital adequacy levels. The model predicts that as regulation becomes more stringent, either all firms reduce their risk-taking, or there exists a capital-adequacy threshold below which risk-taking increases. The Chinese insurance solvency regulatory reform provides a unique natural experiment to examine firms' risk-taking responses to the capital shock driven by the reform. We find that increasing regulatory pressure – i.e. a more stringent regulation – induces greater risk-taking for less capital-adequate insurers, the insurers whose risk-taking the regulator most wants to reduce. We rule out the potential reverse causality that insurers' risk structures prior to the reform determine their degrees of capital shock and that insurers target low capital-adequate positions by taking more risks prior to the reform. Our results suggest that reinforcing the qualitative risk assessment, increasing the penalties of insolvent insurers, and increasing the risk sensitivity of capital requirements could be effective policy remedies for this backfiring problem. [ABSTRACT FROM AUTHOR]

Under the Solvency Capital Requirement (SCR) formula of European Solvency II, the required capital for an insurer is calculated as the Value-at-Risk of the aggregate loss, utilizing a modular approach with a set of fixed correlations among business lines. This square-root method, while well-aligned with the multivariate normal model, does not easily extend to general loss distributions which are often right-skewed or heavy-tailed. To address this limitation, Sandström (Solvency II: Calibration for skewness, SAJ, 2007(2)) introduced a skewness adjustment term in the tail measure to improve SCR estimation. However, estimating the portfolio skewness remains challenging as it requires third-order cross-moments among the risks, which are generally impossible to derive from the prescribed correlations. In this paper, we propose a method to estimate portfolio skewness using the Normal Power approximation. By leveraging high-order cross-moments of the standard normal variable, our proposed method effectively calibrates portfolio skewness, while maintaining the mandated correlations. Additionally, we apply extreme value theory to estimate the Expected Shortfall within our framework. Our method is consistent with the current SCR framework and well-suited for insurance supervision that requires a balance between precision and simplicity. Our simulation study shows that the new approach performs significantly better than existing alternatives. [ABSTRACT FROM AUTHOR]

We assess the impact of quantitative easing (QE) on the provision of liquidity and pricing in the UK gilt repo market. We compare the behaviour of banks that received reserve injections via QE operations to other similar banks in terms of the amounts lent and pricing. We also investigate whether leverage ratio capital requirements affected the amounts of liquidity supplied by broker-dealers and the spreads they charged. We find that QE interventions can improve liquidity provision and that their size determines how this is attained. QE can also reduce the cost of borrowing in the repo market unless it is associated with spikes in demand for liquidity. Our findings indicate that the leverage ratio supports the provision of liquidity during stress, as it prompts banks to become less leveraged. However, the larger capital charge repo transactions attract under the leverage ratio requirements reflects on the spreads these banks charge. [ABSTRACT FROM AUTHOR]

Copyright of Zeitschrift für Bankrecht und Bankwirtschaft is the property of De Gruyter 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.)

Copyright of Zeitschrift für Bankrecht und Bankwirtschaft is the property of De Gruyter 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.)

Purpose: We study how capital requirements, intended as a measure to ensure security for the financial system, can create moral hazard for banks in dealing with distressed debts. Design/methodology/approach: Over the period spanning from 1993 to 2019, we manually gathered data on 1953 firms, identifying a total of 2,146 distress events, with 804 instances resulting in bankruptcy fillings. Findings: Our analyses at the loan level and the bank level consistently show that loans of distressed firms are much more likely to be extended when the lenders are closer to the capital requirement limit. Exploiting the discontinuity in the predetermined maturity date of loans, we provide causal evidence on the relationship between capital ratios and extension likelihood. Distressed loans that are due just before the report date (end of a quarter) are much more likely to be extended than loans due just after the report date, after controlling for loan and firm characteristics. Additional analyses show that the effects are stronger when external financing is more costly and when the banks are poorly capitalized. Originality/value: Our paper presents the first causal evidence of capital requirements on lending distortion, contributing to our understanding of the dynamics within the banking sector and providing policy implications for promoting financial stability and regulatory efficacy. [ABSTRACT FROM AUTHOR]

The stability of the economic system, which directly depends on the reliability of the country's financial sector, is crucial for growth and development. Therefore, effective risk management is of paramount importance for both banks and other financial institutions. In a turbulent and unpredictable business environment, banks are constantly exposed to risks. For this reason, it is necessary to continuously improve control systems. Basel III refers to a set of global regulatory standards for banks, introduced in 2010 by the Basel Committee on Banking Supervision (BCBS). The aim of the defined standards is to ensure the resilience and stability of banks and prevent financial shocks. On the other hand, this new regulatory framework imposes stricter criteria on commercial banks, which affects credit policy. In addition to a theoretical overview of the new regulatory framework, the paper analyzes the indicators of capital adequacy and the impact of changes in the macroeconomic environment on the exposure of domestic banks to liquidity risk.

The need to apply the requirements of the Basel III agreement in order to improve the performance of the banking system in the country and reduce the effects of the risks facing this sector, prompted this study to investigate the level of implementation of the Basel III guidelines and their effect on the performance of the banking system in Iran. In this regard, this research using the information obtained from the annual financial statements of 16 sample banks, including Bank Ekhtaz Novin, Parsian, Tejarat, Sina, Saderat, Kerebehan, Mellat, Post Bank, Saman, Pasargad, Day, Shahr, Tourism, Capital , the future and the Middle East for the annual period from 2013 to 2021 studies the state of the banking system in Iran. This research uses DID models to carry out the aforementioned investigation. Empirical findings showed that in the presence of the requirement of stable net investment ratio, bank size has a positive effect on the bank stability index. This is also true for the ratio of cash to property. However, the effect of net profit-to-equity ratio and liquidity (liquidity) on bank stability is negative, assuming the At the level of 5% effect of bank size, net interest to equity ratio, cash to asset balance, liquidity and capital flight under the conditions of 8% capital ratio requirement have a significant effect on the stability of the banks under the conditions of applying the 8% capital ratio requirement.requirement of stable net investment ratio.

This research paper presents a comprehensive analysis of three prominent volatility and dependence models for financial time series: ARMA-GARCH, GARCH-EVT, and DCC-GARCH. These models are employed to assess and forecast capital requirements for life and non-life insurer investments. This study evaluates the models' performance in forecasting Value-at-Risk, using daily data on key Thai financial indicators (representing permissible insurer investment assets) from March 2009 to March 2024. Specifically, 1-day and 10-day VaR forecasts are generated using the ARMA-GARCH and DCC-GARCH models, while the ARMA-GARCH-EVT model is employed for 1-day VaR forecasting. Our findings indicate that the ARMA-GARCH model effectively captures time-varying volatility, while the GARCH-EVT approach enhances tail risk estimation, particularly relevant for stress testing. Additionally, the DCC-GARCH model allows for the examination of dynamic conditional correlations between assets, providing insights into portfolio diversification benefits. Rigorous backtesting procedures, employing Kupiec and Christoffersen tests with a rolling window of 1,000 out-of-sample observations, confirm that the majority of models accurately forecast VaR at their respective horizons, with only a very small subset of 10-day VaR models exhibiting limitations. These results highlight that ARMA-GARCH, ARMA-GARCH-EVT, and DCC-GARCH models offer insurers robust tools for estimating minimum capital requirements, forecasting investment risk, and guiding strategic asset allocation decisions. This research underscores the effectiveness of these models for practical application in the insurance industry while also emphasizing the importance of continued model validation, particularly for extended forecasting horizons. Doi: 10.28991/ESJ-2024-08-06-03 Full Text: PDF

According to Ball's principles, the most important weakness and shortcoming in the banking sector is the lack of financial resources and lending by banks to other economic sectors. Banks need liquidity to cover fluctuations and expected or unanticipated changes in balance sheet items, as well as to attract new resources for allocation and as a result to earn income. In this regard, in this research, the asymmetric effects of banking monetary law requirements on lending and financial stability of banks admitted to the Tehran Stock Exchange have been investigated. For this purpose, the data of 19 selected banks and financial institutions were used during the period of 2012-2020. The findings of the research showed that the banking monetary law and capital requirements had negative and significant effects on bank lending. It was also observed that the banking monetary law and capital requirements had positive and significant effects on the financial stability of banks. Finally, it was observed that there is a symmetrical convergence relationship between lending power and banking stability with capital requirements and banking monetary law. [ABSTRACT FROM AUTHOR]

Purpose – This research aims to evaluate the accuracy of several Value-at-Risk (VaR) approaches for determining the Minimum Capital Requirement (MCR) for Islamic stock markets during the pandemic health crisis. Design/methodology/approach – This research evaluates the performance of numerous VaR models for computing the MCR for market risk in compliance with the Basel II and Basel II.5 guidelines for ten Islamic indices. Five models were applied—namely the RiskMetrics, Generalized Autoregressive Conditional Heteroskedasticity, denoted (GARCH), fractional integrated GARCH, denoted (FIGARCH), and SPLINE-GARCH approaches—under three innovations (normal (N), Student (St) and skewed-Student (Sk-t) and the extreme value theory (EVT). Findings – The main findings of this empirical study reveal that (1) extreme value theory performs better for most indices during the market crisis and (2) VaR models under a normal distribution provide quite poor performance than models with fat-tailed innovations in terms of risk estimation. Research limitations/implications – Since the world is now undergoing the third wave of the COVID-19 pandemic, this study will not be able to assess performance of VaR models during the fourth wave of COVID-19. Practical implications – The results suggest that the Islamic Financial Services Board (IFSB) should enhance market discipline mechanisms, while central banks and national authorities should harmonize their regulatory frameworks in line with Basel/IFSB reform agenda. Originality/value – Previous studies focused on evaluating market risk models using non-Islamic indexes. However, this research uses the Islamic indexes to analyze the VaR forecasting models. Besides, they tested the accuracy of VaR models based on traditional GARCH models, whereas the authors introduce the Spline GARCH developed by Engle and Rangel (2008). Finally, most studies have focus on the period of 2007–2008 financial crisis, while the authors investigate the issue of market risk quantification for several Islamic market equity during the sanitary crisis of COVID-19.

The future of supply chain management (SCM) has dawned, with global supply chains evolving from traditional linear models to dynamic demand-driven systems. Digitalisation and the advanced technologies of the Fourth Industrial Revolution (4IR) are transforming SCM, which is a crucial specialisation area in industrial engineering, and in which industrial engineers play a significant role in meeting SCM human capital requirements. This discussion paper explores SCM's holistic human capital development in the 4IR and its potential for driving sustainable SCM in Africa. The study employed a qualitative research approach, using a literature review to examine SCM competency requirements and development, and proposes holistic approaches and strategies for developing SCM competency. In addition, it aims to provoke enquiry and discussion among academics, practitioners, and policymakers to reimagine SCM competency development. The paper could enhance industrial engineers' specialisation and contributions to SCM. [ABSTRACT FROM AUTHOR]

This paper investigates the effects of the new post‐financial crisis regulatory regime – risk‐based capital ratios (RBC) and stress tests – on banks' off‐balance sheet activities (OBS). We use a panel of US bank holding companies over the period 2001–2018 to examine the relationship between banks' capital levels and OBS activities. Our major finding is that banks significantly reduced their OBS exposure following the introduction of the new capital regulatory framework requirements. In particular, we show that tighter regulatory RBC resulted in a reduction of OBS activities in well‐capitalised banks. Conversely, we find that under‐capitalised banks increased their OBS activities, which suggests the possibility of regulatory arbitrage. [ABSTRACT FROM AUTHOR]

Political influence on bank credit allocation is often viewed as being necessary to address social problems like income inequality. We hypothesize that such influence elicits bank capital responses. Our hypothesis yields three testable predictions for which we find supporting evidence. First, when banks observe election outcomes that suggest greater impending political credit-allocation influence, they reduce capital to increase fragility and deter political influence. Second, banks subject to greater political influence nonetheless increase lending that politicians favor, and household consumption consequently increases. Third, these banks exhibit poorer post-lending performance. Our study has implications for the interaction between politics, household consumption, and bank risk through a specific channel—the interplay between credit-allocation regulation and bank capital structure. This paper was accepted by Victoria Ivashina, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.04056. [ABSTRACT FROM AUTHOR]

The debt brake was introduced to limit electoral spending excesses and ensure (debt) sustainability. Although the debt ratio has been reduced, this has come at the cost of an investment backlog and persistent current account surpluses. The reason for this is the household savings surplus that cannot be utilised domestically. If these savings exceed the capital requirements of companies, either government debt or foreign debt inevitably increases. Consequently, the reduction in the debt ratio in recent years has led to higher foreign debt. In light of low interest rates, higher investments will benefit future generations more than lower debt levels. [ABSTRACT FROM AUTHOR]

Aggregated long and short trading risk positions of speculative assets over time are likely to be unequal. This may be because of irrational decisions of traders and investors as well as catastrophic events that lead to pronounce or salient market crashes. Returns of such assets are therefore more likely to have one polynomial tail and one exponential tail. The generalized hyperbolic (GH) skewed Student‐t distribution is known to handle such situations quite well. In this paper, we use generalized autoregressive conditional heteroscedasticity (GARCH) models to empirically show the superiority of the GH skewed Student‐t distribution in forecasting the extreme tail risks of cryptocurrency returns in the presence of substantial skewness in comparison with some competing distributions. Furthermore, we show the practical significance of the GH skewed Student‐t distribution‐based risk forecasts in computing daily capital requirements. Evidence from the study suggests that the GH skewed Student‐t distribution model tends to be superior in forecasting volatility and expected shortfall (ES) but not value‐at‐risk. In addition, the distribution yields higher value‐at‐risk (VaR) exceptions but surprisingly avoids the red zone of the Basel II accord penalty zones and produces lower but optimal daily capital requirements. Therefore, in the presence of substantially skewed returns having exponential‐polynomial tails, we recommend the use of the GH skewed Student‐t distribution for parametric GARCH models in forecasting extreme tail risk. [ABSTRACT FROM AUTHOR]

Bank capital stands at the heart of banking regulation aimed at curbing bank risk-taking. This paper examines the impact of the Chinese version of Basel III capital regulation on bank risk-taking in China, by applying panel regressions to a large sample of Chinese commercial banks. Our findings indicate that more Tier 2 contingent convertible (CoCo) bonds as capital instruments in the capital composition may paradoxically increase, rather than decrease, bank risk-taking. This effect is robust to instrumental variable estimation. A channel analysis reveals that this unintended effect primarily arises from a leverage effect. This is due to the strong debt attributes of Chinese Tier 2 CoCo bonds, leading to lower core capital levels. Conversely, no evidence is found for the franchise value effect as a significant driver. Lastly, we confirm that capital constraints influence banks' capital adjustments and asset risk allocation aligning with regulatory aims. Our paper has significant policy implications for financial regulation, shedding light on the efficacy of Basel III capital regulation while highlighting the limitations of Tier 2 CoCo bonds as capital instruments in China. [ABSTRACT FROM AUTHOR]

The goal of this research is to investigate whether taxation affects the leverage decisions of banks and if the response of leverage to tax increases depends on profit-shifting opportunities available to individual banks. This topic remains controversial since it is often believed that banking regulation is such an essential driver of leverage choices that little room is left for other considerations studied in the corporate finance literature. Using a difference-in-differences setup encompassing the period from 2006 to 2017, we exploit two exogenous income tax rate increases applicable to 225 Brazilian banks, employing novel identification strategies based on the intricacies of local taxation rules and on the distinctions between individual banks and financial conglomerates. We find stark differences in the behavior of banks around the two events, with a substantial increase in leverage following the first tax hike but no leverage response following the second. In addition, we find no evidence of heterogeneous effects based on the amount of profit-shifting opportunities available to individual banks. Regulatory concerns possibly became more relevant for leverage decisions during the period around the second tax hike because it coincided with the implementation of stricter capital requirements associated with the Basel III framework. Taken together, our results suggest that financial institutions balance considerations regarding the tax-shield benefits of debt against regulatory concerns specific to the banking industry when making capital structure choices. [ABSTRACT FROM AUTHOR]

The study examines the Green Preferential Capital Requirement Programmes of the Magyar Nemzeti Bank, with a special focus on their extension, and presents the information on which the decision is based, the theoretical background of the programmes, the international regulatory environment, the mechanism of the preferential capital requirement and the results of the programmes. The results and feedback from market participants suggest that the preferential capital requirement programmes have a market and institutional development impact across the financial institutions system. From a prudential perspective, the green preferential capital requirement programmes did not have a material negative impact: they reduced banks' capital requirements by up to 0.31 per cent only. In view of the positive results, having been extended for a uniform period, these programmes are expected to continue to encourage green lending. [ABSTRACT FROM AUTHOR]

This paper incorporates mortality shocks in the scenarios for future mortality rates produced by a stochastic multi‐population mortality model. Hereto, the proposed model combines a decreasing stochastic mortality trend with a mechanism that switches between regimes of low and high volatility. During the high volatility regimes, mortality shocks occur that last from one to several years and temporarily impact the mortality rates before returning to the overall mortality trend. Furthermore, we account for the age‐specific impact of these mortality shocks on mortality rates. Actuaries and risk managers can tailor this scenario generator to their specific needs, risk management objectives, or supervisory requirements. The generated scenarios allow (re)insurers, policymakers, or actuaries to evaluate the effects of different catastrophe risk scenarios on, for example, the calculation of solvency capital requirements. [ABSTRACT FROM AUTHOR]

Copyright of Service Industries Journal is the property of Taylor & Francis Ltd 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.)

AbstractFinancial risk has received increasing attention from policymakers and financial institutions. Therefore, the present study examines the relationship between capital and risk for Jordanian banks by using data from 2010–2019. The study employs fixed effect, random effect, GMM, and 3SLS. Our findings show that the capital requirement regulation has a positive impact on capital and risk rates. Moreover, the study also concludes that Jordanian banks hold more than the minimum regulatory capital requirements laid down by Basel II, III, and the CBJ. The banking sector increases its capital adequacy by raising its liquidity and reducing its tendency to take risks. Our results indicate a highly significant negative relationship between Jordanian commercial bank capital and risk. Liquidity risk, ROA and stock market capitalization are positively related to bank capital. The results of the study suggest that Jordanian banks should be involved in higher-risk lending actions and help increase competition in the banking sector.

We study capital requirement regulation in a dynamic quantitative model in which nonfinancial firms, as well as households, hold deposits. A novel general equilibrium channel that operates through firms deposits mitigates the cost of increasing capital requirements. In the calibrated model, (a) the optimal capital requirement is 7.3 percentage points higher than in a comparable model in which all the deposits are held by households, and (b) setting the capital requirement higher than the true optimum is not as costly as one would gauge from the comparable model. We also provide some independent evidence that supports our novel channel. [ABSTRACT FROM AUTHOR]

We analyze the effects of a reform of capital regulation for U.S. insurance companies in 2009. The reform eliminates capital buffers against unexpected losses associated with portfolio holdings of MBS, but not for other fixed-income assets. After the reform, insurance companies are much more likely to retain downgraded MBS compared to other downgraded assets. This pattern is more pronounced for financially constrained insurers. Exploiting discontinuities in the reform's implementation, we can identify the relevance of the capital requirements channel. We also document that the insurance industry crowds outs other investors in the new issuance of (high-yield) MBS. 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]

Purpose: Financial inclusion aims to provide affordable financial services, including banking, loans, equity, and insurance products, to underserved populations. This study aims to examine the moderating effect of a bank's capital adequacy ratio (CAR) on the nexus between financial inclusion (FI) and a bank's financial performance (FP) in the Egyptian setting. Design/methodology/approach: The study uses two empirical linear mixed models (LMM) to test the moderation effect of a bank's CAR on the association between FI and FP. The study sample comprises 360 bank quarter-observations of 10 listed banks in the Egyptian Stock Exchange (EGX) from 2013 to 2021. Findings: The findings show that the bank's CAR strengthens the association between FI dimensions, namely, deposit growth, loan growth, and the number of employees, and the bank's FP with contradicted directions. Research limitations/implications: This study provides policymakers insights into the crucial role of complying with banking regulation, namely, the capital adequacy ratio (CAR) and expanding financial inclusion practices to enhance and improve the bank's FP. Thus, encouraging more strategies and facilities toward financial inclusion. Originality/value: Due to the scarcity of financial inclusion literature in emerging economies, this paper extends FI literature by highlighting the moderation impact of a bank's CAR on the relationship between FI dimensions and FP in the Egyptian banking sector. Consequently, this study clarifies this beneficial relationship, which may have significant implications for restoring the challenges faced by the Egyptian economy following the critical events it went through, which, in turn, impacted the country's poor and vulnerable. [ABSTRACT FROM AUTHOR]

Generally, insurance companies face challenges in determining the Capital Requirement (CR) which is essential for business continuity. This situation could worsen if substantial number and amount of claims are requested by policyholders due to losses from catastrophic events such as floods, tsunamis, and earthquakes. In this paper, we propose a structured model to determine the CR for non-life insurance companies through loss ratios. Firstly, dependence structure among the business lines is modelled using copulas from both Elliptical and Archimedean copulas family with loss ratios from four business lines as the risk factors. The loss ratios are derived from incurred claims and earned premiums data of Malaysia’s non-life insurance businesses, such as Fire insurance, Motor insurance, Marine, Aviation and Transport (MAT) insurance, and Miscellaneous insurance. Subsequently, a combination of popular risk measures such as Value-at-Risk (VaR) and TailValue-at-Risk (TVaR) with a Drawable Vine (D-Vine) copulas model known as hybrid model is developed to estimate insurance companies’ risk capital. Finally, a simulation of Monte Carlo is commanded by calibrating data with our selected model to project the CR. This study contributes to the literature by addressing the problem of determining the appropriate CR for non-life insurance companies, proposing an empirical model based on real non-life insurance company data with a hybrid model built from risk measures and D-Vine copula. [ABSTRACT FROM AUTHOR]

We show that the supply of U.S. life annuities is constrained by interest rate risk. We identify this effect using annuity prices offered by life insurers from 1989 to 2019 and exogenous variations in contract-level regulatory capital requirements. The cost of interest rate risk management—conditional on the effect of adverse selection—accounts for about half of annuity markups, or 8 percentage points. The contribution of interest rate risk to annuity markups sharply increased after the Global Financial Crisis, suggesting new retirees' opportunities to transfer their longevity risk are unlikely to improve in a persistently low interest rate environment. [ABSTRACT FROM AUTHOR]

We analyse the effects of changes in regulatory capital requirements under Basel III on the dynamic evolution of bank shareholder equity over time. Evidence from managerial and regulatory reports shows that bank shareholder equity stands between micro-prudential regulatory capital requirements and managerial pursuit of equity economising strategies. Shareholder value strategies see shareholders as the equity investment remuneration recipients. Micro-prudential regulators, in turn, address them as equity investment providers. With opposing cash streams, one orientation puts the other to a test. The article visualises this conflict by analysing the actual shareholder contribution to the bank equity position in nine case studies of European financial institutions between 2001 and 2017; our evidence-based financial analysis applies an innovative method to data directly extracted from financial statements, in order to measure this equity position evolution and assess bank equity dynamics in light of revised regulatory capital requirements and persistent assurance of shareholder value thriving in managerial reports. The choice of in-depth analysis of a sample of relevant case studies overcomes the absence of detailed data on changes in bank equity in existing databases. [ABSTRACT FROM AUTHOR]

Objective-- The primary aim of this study is to investigate the effect of dynamic working capital (DWC) management on operational efficiency through operating expenses and operating margins across non-financial firms in emerging markets. Methodology/Technique -- This study utilized generalized method of moments (GMM) to evaluate a comprehensive dataset of 438 firms from Indonesia, Malaysia and Thailand for the period 2018 to 2023. Findings -- DWC is measured study using both cash conversion cycle (CCC) and working capital ratio (WCR). Results show that optimized DWC management reduces operating expenses (OER) and increases operating margins (OMR). These findings highlight the importance of efficient working capital practices and liquidity management in emerging markets. Novelty -- This study provides valuable insights for financial managers in emerging countries, advocating focused strategies on working capital cycles to strengthen operational efficiency and profitability. Type of Paper: Empirical [ABSTRACT FROM AUTHOR]

This study aims to shed light on the application of the value-at-risk (VaR) method to estimate operational risks at the level of the External Bank of Algeria (EBA), by taking a comprehensive view of operational risks and studying how to assess them using value at risk, and then trying to apply the latter at the level of the External Bank of Algeria to two events using two different approaches (Monte Carlo and the scheduling process). This was based on the case study approach with the use of the interview as a tool for data collection, and the use of Excel to analyze it. Through this study, it became clear that it is possible to determine the maximum loss that the Algerian External Bank could be exposed to - due to operational risks - for the coming year at different levels of confidence, as well as to determine the capital requirements necessary to cover it, taking into account several requirements to ensure its proper application, foremost of which is the provision of a comprehensive and accurate database, sophisticated and specialized programs and qualified human cadres, all this to create greater flexibility in dealing with volatile risks in the modern business environment. [ABSTRACT FROM AUTHOR]

Since 2016, the Basel Committee on Banking Supervision has regulated banks to switch from a Value-at-Risk (VaR) to an Expected Shortfall (ES) approach to measuring the market risk and calculating the capital requirement. In the transition from VaR to ES, the major challenge faced by financial institutions is the lack of simple but powerful tools for evaluating ES forecasts (i.e., backtesting ES). This article first shows that the unconditional backtest is inconsistent in evaluating the most popular Historical Simulation (HS) and Filtered Historical Simulation (FHS) E S models, with power even less than the nominal level in large samples. To overcome this problem, we propose a new class of conditional backtests for E S that are powerful against a large class of alternatives. We establish the asymptotic properties of the tests, and investigate their finite sample performance through some Monte Carlo simulations. An empirical application to stock indices data highlights the merits of our method. [ABSTRACT FROM AUTHOR]

The main objective is to find out the impact of the Tax Credit (ITC) in the GST structure on the utilitarian capacity and liquidity of micro, small and medium-sized enterprises (MSMEs) in India. Using a coordinated survey to gather information on working capital stocks and GST consistency, 200 MSMEs in Assam, India, were selected to conduct a quantitative assessment. The results show that there are significant areas for the relationship between better working capital conditions and the use of ITS. This suggests that MSMEs can have greater financial flexibility and fewer pay restrictions if they do register ITC claims. According to the practical implications of the assessment, policymakers should deal with the ITC system and offer additional assistance to ensure that MSMEs can fully benefit from the GST. This study is novel because it is uniquely relevant to the state of Assam, offering alternative, progressive views on the specific impact of the goods and services tax on small businesses in that state. [ABSTRACT FROM AUTHOR]

We collected over 1600 estimates on the relationship between bank capital and lending and construct 40 variables to capture the context in which these estimates are obtained. Accounting for potential publication bias, we find that a 1 percentage point (pp) increase in capital (regulatory) ratio results in around 0.3 pp increase in annual credit growth, while changes to capital requirements cause a decrease of around 0.7 pp. Using Bayesian and frequentist model averaging, we show that the relationship between bank capital and lending changes over time, reflecting the post‐crisis period of increasingly demanding bank capital regulation and subdued profitability. We also find that the reported estimates of semi‐elasticities are significantly influenced by the empirical approach chosen by researchers. Our findings suggest that the literature fails to provide policymakers with reliable estimates of the effects of capital regulation on bank lending, and our study offers insights that could help guide future research. [ABSTRACT FROM AUTHOR]

Purpose: The study seeks to evaluate the effect of capital adequacy and competition on the liquidity creation of Kenyan commercial banks. Design/methodology/approach: Unbalanced panel data from 36 Kenyan commercial banks with licenses from 2001 to 2020 is used in the study. The generalized method of moments (GMM), a two-step system, is employed in the investigation. To increase the robustness and prevent erroneous findings, serial correlation tests and instrumental validity analyses are used. The methodology developed by Berger and Bouwman (2009) is used to estimate the commercial banks' levels of liquidity creation. Findings: The study supports the financial fragility-crowding out hypothesis by finding a significant negative effect of capital adequacy on the liquidity creation of commercial banks. The research also identifies a significant inverse relationship between competition and liquidity creation, depicting competition's value-destroying effect. Practical implications: A trade-off exists between capital adequacy and liquidity creation, which must be carefully evaluated as changes in capital requirements are considered. The value-destroying effect of competition on liquidity creation presents a case for policy geared toward consolidating banks' operations through possible mergers and acquisitions. Originality/value: To the best of the authors' knowledge, this is the first study to empirically offer evidence concurrently on the effect of competition and capital adequacy on the liquidity creation of commercial banks in a developing economy such as Kenya. Additionally, the authors employ a novel measure of competition at the firm level. [ABSTRACT FROM AUTHOR]

Companies rely on creditors for funding to operate, making it crucial to have legislative and procedural frameworks that protect the interests of these creditors. This article engages in a comparative analysis of corporate creditors' protection rights on a global scale, emphasizing the Ethiopian case. The study contends that while countries may adopt distinct approaches to safeguard corporate creditors, and variations may exist in the strictness of rules across different strategies, nations have a universal commitment to implement strategies to ensure adequate protection for creditors' interests. Notably, the study underlines that, amid the surge in globalization and cross-border commerce, strategies for corporate creditor protection are progressively aligning and converging worldwide, signaling a positive trend in global business dynamics, and the Ethiopian case is not an exception. This convergence reflects a harmonized effort across nations to establish a consistent and practical framework for protecting corporate creditors' interests in the contemporary globalized economic landscape. [ABSTRACT FROM AUTHOR]

Copyright of Informacion Comercial Espanola Revista de Economia is the property of S.G.E.E.I.P.C., Secretaria de Estado de Comercio, Ministerio de Industria, Comercio y Turismo 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.)

Copyright of Business Intelligence Management Studies is the property of Allameh Tabatabai University 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.)

This paper aimed to investigate the effects of government borrowing banks' capital structure using a sample of banks registered in South Africa from 2012 to 2021. Despite the extensive literature on this association, few prominent researchers have studied this phenomenon in the banking sector. Applying the generalised method of moments (GMM) model, the study established a positive but significant effect on the South African banks' capital structure from total government borrowing, local government borrowing and foreign government borrowing, and capital structure. Contrary to the crowding-out effects detected, the results revealed a positive and significant relationship between government borrowing and banks' capital structure. The crowding-in effect better explains these results, where government borrowing stimulates the local market for goods and services, motivating banks to borrow more in order to meet the demand for loans. Future research should test the cointegrating and causality relationship between government borrowing and bank capital structure. Also, given that the banking sector is constrained by Basel III's capital adequacy requirement, controlling for this factor is critical in future research. [ABSTRACT FROM AUTHOR]

The Federal Reserve is currently in the process of reducing the size of its balance sheet. Major questions, especially in light of the surprising impact of its 2019 reductions, are what its ultimate size will be. Many factors will play into that, including the interaction of bank capital and liquidity requirements with the size of reserves and the impact on the ability of the private market to absorb Treasury debt issuance, the willingness of banks to regularly use the discount window and other market participants to borrow at the standing repo facility, as well as the ongoing risk that a large Fed balance sheet can generate large losses to the System. [ABSTRACT FROM AUTHOR]

Purpose: Climate change poses effect on banking sector's risks and profitability through adaptation of green technology. This study aims to incorporates green technology adaptation in three sectors: green banking, green entrepreneurial innovation (EI) and green human resource (HR), in a model of bank's performance. And determines the impact of climate change on bank risk and profitability. Design/methodology/approach: An assessment of profitability and risk profile of commercial banks is done for 27 European countries for 2013–2022, employing a two-step difference system-generalized method of moments estimation technique with a moderate effect of climate change by including interaction between climate change and green technology adaptation. Findings: The results indicate that green banking increases profitability, reduces credit risk and increases liquidity risk. The results also show that green human resource increases profitability and becomes a source of credit and liquidity risks for the banks. Green EI increases credit risk and liquidity risk, while the effects of green EI on profitability vary with the use of two proxies: Green patents increase profitability and environment, social and corporate governance (ESG) scores decrease profitability. Practical implications: Supportive government initiatives, including subsidies and tax rebates to green borrowers, may take the burden of green transition off the banking sector. Originality/value: This paper observes the impact of green technology adaptation in three sectors: banks, EI and HR, moderated by climate change, adding substantially to the existing literature in conceptual framework and methodology. [ABSTRACT FROM AUTHOR]

The risk of lending money collected from savers is that it leaves banks liable to default with depositors if events (and hence repayment demands) become 'abnormal'. Even though international and national regulation has been introduced to ensure that a certain level of capital is retained by banks, such regulation can be subverted. The current system of international regulation based on the Basel III agreements does not stipulate a standardised approach for inspection frequency or penalty magnitude. This leaves the potential for regulatory arbitrage. The scientific value of an analysis to optimise regulatory efficiency and reduce such arbitrage is therefore considerable. This work therefore assesses the results of the empirical testing of a model based on the Von Neumann–Morgenstern utility function and consequently proposes that this model be used as a basis for standardising capital adequacy limit infraction penalties on an international level to prevent regulatory arbitrage. A survey is undertaken in order to test the responses of participants on the level of penalty which would deter them from regulatory transgression under different theorised levels of profit and probability of discovery. Based on the responses of two distinct subject groups ('bankers' and 'non-bankers') in different scenarios of hypothetical capital adequacy violation, the Von Neumann–Morgenstern utility function is reviewed against empirical results and revealed to show a semi-strong correlation. Lastly, the analysis reveals the striking similarities of the two groups' responses, posing regulatory implications for the industry. [ABSTRACT FROM AUTHOR]