scholarly journals Risk attribution and interconnectedness in the EU via CDS data

2020 ◽  
Vol 17 (4) ◽  
pp. 549-567
Author(s):  
R. Giacometti ◽  
G. Torri ◽  
G. Farina ◽  
M. E. De Giuli
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Institutions ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Stress Test ◽  
Machine Learning Techniques ◽  
The European Union ◽  
Set Up

AbstractThe global financial crisis in 2008, and the European sovereign debt crisis in 2010, highlighted how credit risk in banking sectors cannot be analysed from a uniquely micro-prudential perspective, focused on individual institutions, but it has instead to be studied and regulated from a macro-prudential perspective, considering the banking sector as a complex system. Traditional risk management tools often fail to account for the complexity of the interactions in a financial system, and rely on simplistic distributional assumptions. In recent years machine learning techniques have been increasingly used, incorporating tools such as text mining, sentiment analysis, and network models in the risk management processes of financial institutions and supervisors. Network theory applications in particular are increasingly popular, as they allow to better model the intertwined nature of financial systems. In this work we set up an analytical framework that allows to decompose the credit risk of banks and sovereign countries in the European Union according to systematic (system-wide and regional) components. Then, the non-systematic components of risk are studied using a network approach, and a simple stress-test framework is set up to identify the potential transmission channels of distress and risk spillovers. Results highlight a relevant component of credit risk that is not explained by common factors, but can still be a potential vehicle for the transmission of shocks. We also show that due to the properties of the network structure, the transmission of shocks applied to different institutions is quite diversified, both in terms of breadth and speed. Our work is useful to both regulators and financial institutions, thanks to its flexibility and its requirement of data that can be easily available.

GLOBALIZATIONAL AND NORMATIVE DETERMINANTS OF THE IMPROVEMENT OF THE BANKING CREDIT RISK MANAGEMENT IN POLAND

2018 ◽  
Vol 4 (2) ◽  
pp. 257-293
Author(s):  
Beata Domańska-Szaruga ◽  
Dariusz Prokopowicz ◽  
Wioletta Wereda
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Institutions ◽  
Global Financial Crisis ◽  
Stock Exchange ◽  
The European Union ◽  
Credit Risk Management ◽  
Polish Economy ◽  
High Level ◽  
Banking Credit

Since the beginning of the nineties, globalization processes have also been progressing faster in Poland. One of the sectors of the Polish economy in which globalization is proceeding relatively quickly is the financial sector, especially commercial banking. This is related to the acquisition of Polish banks by foreign financial institutions, i.e. the process that most intensively occurred in the 90s of the last century. In addition, Poland's accession in 2004 to the structures of the European Union and the development of electronic banking, the development of technologies and Internet services are factors that have accelerated globalization processes in Poland in recent years. The high level of globalization also applies to the capital market, both from the side of the organization and the nature of transactions made at the Warsaw Stock Exchange. The result of this high level of globalization of financial markets in Poland was the rapid appearance of negative market and cyclical effects of the global financial crisis in the autumn of 2008. The source of this crisis was the acceptance of an excessively high level of credit risk in US investment banks. However, the negative economic consequences of this crisis also quickly appeared in Poland. In addition to the significant depreciation of market valuations of shares of companies listed on the War-saw Stock Exchange, significant macroeconomic effects have also appeared in the form of a decline in the economic growth of the Polish economy. The existing situation indicates the need to continue the improvement of banking prudential regulations and credit risk management instruments in financial institutions.

NPA Management in India: In Search of a New Paradigm?

Paradigm ◽  
2005 ◽  
Vol 9 (2) ◽  
pp. 64-76
Author(s):  
Alok Pandey ◽  
Syamal K. Ghosh
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Institutions ◽  
Management Practices ◽  
Banking Sector ◽  
Credit Derivatives ◽  
Credit Risk Management ◽  
New Paradigm ◽  
Management Techniques ◽  
Rapid Transformation

The banking & financial sector in India is undergoing rapid transformation Banks & financial institutions have amassed huge NPA's (Non-Performing Assets). This paper presents a comparative analysis of NPA management practices in several Asian countries and seeks to find out whether Indian institutions should emulate these. It also looks at several innovations in NPA and credit risk management techniques at banks & financial institutions in the last decade. This paper also analyzes the efficacy of credit derivatives as a tool for credit risk management and insolvency management in banking and financial institutions. It critically analyzes the evolution, growth and usage of these instruments since their introduction in the banking sector in India.

The Future of the European Union

2015 ◽  
Vol 15 (2) ◽  
pp. 213-230 ◽  
Author(s):  
Scheherazade Rehman
Keyword(s):  
European Union ◽  
Sovereign Debt ◽  
Market Failure ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Stress Test ◽  
The European Union ◽  
Fiscal Discipline ◽  
Political Issues ◽  
National Economic

The European Union (EU) currently comprised of 28 countries is heralded as the single most ambitious voluntary supra-national economic, trade and monetary arrangement in recent modern history. The initial impetus of this arrangement began in 1951 with The Coal and Steel Union amongst Germany, France, Belgium, Luxemburg, Netherlands, and Italy and it continues to evolve today. The most ambitious part of this arrangement is the economic and monetary union (EMU) of 19 EU members countries called the Eurozone. This grand experiment has recently faced its biggest stress test with a double dip recession – the 2008 global financial crisis and the 2010+ European sovereign debt crisis. While many experts focused on the lack of fiscal union to resolve the Eurozone’s current problems, the issues are more complex. Systemic risk in Eurozone originates in part from three principal areas: political issues, lack of a fiscal discipline enforcement mechanism, and market failure.

The Banking Union in Europe

2019 ◽  
Author(s):  
Lucia Quaglia
Keyword(s):  
Euro Area ◽  
Sovereign Debt ◽  
Banking Sector ◽  
Debt Crisis ◽  
National Level ◽  
Academic Research ◽  
Banking Union ◽  
The European Union ◽  
On The Road ◽  
Set Up

The banking union is considered to be one of the main steps in economic integration in the European Union. Given the rather recent establishment of this policy, academic research on the banking union does not have a long lineage, yet it is an area of bourgeoning academic enquiry. There are three main “waves” of research on the banking union in political science, which have mostly proceeded in a chronological order. The first wave of scholarly work focused on the “road” to banking union, from the breaking out of the sovereign debt crisis in the euro area in 2010 to the agreement on the blueprint for the banking union in 2012, explaining why it was set up. The second wave of literature explained how the banking union was set up and took an “asymmetric” shape, whereby banking supervision was transferred to the European Central Bank (ECB); however, banking resolution partly remained at the national level, whereas other components of the banking union, namely, a common deposit guarantee scheme and a common fiscal backstop, were not set up. The third wave of research discussed the functioning of the banking union, its effects and defects. The banking union has slowly brought about significant changes in the banking systems of the member states of the euro area and in government–business relations in the banking sector, even though these effects have varied considerably across countries.

scholarly journals Assessment of the European banking regulatory framework in light of its significance for the Republic of Serbia

Bankarstvo ◽  
2020 ◽  
Vol 49 (3) ◽  
pp. 77-101
Author(s):  
Kristijan Ristić ◽  
Aleksandar Živković
Keyword(s):  
European Union ◽  
Financial Markets ◽  
Financial Stability ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Regulatory Framework ◽  
Banking Union ◽  
The European Union ◽  
The Eu

The debt crisis in the European Union is known to be caused by the interdependence of banking and state financial stability, and, together with the non-existence of the fiscal union, it has taken on the existential dimensions of the EU project itself. Under the guise of financial fragmentation within the financial markets of the Eurozone, and from the aspect of the outbreak of the crisis, EU member states resorted to national interventions, thus closing national banking and financial markets, which ultimately resulted in deepened and stronger structural foundation of the crisis and its economic and financial consequences. In that context, the Banking Union is the regulatory and institutional response of the EU after the global financial crisis, about which the first proposals have found a place in institutional controversies since 2012. In addition to the key moment and motive for establishing such an institutional regulatory arrangement, the reason for its creation is more to create a union that is connected with the creation of a single market for financial services and free money circulation, and certainly with the tendency of fuller monetary integration. However, certain questions which arose remained relevant to date: whether these established and instrumentalized frameworks, mechanisms and procedures are in fact sufficient; whether the EU banking union, conceptually designed, really represents banking integration; and whether the "centralized-common" and "sovereign-national" relationships continued in the EU financial architecture, the use of the principle "one measure for all" in the implementation of the Basel III, non-inclusion of all types of banks, and the conflict of emission and supervisory roles of the Central Bank, be a structural conflict in achieving the desired financial stability, which is the ultimate goal. In the broader context of the functioning of the EU, financial stability can also be interpreted as a factor in the survival of the common currency and the European Union itself, regardless of the intertwined contradictions and construction conflict. In this paper, we analyze the functional scope of the regulatory framework for banking supervision in the EU during the five-year existence to date, and finally the effects and impact that this framework has had on the regulatory adjustment of the Serbian banking sector.

scholarly journals Risk Management in Banking Sector: Empirical Data from Commercial Banks in Kosovo

2019 ◽  
Vol 3 (1) ◽  
pp. 6
Author(s):  
Isuf Qabrati
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Institutions ◽  
Commercial Banks ◽  
Banking Sector ◽  
Insurance Companies ◽  
Microfinance Institutions ◽  
Return On Equity ◽  
Equity Risk ◽  
The One

Financial institutions are an important source of financial system functioning of a country and include banks, pension funds, insurance companies, microfinance institutions, and so on. While the risk of financial institutions presents their ability to lose, consequently the change of the actual cash flow from the planned one. Among the major risks facing financial institutions are credit risk, market risk, operational risk and liquidity risk.The purpose of this paper is to investigate the risk management in financial institutions by making a survey with the banking sector, which accounts for most of the financial activities. For this reason, eight financial indicators are used to calculate the financial performance of the eight commercial banks involved in the research, which operate in Kosovo, taking into account the last two years of their operation. From the data derived from these indicators, using the One-Way ANOVA analysis, differences between banks were investigated according to their performance. As a result, it has been found that there are significant differences between banks according to liquidity risk, credit risk, equity risk and profitability risk. In addition, a linear regression model was also performed, which shows that the change in the return on equity (ROE) depends almost entirely on the change in the other seven indicators included. Key words: Commercial Banks,Risks, Liquidity, Credit, Equity, Profitability.

COVID -19 and Indian Financial Markets: A Review

2020 ◽  
Vol 16 (02) ◽  
pp. 1-8
Author(s):  
Kamaldeep Kaur Sarna
Keyword(s):  
Financial Markets ◽  
Financial Institutions ◽  
Financial Services ◽  
Stock Markets ◽  
Global Economy ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Negative Impact ◽  
Management Strategies ◽  
The Impact

COVID-19 is aptly stated as a Black Swan event that has stifled the global economy. As coronavirus wreaked havoc, Gross Domestic Product (GDP) contracted globally, unemployment rate soared high, and economic recovery still seems a far-fetched dream. Most importantly, the pandemic has set up turbulence in the global financial markets and resulted in heightened risk elements (market risk, credit risk, bank runs etc.) across the globe. Such uncertainty and volatility has not been witnessed since the Global Financial Crisis of 2008. The spread of COVID-19 has largely eroded investors’ confidence as the stock markets neared lifetimes lows, bad loans spiked and investment values degraded. Due to this, many turned their backs on the risk-reward trade off and carted their money towards traditionally safer investments like gold. While the banking sector remains particularly vulnerable, central banks have provided extensive loan moratoriums and interest waivers. Overall, COVID-19 resulted in a short term negative impact on the financial markets in India, though it is making a way towards V-shaped recovery. In this context, the present paper attempts to identify and evaluate the impact of the pandemic on the financial markets in India. Relying on rich literature and live illustrations, the influence of COVID-19 is studied on the stock markets, banking and financial institutions, private equities, and debt funds. The paper covers several recommendations so as to bring stability in the financial markets. The suggestions include, but are not limited to, methods to regularly monitor results, establishing a robust mechanism for risk management, strategies to reduce Non-Performing Assets, continuous assessment of stress and crisis readiness of the financial institutions etc. The paper also emphasizes on enhancing the role of technology (Artificial Intelligence and Virtual/Augmented Reality) in the financial services sector to optimize the outcomes and set the path towards recovery.

scholarly journals PANDEMIC CRISIS AND ITS EFFECTS ON BULGARIAN BANKING SYSTEM’S EFFICIENCY

2021 ◽  
Author(s):  
Gergana Mihaylova-Borisova ◽  
Keyword(s):  
Growth Rate ◽  
Interest Rates ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Negative Impact ◽  
Debt Crisis ◽  
Parametric Method ◽  
Banking System ◽  
Data Envelopment ◽  
The Global Financial Crisis

The economies are once again facing the challenges of another crisis related to the spread of coronavirus in 2020. The banking sector, being one of the main intermediaries in the economies, is also affected by the spread of the new crisis, which is different compared to the previous crises such as the global financial crisis in 2008 and the European debt crisis in 2012-2013. Still, the banking sector in Bulgaria suffers from the pandemic crisis due to decelerated growth rate of loans, provided to households and non-financial enterprises, as well as declining profits related to the narrowing spread between interest rates on loans and deposits. The pandemic crisis, which later turned into an economic one, is having a negative impact on the efficiency of the banking system. To prove the negative impact of the pandemic crisis on the efficiency of banks, the non-parametric method for measuring the efficiency, the so-called Data envelopment analysis (DEA), is used.

scholarly journals Drivers of Individual Credit Risk of Retail Customers—A Case Study on the Example of the Polish Cooperative Banking Sector

Risks ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 219
Author(s):  
Rafał Balina ◽  
Marta Idasz-Balina
Keyword(s):  
Credit Risk ◽  
Financial Institutions ◽  
Predictive Power ◽  
Banking Sector ◽  
Key Factors ◽  
Logit Regression ◽  
Local Character ◽  
History Of ◽  
Cooperative Banks

The main aim of the research was to determine the key factors determining the level of credit risk of individual clients (clients in the form of natural persons, excluding companies) on the example of Polish cooperative banks according to the following features: transaction characteristics, socio-demographic characteristics of the customer, the customer’s financial situation, the customer’s history of cooperation with the cooperative bank where they applied for a loan, and the customer’s history of cooperation with other financial institutions. For the research gathered data from 1000 credit applications submitted by individual customers when applying for a credit in five different cooperative banks were used for the analyses. To assess the credit risk of retail clients we use logit regression models, and additionally, score cards were calculated. The results of the research indicate that among the factors with high predictive power there were the features characterizing the client’s history of cooperation with the cooperative bank, where they applied for a loan. It may mean that when assessing credit risk related to financing individual customers, cooperative banks due to their local character, have an advantage over other financial institutions.

scholarly journals Improved forecast assessment for the expected credit losses in credit risk monitoring in commercial banks in the context of international and Russian practices

2020 ◽  
Vol 15 (3) ◽  
pp. 445-457
Author(s):  
Elena Vladimirovna Travkina ◽  
Keyword(s):  
Risk Assessment ◽  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Banking Sector ◽  
Assessment Model ◽  
Financial Instruments ◽  
Credit Risk Assessment ◽  
Ifrs 9 ◽  
Credit Losses

Current banking sector’s performance raises the issues connected with the IFRS 9 Financial Instruments driven transformation of the forecast assessment for the expected credit losses during monitoring and credit risk assessment in commercial banks. In this regard, it becomes important to conduct a comprehensive systematization of the existing Russian and international practices for monitoring and evaluating credit risk in commercial banks. The purpose of the study is to develop a comprehensive approach to the use of an effective model for the impairment of expected losses in banking activities. The novelty of the study includes the enhancement of the tools for the forecast assessment of the expected credit losses among the commercial banks’ clients to improve the credit risk management efficiency. The results from the implementation of IFRS 9 Financial Instruments in the banking area show that modern conditions maintain the uncertainty of the long-term impact of the credit risk on the commercial banks’ performance. What is more, a huge amount of additional information gives significant difficulties, which contributes into the sophisticated calculations of the future credit losses of the banks. It has been justified that a forecast assessment model for the expected credit losses of the clients during the monitoring and bank’s credit risk assessment should be based on the collective or individual ground. The efficient application of the expected losses impairment in the banking performance has been described as a fundamental tool to simulate the expected credit losses to provision for impairment. This model has been shown to be determined by the features of the credit activities and bank portfolio, types of its financial tools, sources of the available information, as well as the applied IT systems. The proposed model validation algorithm for the expected impairment losses could reduce the expected credit losses, decrease the volume of the created assessed reserves, as well as improve the overall commercial bank performance efficiency. Theoretically, the study develops the credit losses risk management in the context of the transformations in the global and Russian banking practices. From the perspective of the practical value, the research gives an opportunity to create an efficient forecast assessment model for the expected credit losses of the commercial banks’ clients, this model contributing into the cost effectiveness of the bank’s credit activities. A promising further research is considered to be aimed at developing the tools for the assessment of the commercial banks’ credit activity results in the context of the adopted changes connected with the introduction of IFRS 9 Financial Instruments in the Russian banking sector.

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