Part II Commercial Banking, 8 The Standardized Approach

2018 ◽  
Author(s):  
Gleeson Simon
Keyword(s):  
High Risk ◽  
Credit Risk ◽  
Financial Institutions ◽  
Risk Mitigation ◽  
Balance Sheet ◽  
Commercial Banking ◽  
Short Term ◽  
Multilateral Development Banks ◽  
Rating Agencies

This chapter focuses on the standardized approach, which is the bedrock of the Basel system. Although many of the largest banks are internal ratings-based banks, there is probably no bank currently existing which does not use some elements of the standardized approach as part of its overall capital calculation. The discussions cover classification of exposures, credit conversion factors, and credit risk mitigation; ratings and rating agencies; exposures to sovereigns; multilateral development banks; exposures to banks and financial institutions; exposures to corporates; exposures to retail customers; commercial mortgage exposures; overdue undefaulted exposures; high-risk exposures; covered bonds; securitization exposures; short-term claims on financial institutions and corporates; fund exposures: and off-balance sheet items.

scholarly journals Analisis Tingkat Kesehatan Bank Syariah Menggunakan Rasio Permodalan, Profitabilitas, Pembiayaan, dan Risiko Kredit

2020 ◽  
Vol 6 (2) ◽  
pp. 367
Author(s):  
Slamet Santosa ◽  
Muhammad Tho'in ◽  
Sumadi Sumadi
Keyword(s):  
Credit Risk ◽  
Financial Institutions ◽  
Financial Statements ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Short Term ◽  
Good Level ◽  
Quantitative Descriptive ◽  
Good Rating

The aims of the research is to find out the soundness level of Islamic banks seen from the capital ratio, profitability, financing, and credit. Islamic banking financial institutions which are to be the focus of this research are Bank Syariah Mandiri (BSM). This research uses quantitative descriptive methods. The data used are the 2014-2018 financial statements. The results of this study indicate that Bank Syariah Mandiri in terms of capital using the CAR ratio shows an average CAR ratio of 14.75%. This means that BSM in terms of capital is ranked very well. Bank Syariah Mandiri in terms of profitability using the ROA and ROE ratio shows an average ROA of 0.53% and ROE of 6%. This means that BSM's ability to generate profits is ranked quite well. Bank Syariah Mandiri in terms of financing using the FDR ratio shows an average FDR ratio of 79.81%. This means that BSM's ability to repay short-term loans and meet agreed financing is at a healthy rating. Bank Syariah Mandiri in terms of credit risk using the NPF ratio shows an average NPF ratio of 3.18%. This means that there is very little credit provided by BSM and the bank is viewed from the aspect of credit risk, including in a good rating. From the results of these research, indicate that the the soundness level of Bank Syariah Mandiri is in a good level of soundness.

scholarly journals Neural Networks in Credit Risk Classification of Companies in the Construction Sector

2018 ◽  
Vol 2 (2) ◽  
pp. 63-77 ◽  
Author(s):  
Aleksandra Wójcicka
Keyword(s):  
Neural Networks ◽  
Decision Making ◽  
Credit Risk ◽  
Financial Institutions ◽  
Real World ◽  
Decision Making Process ◽  
Construction Sector ◽  
Real World Data ◽  
Input Variables

The financial sector (banks, financial institutions, etc.) is the sector most exposed to financial and credit risk, as one of the basic objectives of banks' activity (as a specific enterprise) is granting credit and loans. Because credit risk is one of the problems constantly faced by banks, identification of potential good and bad customers is an extremely important task. This paper investigates the use of different structures of neural networks to support the preliminary credit risk decision-making process. The results are compared among the models and juxtaposed with real-world data. Moreover, different sets and subsets of entry data are analyzed to find the best input variables (financial ratios).

scholarly journals Determinants of Off-Balance Sheet (OBS) Activities: A Case of Selected Retail Banks in Malaysia

2019 ◽  
Vol 14 (1) ◽  
pp. 95-113
Author(s):  
Oladokun Nafiu Olaniyi ◽  
◽  
Shamsul Kamariah Abdullah ◽  
Charmele Ayadurai ◽  
Keyword(s):  
Credit Risk ◽  
Financial Institutions ◽  
Financial Stability ◽  
Generalized Method Of Moments ◽  
Balance Sheet ◽  
Policy Implications ◽  
Risk Transfer ◽  
Credit Risk Transfer ◽  
Balance Sheet Liquidity ◽  
The Stability

The present paper examines factors influencing the Off-Balance Sheet activities of selected commercial banks in Malaysia for the period 2004- 2014. OBS activities are an integral part of financial institutions in response to the needs of businesses for different types of guarantee that have conflicting implications on the stability of financial institutions. Data collected on selected banks from the Bankscope database was analyzed using the Generalized Method of Moments (GMM) regression. Specifically, the study built its analysis on three main recognized determining factors namely: (1) liquidity motives, (2) credit risk transfer motive, (3) profitability motives, and (4) capital arbitrage motive. The findings thus suggest that the selected banks mainly used OBS instruments for capital arbitrage purpose, enhancing operational efficiency and managing loan portfolio risks. The findings further suggested that its usage for capital arbitrage purposes may undermine the regulatory measures of accurately estimating and monitoring the risk of banks. The findings thus offer significant practical and policy implications that can help to enhance financial stability. Keywords: off-balance sheet, liquidity, credit risk transfer, profitability, capital arbitrage

scholarly journals Investigação dos fatores condicionantes do capital de giro em micro e pequenas empresas: uma abordagem por grupos estratégicos

2009 ◽  
Vol 13 (3) ◽  
pp. 51
Author(s):  
Lucas Maia dos Santos ◽  
Marco Aurélio Marques Ferreira
Keyword(s):  
High Risk ◽  
Low Risk ◽  
Small Enterprises ◽  
Short Term ◽  
Conditioning Factors ◽  
Medium Risk ◽  
Micro And Small Enterprises ◽  
Financial Administration ◽  
The City

In a general way, micro and small enterprises (MPEs) are attractive for their rentability, but, because of some deficiencies in short term financial administration, they work in a high risk of bankruptcy. In this context, this paper aimed to identify and analyze the acting of strategical groups of MPEs according to the methodologies and practices in the working capital conduction, taking as reference the city of Viçosa, MG. In this paper, in which it was used the exploratory quantitive approach, 172 MPEs proprietors were interviewed, and this fact, through the factorial analyses followed by the cluster analyses, enables the identification of three groups with distincts characteristics, basing in restrictive aspects of risk of bankruptcy in these enterprises: low risk, medium risk, and high risk. Despite of the fact that it was noticeable a low risk of bankruptcy group, it is evident the importance of the short term financial administration in the region studied, since the maintenance of a correct administration is far from being unannimous because of the classification of nearly 30% of the enterprises in medium and high risk of bankruptcy groups. To finish, the identification of the enterprises with similar strategies and the best practices used in the short term financial administration can be an aplication instrument in the enterprises classified in medium and high risk of bankruptcy, since some conditioning factors of the risk of bankruptcy were identified.

scholarly journals Analysis of The Effect of Capital, Credit Risk, and Liquidity Risk on Profitability in Banks

2018 ◽  
Vol 10 (2) ◽  
pp. 44 ◽  
Author(s):  
Antyo Pracoyo ◽  
Aulia Imani
Keyword(s):  
Credit Risk ◽  
Liquidity Risk ◽  
Commercial Banking ◽  
Capital Adequacy ◽  
Return On Assets ◽  
Panel Data Regression ◽  
Capital Adequacy Ratio ◽  
Data Regression ◽  
Independent Variable

This research aims to analyze the influence of bank-specific component to profitability of banking industry within the classification of commercial banking category 3 (Bank Umum Kegiatan Usaha 3, classification based on Central Bank of Indonesia) in the period of 2011 until 2015. The number of sample for this research are 8 banks or Bank Devisa. Independent variable used for this research are based on the ratio of banks. There are Capital measured by Capital Adequacy Ratio, Credit Risk measured by Non Performing Loan, and Liquidity Risk measured by Loan to Deposit Ratio. While dependent variable Profitability measured by Return On Assets. This research analyzed using Eviews 7 program for Panel Data Regression. The result of this research shows that Capital and Liquidity Risk has insignificance effect to Profitability. Meanwhile, Credit Risk has significant effect to Profitability

scholarly journals The Impact of Business Scale of “Shadow Banking” on Credit Risk of Commercial Banks --Take Ten Domestic Listed Commercial Banks as Examples

2017 ◽  
Vol 9 (5) ◽  
pp. 94 ◽  
Author(s):  
Sijia Wen ◽  
Jishan Ma ◽  
Yawen Pan ◽  
Yuan Qi ◽  
Ruizhi Xiong
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Balance Sheet ◽  
Commercial Banking ◽  
Shadow Banking ◽  
Financial Products ◽  
Banking Business ◽  
The Government ◽  
Definition Of ◽  
The Impact

In this article, according to search for the definition of shadow banking, we can make sure the business kinds of “shadow banking”, discuss the influence of business in “shadow banking” on credit risk of commercial banks, and study the elements which may increase the credit risk of commercial banks by using the semi-annual panel data during 2011-2016 of 10 listed banks. Then we can come to some primary conclusions: The credit risk of commercial banks is related to the shadow banking business. All the survival scale increment of financial products increasing, the size of entrusted loans increasing in increment, and the increasing in the size of guarantee commitments will increase the credit risk of commercial banks. There is no obvious relationship between trust loan business and bank credit risk. Our study is of great significance for the government to supervise the off-balance-sheet business of commercial banks. At the same time, it also fills the vacancy of domestic commercial banking “shadow banking” business empirical research.

scholarly journals VOLATILITY MEASURES, LIQUIDITY AND CREDIT LOSS PROVISIONS DURING PERIODS OF FINANCIAL DISTRESS

2018 ◽  
Vol 06 (02) ◽  
pp. 1850006
Author(s):  
GIULIO ANSELMI
Keyword(s):  
Credit Risk ◽  
Financial Distress ◽  
Implied Volatility ◽  
Risk Measures ◽  
Balance Sheet ◽  
Realized Volatility ◽  
Loan Loss ◽  
Short Term ◽  
Futures Contract ◽  
Lending Activity

In this paper, we investigate the role of liquidity in banks lending activity and how liquidity provision is related to bank’s credit risk and others market-based risk measures, such as bank’s implied volatility skew from options traded on the market and realized volatility from futures contract on LIBOR, during periods of global financial distress. Credit risk is given by the ratio between loan loss reserves and total assets and we find that losses from lending activity force banks to build up new liquidity provisions only during the period of financial distress. Liquidity ratio is given by the sum of cash and short-term assets over total assets and we discovered that credit risk reduces liquidity ratio only in bad times, as this demand for liquid asset is suddenly switched on and the more reserves from loan losses the bank has, the more it cleans its balance sheet from long-term commitments in order to replenish its cash and short-term securities. When we control for market-based risk measures, we evidence that both implied volatility skew and LIBOR’s realized volatility are negatively related with the liquidity ratio and are useful in predicting a distress in bank’s liquidity holdings.

scholarly journals Corporate Board Attributes, Shariah Board Attributes and Credit Rating: Evidence from Islamic Banks of Pakistan

10.26414/a090 ◽  
2021 ◽  
Vol 8 (1) ◽  
pp. 19-34
Author(s):  
Muhammad Mansoor ◽  
Nazima Ellahi ◽  
Qaiser Ali Malik
Keyword(s):  
Financial Institutions ◽  
Credit Rating ◽  
Rating Scale ◽  
Credit Ratings ◽  
Islamic Banks ◽  
Corporate Board ◽  
Short Term ◽  
Rating Agencies ◽  
Shariah Governance

Shariah Governance is an essential characteristic that differentiates Islamic financial institutions from Conventional financial institutions. The study’s purpose is to explore the effect of corporate governance attributes and Shariah board attributes on the long term and short-term credit rating of Islamic banks in Pakistan. The study develops six different models based on corporate board characteristics, Shariah board attributes and credit ratings, and collected data from annual reports of Pakistani Islamic banks for the period 2013- 2019. This study used Long term credit rating scale used by Grassa (2016) and, Ashbaugh-Skaife, Collins, and LaFond (2006), and developed a Short term credit rating scale. The study applied descriptive statistics, correlations and ordered logit regression. The results confirmed that corporate governance and Shariah governance attributes are significantly associated with the long term and short-term credit ratings of Islamic banks. The study concludes that credit rating agencies in Pakistan i.e. PACRA and JC-VIS, and other international credit rating agencies including Fitch, Moody and Standard & Poor’s must consider Shariah governance attributes as key determinants while assigning long term and short term credit ratings to Islamic banks.

Part II Commercial Banking, 11 Netting, Collateral, and Credit Risk Mitigation

2018 ◽  
Author(s):  
Gleeson Simon
Keyword(s):  
Credit Risk ◽  
Risk Mitigation ◽  
Regulatory System ◽  
Commercial Banking ◽  
Third Parties ◽  
Loan Covenants ◽  
The Way

Credit risk mitigation is the umbrella term that covers the various different ways in which an exposure can be reduced for regulatory reporting purposes. This chapter discusses the three ways of doing this: netting against an existing exposure owed by the bank to the borrower; taking (certain types of) collateral; and obtaining cover from third parties in the form of guarantees or similar contracts. Banks use a several techniques to improve their position as lenders which are simply disregarded by the regulatory system, of which the most important are probably loan covenants. No matter how restrictive the undertakings which a borrower gives a bank as to the way in which it manages its business, or the way in which it will repay its loan, this protection will not be recognized for regulatory purposes.

Sign in / Sign up

Export Citation Format

Share Document