Part A Regulatory Matters, 6 Capital Adequacy, Liquidity, and Large Exposures

2015 ◽  
Author(s):  
Proctor Charles
Keyword(s):  
Credit Risk ◽  
Risk Mitigation ◽  
Banking System ◽  
Operational Risk ◽  
Market Risk ◽  
Capital Adequacy ◽  
Mitigation Techniques ◽  
The Stability ◽  
Basel 3

This chapter examines the current capital adequacy framework and associated provisions designed to ensure that a bank's business is managed on a prudent basis. It also considers other closely allied topics which may affect the stability of the banking system, namely, liquidity and large exposure requirement. Topics discussed include the origins of the Basel Standards; Basel 2 and Basel 3 rules; the calculation of risk-weighted assets; the nature and effect of credit risk mitigation techniques; market risk; operational risk; and reform on Basel 2.

scholarly journals Risk Reporting of the Banking Sector of Bangladesh: A Time Horizon Analysis

2018 ◽  
Vol 10 (1) ◽  
pp. 178
Author(s):  
Niluthpaul Sarker ◽  
Shamsun Nahar
Keyword(s):  
Credit Risk ◽  
Time Horizon ◽  
Banking Sector ◽  
Banking System ◽  
Operational Risk ◽  
Market Risk ◽  
Bank Risk ◽  
Financial Disclosures ◽  
Risk Disclosures ◽  
Risk Reporting

The study focused on the practical scenarios of bank risk disclosures where it is assumed that adequate risk disclosures expand the path of transparency in the marketplace. The reason is that the financial disclosures, including risk items, represent their image of the current and potential investors, and can impact their mentality about investment. The research analyzed the credit risk, market risk and operational risk reporting intensities in their reports. It is noted that the maximum Risk Weighted Assets (RWA) are held for credit risk of the banking system whereas the remaining part of the system utilized by the market risk and operational risk. It is found that the risk for the top five (5) or the top ten (10) banks is extremely high. The concentration symptom of risk is not good as the fewer borrowers occupied the most of the credit.

scholarly journals Bankruptcy Prediction Model of Banks in Indonesia Based on Capital Adequacy Ratio

2019 ◽  
Vol 4 (1) ◽  
pp. 08-16
Author(s):  
Lis Sintha
Keyword(s):  
Credit Risk ◽  
Risk Ratio ◽  
Prediction Models ◽  
Operational Risk ◽  
Market Risk ◽  
Bankruptcy Prediction ◽  
Capital Adequacy ◽  
Financial Ratios ◽  
Minimum Capital ◽  
Capital Adequacy Ratio

Objective - The purpose of this study is to examine the influence of capital on bankruptcy banks. The hypothesis of this research is that capital has an effect on the bankruptcy of a bank. Methodology/Technique - This research examines financial reports between 2005-2014. An econometric model with a logistical regression analysis technique is used. In this study, capital is measured by CAR, taking into account credit risk; CAR by taking into account market risk; Ratio of Obligation to Provide Minimum Capital for Credit Risk and Operational Risk; Ratio of Minimum Capital Adequacy Ratio for Credit Risk, Operational Risk and Market Risk; Capital Adequacy Requirements (CAR). Findings - The results show that the capital adequacy ratio for market ratio and capital adequacy ratio for credit ratio and operational ratio support the research hypothesis and can form a logit model. The test results of CAR by taking into account credit risk, Minimum Capital Requirement Ratio for Credit Risk, Operational Risk and Market Risk and Minimum Capital Provision Obligations do not support the research hypothesis. Novelty – This paper contribute to bank bankruptcy prediction models based on time dimension and bank groups using financial ratios which are expected can influence bank in bankrupt condition. Type of Paper - Empirical. Keywords: Banking crisis, Cost of bankruptcy, Adequacy Ratio, Financial ratios, Prediction models JEL Classification: G32, G33, G39. DOI: https://doi.org/10.35609/jfbr.2019.4.1(2)

scholarly journals Analysis of The Influence of Liquidity, Credit and Operational Risk, in Indonesian Islamic Bank’s Financing for The Period 2007-2013

2015 ◽  
Vol 17 (3) ◽  
pp. 279 ◽  
Author(s):  
Ousmane Diallo ◽  
Tettet Fitrijanti ◽  
Nanny Dewi Tanzil
Keyword(s):  
Credit Risk ◽  
Causal Relationship ◽  
Risk Sharing ◽  
Banking Sector ◽  
Panel Data Analysis ◽  
Banking System ◽  
Liquidity Risk ◽  
Operational Risk ◽  
Islamic Banking ◽  
Islamic Bank

The purpose of this paper is to analyze the influence of credit, liquidity and operational risks in six Indonesian’s islamic banking financing products namely mudharabah, musyarakah, murabahah, istishna, ijarah and qardh, in order to try to discover whether or not Indonesian islamic banking is based on the “risk-sharing” system. This paper relies on a fixed effect model test based on the panel data analysis method, focusing on the period from 2007 to 2013. The research is an exploratory and descriptive study of all the Indonesian islamic banks that were operating in 2013. The results of this study show that the Islamic banking system in Indonesia truly has banking products based on “risk-sharing.” We found out that credit, operational and liquidity risks as a whole, have significant influence on mudarabah, musyarakah, murabahah, istishna, ijarah and qardh based financing. There is a correlation between the credit risk and mudarabah based financing, and no causal relationship between the credit risk and musharaka, murabahah, ijarah, istishna and qardh based financing. There is also correlation between the operational risk and mudarabah and murabahah based financing, and no causal relationship between the operational risk and musharaka, istishna, ijarah and qardh based financing. There is correlation between the liquidity risk and istishna based financing, and no causal relationship between the liquidity risk and musharaka, mudarabah, murabahah, ijarah and qardh based financing. A major implication of this study is the fact that there is no causal relationship between the credit risk and musharakah based financing, which is the mode of financing where the islamic bank shares the risk with its clients, but there is an influence of credit risk toward mudarabah mode financing, a financing mode where the Islamic bank bears all the risk. These findings can lead us to conclude that the Indonesian Islamic banking sector is based on the “risk sharing” system.

scholarly journals Political risk and banking sector performance in Nigeria

2021 ◽  
Vol 16 (3) ◽  
pp. 1-12
Author(s):  
Adefemi A. Obalade ◽  
Babatunde Lawrence ◽  
Joseph Olorunfemi Akande
Keyword(s):  
Credit Risk ◽  
Stock Price ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Banking System ◽  
Political Risk ◽  
Political Systems ◽  
Business Outcomes ◽  
Stage System ◽  
The Stability

Political risk is prevalent in Nigeria and tends to influence business outcomes and the stability of the banking system. As a result of this study, it was determined whether political risk matters to the performance of the banking sector in Nigeria. The effect of political risk on different banks’ performance measures, such as return on assets, return on invested capital, credit risk and stock price, were examined in a panel of 12 selected commercial banks for the period 2006–2018. Data was analyzed using a two-stage system of generalized method of moments. The results provided evidence that the effect of political risk on bank performance depends on the performance proxies. Specifically, political risk was found to be negatively related to banks’ returns on invested capital and positively related to deteriorating credit risk. Hence, it can be concluded that political risk induces poor banking system performance in Nigeria. The study provides a critical insight into the management of a country’s political systems in terms of their potential to create unfavorable conditions for banking systems to thrive.

scholarly journals Impact of Covid-19 on banking business

2021 ◽  
Vol 18 (2) ◽  
pp. 79-90
Author(s):  
Marijana Joksimović ◽  
Jozefina Beke-Trivunac
Keyword(s):  
Credit Risk ◽  
World Health Organization ◽  
Banking System ◽  
World Health ◽  
Global Level ◽  
The World ◽  
Banking Business ◽  
The Stability ◽  
Health Organization ◽  
Positive Effect

The Covid-19 virus pandemic, declared in 2020 by the World Health Organization, has a very large impact on banking business around the world. The most significant problem is the growth of credit risk and the huge growth of demand for liquid assets. The crisis has also increased the risks associated with the digitalization of banking business and brought new risks posed by the work of employees from home. The timely reaction of regulatory authorities, at the global level, and the willingness of the monetary and fiscal authorities of all countries to cooperate have shown a very positive effect on the stability of the banking system.

Risk Behavior, Country Governance, and Bank Stability in Pakistan

2021 ◽  
pp. 185-203
Author(s):  
Hafiz Waqas Kamran ◽  
Abdelnaser Omran
Keyword(s):  
Economic Growth ◽  
Credit Risk ◽  
Risk Behavior ◽  
Commercial Banks ◽  
Financial Stability ◽  
Operational Risk ◽  
Bank Stability ◽  
Regression Methods ◽  
The Stability ◽  
Control Of Corruption

Keeping risk behavior and country governance in observation, this study has investigated the trends in financial stability for a sample of 22 commercial banks in Pakistan while controlling the effect of economic growth. Over the period of 2007 to 2016, the authors have applied OLS, FE, and RE regression methods to investigate which risk and governance factors are influencing the stability measures of the banks. It is found that financial stability in overall banks is affected by credit risk, operational risk, country risk, and financial crisis risk while control of corruption is also affecting ZROA in an adverse way.

Basel I to Basel III: Impact of Credit Risk and Interest Rate Risk of Banks in India

2018 ◽  
Vol 17 (1_suppl) ◽  
pp. S83-S111 ◽  
Author(s):  
Noor Ulain Rizvi ◽  
Smita Kashiramka ◽  
Shveta Singh
Keyword(s):  
Interest Rate ◽  
Credit Risk ◽  
Interest Rates ◽  
Banking System ◽  
Interest Rate Risk ◽  
Theoretical Background ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Rate Risk ◽  
Net Interest Margin

The study explores the theoretical background of Basel III and investigates the drivers of interest rate risk and credit risk of banks in various parlances, namely, pre and post the financial crisis, phases of implementation and ownership on a sample of 36 listed banks in India. The findings indicate that the high capital adequacy requirement (CAR) exhibits a positive relation with gross non-performing assets (GNPAs) and net interest margin (NIM). This is perhaps one of the major drawbacks of Basel implementation, which may become a cause of lower GDP in the future as explained in the findings of the literature. Originality/value: This article is perhaps the first attempt of its kind to empirically examine the bank-specific, macroeconomic variables and link it with the Basel implementation in the Indian banking system for the time period 2002–2015. This study endeavours to enhance the existing empirical research in the field and give insights into the role of various factors on GNPAs and interest rates (with regards to Indian banks).

Part III Investment Banking, 12 The Trading Book

2018 ◽  
Author(s):  
Gleeson Simon
Keyword(s):  
Credit Risk ◽  
Investment Banking ◽  
Market Risk ◽  
Market Risks ◽  
Counterparty Credit Risk ◽  
Basel 3

This chapter begins by discussing market risk in the Basel framework. Market risk was a relative latecomer to the Basel framework. Although the original Accord was signed in 1988, it was only in 1996 that the amendment to incorporate market risks was implemented. Market risk in the trading book is comprised of two significant components: position risk, which measures the risk of a change in the value of assets held; and counterparty credit risk, which measures the riskiness of counterparties to derivatives, options, and other trading positions. The remainder of the chapter covers trading book eligibility under Basel 2.5 and Basel 3.

Foreign exchange positions and risks of czech banks

1997 ◽  
Vol 6 (1) ◽  
Author(s):  
Josef Jílek ◽  
Jiřina Jílková
Keyword(s):  
Foreign Exchange ◽  
Banking System ◽  
Market Risk ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Minimum Capital ◽  
Market Risks ◽  
Current State ◽  
National Bank ◽  
Foreign Exchange Trading

Almost every bank has some degree of foreign exchange exposure. A bank, which holds net open positions in foreign currencies is exposed to the risk that exchange rates may move against it. Net open positions are due to foreign exchange trading positions or because of exposures caused by firm's overall assets and liabilities. Czech National Bank has imposed limits of FX risks and is thus limiting maximum potential loss of the Czech banking system. The paper describes the way how to calculate a bank's open FX positions and the current state of FX positions in selected Czech commercial hanks. The FX risk is a part of market risk. The Capital Adequacy Directive (CAD) and Basle Committee on Banking Supervision in its document Amendment to the Capital Accord to Incorporate Market Risks set out the minimum capital requirements for credit institutions and investment firms with respect to market risk.

scholarly journals Operational control over the financial stability of banking

2020 ◽  
Vol 15 (1) ◽  
pp. 51-58
Author(s):  
Angela Kuznetsova ◽  
Borys Samorodov ◽  
Galyna Azarenkova ◽  
Kateryna Oryekhova ◽  
Maksym Babenko
Keyword(s):  
Credit Risk ◽  
Financial Stability ◽  
Control Charts ◽  
Banking System ◽  
Banking Regulation ◽  
Capital Adequacy ◽  
Operational Control ◽  
Regulatory Capital ◽  
Control Value ◽  
Banking Institutions

Maintaining proper financial stability of each banking institution is one of the main tasks facing the banking system of Ukraine. This enables operational control over the financial strength of banking activities.The purpose of the article is to develop recommendations on the operational control of financial stability of banking and to test them using banking institutions in Ukraine as an example.To execute operational control over the financial stability of banking, economic standards of banking regulation are grouped under the “at least” or “not exceeding” principle. To determine their change over time, Shewhart control charts are proposed.The recommendations were tested through the example of the Ukrainian banking institutions (with state, foreign and private capital). It was found out that in 2017–2019, the following three economic standards of banking regulations were not met: regulatory capital adequacy, high credit risk, and average investments; besides, there were two standards at the limit of control value: the ratio of regulatory capital to total assets and the maximum amount of credit risk per counterparty.To improve the financial status of banking institutions, it is recommended to take organizational and financial measures to change the average value of the relevant economic standards for banking regulation to a level that ensures financial stability.

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