scholarly journals The Impact of Credit Risk Management Indicators on Profitability Attributes: Evidence from the State-Owned Commercial Banks in Bangladesh

2021 ◽  
Vol 8 (3) ◽  
pp. 215-224
Author(s):  
Mst. Hasna Banu ◽  
Md. Sayaduzzaman ◽  
Subhash Chandra Sil
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Banking Sector ◽  
Management Practice ◽  
Management Policy ◽  
Annual Reports ◽  
Credit Risk Management ◽  
Management Indicators ◽  
The Impact

The focal attempt of this research is to identify the consequence of credit risk management indicators on profitableness attributes of state-owned commercial banks functioning in Bangladesh. To attain the objectives of this research study researcher has analyzed four sample banks’ audited annual reports covering the period 2012 to 2016. The study has employed the ANOVA technique, multiple regression model, and correlation matrix to reach the concluding remark as per study objectives. The findings revealed that there is significant and insignificant variation as well as relationship in the different indicators of credit risk management but there is insignificant variation in the different attributes of profitability in the midst of the sample banks within the study period. Furthermore, there is the insignificant impact of the different indicators of credit risk management namely loan and advance, classified loan, unclassified loan, leverage ratio, bad debt, default ratio, cost per loan asset, and cost to income ratio on profitability attributes such as return on assets, return on equity along with net profit percentage of the sample banks over the study period. Hence, the study has recommended that the management of the banking sector should emphasize creating a smart credit management policy as well as lending guidelines to formulate the suitable credit risk management practice to meet the demand of loans applicants properly.

Prediction of Return on Equity Using Capital Adequacy Ratio in Commercial Banks: An ANOVA Table Analysis

2014 ◽  
Vol 4 (2) ◽  
Author(s):  
Meenakshi Chaturvedi
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
News Media ◽  
Commercial Banks ◽  
Banking Sector ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Return On Equity ◽  
The Impact

The purpose of this study is to predict the impact of Credit Risk Management on Profitability of Commercial Banks in India. Data is obtained from different news media, publication and sample banks to describe present scenario of banking sector in India. To analyze the profitability and credit risk management of banks after implementing the Basel II standard, we collected secondary data of ten years (2003 to 2013) from the annual report of banks. Few bar-diagrams have been drawn to compare the performance among six banks. While, to fulfill the research objective, ROE, and CAR is calculated to evaluate the Credit Risk of the Banks. Using these two ratios, researcher constructed the regression model statistics.

scholarly journals The Impact of Credit Risk Management on the Commercial Banks Performance in Nigeria

2014 ◽  
Vol 3 (5) ◽  
pp. 295-306
Author(s):  
Idowu Abiola ◽  
Awoyemi Samuel Olausi
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Commercial Banking ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Financial Reports ◽  
Return On Equity ◽  
Management Indicators ◽  
The Impact

Credit risk management in banks has become more important not only because of the financial crisis that the industry is experiencing currently, but also a crucial concept which determine banks’ survival, growth and profitability. The aim of this study is to investigate the impact of credit risk management on the performance of commercial banks in Nigeria. Financial reports of seven commercial banking firms were used to analyze for seven years (2005 – 2011). The panel regression model was employed for the estimation of the model. In the model, Return on Equity (ROE) and Return on Asset (ROA) were used as the performance indicators while Non-Performing Loans (NPL) and Capital Adequacy Ratio (CAR) as credit risk management indicators. The findings revealed that credit risk management has a significant impact on the profitability of commercial banks’ in Nigeria.

An Investigation of Credit Risk Management Strategies of Private Commercial Banks of Bangladesh

2014 ◽  
Vol 2 (2) ◽  
pp. 77-87
Author(s):  
Abu Hanifa Md. Noman ◽  
Md. Amzad Hossain ◽  
Sajeda Pervin
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Management Practices ◽  
Management Practice ◽  
Management Strategies ◽  
Third Party ◽  
Primary Data ◽  
Credit Risk Management ◽  
Risk Management Strategies

Objective - The study aims to investigate credit risk management practices and credit risk management strategies of the local private commercial banks in Bangladesh. Methodology -The investigation is conducted based on primary data collected from a set of both closed end and open end questionnaire from 23 out of 39 local private commercial banks in Bangladesh. Descriptive statistics has been used in processing the data and interpreting the results. Findings - The results reveal that credit risk management practice of the sample banks is sound which is attributed to the appropriate implementation of Basel II and credit risk management guidelines the country's central bank. The findings further show that use of Credit risk grading is most popular and effective criteria for measuring the borrowing capacity of the borrowers. In order to control credit risk and preventing losses from credit exposure banks give more focus on collateralization, accurate loan pricing and third party guarantee. Loan is monitored properly and credit reminder is given to the client if principal and interest remain outstanding for three months. The study further reveals that lack of experienced and trained credit officers, lack of genuine market information and Lack of awareness regarding non-genuine borrower are the most important problems of current credit risk management practices in Bangladesh. Novelty - To the best of the knowledge of the authors the study is the first that investigates credit risk management strategies of private commercial banks, especially on Bangladesh. Type of Paper - Empirical Keyword : Bangladesh; Commercial Bank; Credit risk; Credit risk management; Credit risk management strategies.

Enterprise risk management and sustainability of banks performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Babajide Oyewo
Keyword(s):  
Risk Management ◽  
Banking Sector ◽  
Management Practice ◽  
Enterprise Risk Management ◽  
Annual Reports ◽  
Banking Reform ◽  
Content Type ◽  
Enterprise Risk ◽  
The Impact

PurposeThis study investigates firm attributes (namely level of capitalisation, scope of operation, organisational structure, organisational lifecycle, systemic importance and size) affecting the robustness of enterprise risk management (ERM) practice, the extent to which ERM affects the performance of banks and the impact of ERM on the long-term sustainability of banks in Nigeria. This was against the backdrop that the 2012 banking reform was a major regulatory intervention that mainstreamed ERM in the Nigerian banking sector.Design/methodology/approachThe study employed a mixed methodology of content, trend and quantitative analyses. Ex post facto research design was deployed to analyse performance differential of banks, with respect to the implementation of ERM, over a 10-year period (2008–2017). A disclosure checklist developed from the COSO ERM integrated framework was used to assess the robustness of ERM by content-analysing divulgence on risk management in published annual reports. The banking reform periods were dichotomised into pre- (2008–2012) and post- (2013–2017) reform periods. Jonckheere–Terpstra test, independent sample t-test and Mann–Whitney test were applied to analyse a total of 1,036 firm-year observations over the period 2008–2017.FindingsResult shows that bank attributes significantly affecting the robustness of risk management practice are level of capitalisation, scope of operation, systemic importance and size. Performance of banks improved slightly during the post-2012 banking reform period. This suggests that as banks consolidate on the gains of ERM, benefits of the regulatory policy on risk management may be realised in the long run. Result also shows that ERM enhances long-term performance, connoting that effective risk management could serve as a competitive strategy for surviving turbulence that typically characterises the banking sector.Practical implicationsThe emergence of level of capitalisation, scope of operation, systemic importance and size as determinants of ERM provides empirical evidence to support the practice of reviewing the capital requirements for banking business from time to time by regulatory authorities (i.e. recapitalisation policy) as a strategy for managing systemic risk. Top management of banks may consider instituting mechanisms that will ensure risk management is given prominence. A proactive approach must be taken to convert risks to opportunities by banks and other financial institutions, going forward, to cope with the vicissitudes of financial intermediation.Originality/valueThe originality of the study stems from the consideration that it provides some new insights into the impact of ERM on banks long-term sustainability in a developing country. The study also contributes to knowledge by exposing the factors determining the robustness of risk management practice. The study developed a checklist for assessing ERM practice from annual reports and other risk management disclosure documents. The paper also adds to the scarce literature on risk governance and risk management.

scholarly journals Credit Management and Issues of Bad Debts: An Empirical Study of Listed Deposit Banks in Nigeria

2020 ◽  
pp. 32-49
Author(s):  
Peter E. Ayunku ◽  
Akwarandu Uzochukwu
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Random Effect ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Data Set ◽  
Credit Management ◽  
Loan Loss Provision ◽  
The Impact

This study examines the impact of credit management on firm performance amidst bad debts, among Nigerian deposit banks. Five hypotheses were formulated following the dependent variables of Return on Asset and Tobin Q. The independent variables employed for this study include: Loan Loss Provision, Loan to Deposit Ratio, Equity to Asset Ratio, and Loan Write off. This study is based on ex-post facto research design and employed a panel data set collected from fourteen (14) commercial banks over six years ranging from 2014 to 2019 financial year. We analyzed the data set using descriptive statistics, correlation and Ordinary Least Square Regression Technique. The random effect models established that non-performing loan, loan loss provision and equity to asset impact significantly on banks’ performance in both Return on Asset and Tobin-Q models. This suggests that the sampled banks need to establish efficient arrangements to deal with credit risk management. In all, credit risk management indicators considered in this research are important variables in explaining the profitability of Nigerian commercial banks. However, based on the outcome from the empirical analysis, the study carefully recommends that investors and shareholders in these banks should be aware of the possible use of provisions for losses on non-performing loans by managers for smoothening of profits. The shareholders specifically should be ready to meet optimal agency costs to reduce the manager's information asymmetry by hiring competent internal and external auditors.

scholarly journals The Threats of Unsystematic Risks in Jordanian Commercial Banking Sector

2017 ◽  
Vol 9 (9) ◽  
pp. 175
Author(s):  
Ghaith N. Al-Eitan ◽  
Ismail Y. Yamin
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Banking Sector ◽  
Fixed Effect Model ◽  
Commercial Banking ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Effect Model ◽  
The Impact ◽  
The Empirical Analysis

The objective of this study is to empirically examine the effect of unsystematic risks on the performance of commercial banks in Jordan, using panel data for the period of 10 years (2005-2015). The study uses earning per share and dividends as dependent variables to represent Banks’ performance. The empirical analysis based on the fixed effect model selected on the basis of Hausman test. The results indicate that the impact of Non-performing loans on commercial banks’ dividends is positive and significant while the impact of capital adequacy is negative and statistically significant on dividends. The results indicate that the credit risk, liquidity risk, non-performing loan and capital adequacy have significant effect on earnings per share and the effects are negative as expected. Based on the study it is recommended that the Jordanian commercial banks needs enhance the process of credit risk management to determine loan defaulter and impose the appropriate legal action against them.

scholarly journals Does Credit Risk Management affect the Financial Performance of Commercial Banks in Kosovo?

2018 ◽  
Vol 7 (2) ◽  
pp. 49-57
Author(s):  
Rrustem Asllanaj
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Multiple Regression ◽  
Commercial Banks ◽  
Multiple Regression Model ◽  
Capital Adequacy ◽  
Regression Equations ◽  
Credit Risk Management ◽  
The Impact

This study analyses the impact of credit risk management on financial performance of commercial banks in Kosovo, and comparing the relationship between the determinants of credit risk management and financial performance by using CAMEL indicators. Panel data of 85 observations from 2008 to 2012 of ten commercial banks was analysed using multiple regression model. Findings through multiple regression analysis are presented in forms of tables and regression equations. The study also elaborates whether capital adequacy, asset quality, management efficiency, earnings and liquidity have strong or weak relationship with financial performance of commercial banks. The study concludes that CAMEL model can be used as a system of assessment and rating of credit risk management by commercial banks in Kosovo.

scholarly journals An Assessment of the Impact of Credit Risk Management and Performance on Loan Portfolio at International Bank Liberia

2021 ◽  
pp. 55-64
Author(s):  
Alvin Boye Dolo
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
The Body ◽  
Management Policy ◽  
Credit Risk Management ◽  
Loan Portfolio ◽  
Net Worth ◽  
International Bank ◽  
And Performance ◽  
The Impact

This research entitled “An Assessment of the impact of credit risk management and performance on loan portfolio at International Bank Liberia Limited from 2015-2017 contributed to the body of knowledge to the beneficiaries. It findings are also important for the Central Bank to use in monitoring credit scoring and history across all commercial bank with in the country. This study was quantitative in nature, and involves mathematical modelling in order to determine the effect of changes in interest rates on profit and net worth of the sampled banks. This study uses panel data and assumes that the effect of interest rate changes vary across the observations and over time, therefore the use of stochastic econometric (panel regression analysis) process is appropriate. The population of the study will consist of 150 credit staffs and other staffs of IBLL. The study adopt a census study and collect data for two years from 1st January, 2015 to 31st December, 2017 and the researcher used sample out 85 respondents representing 57% as the sample size from the population of 150 persons from the study area. The findings reveals that it was established from the study that 25% of the respondents who were picked from the institution agreed that credit score is one of the major system used by the bank in determining loan and 32% selected credit history. It was also observed that that bank operate within a defined credit granting criteria. The findings also show that IBLL established a system of independent, ongoing assessment of the bank‟s credit risk management. It was proven that 48% of the respondents agree while 41% strongly agree. It was established that IBLL have a loan risk management policy in place. This policy is very crucial in providing guidelines on how to manage the various risks the bank encounter in their lending activities. Members of the bank and regulators are those responsible for the formulation of the credit policy with less input from employees.

The relationship between credit risk management and non-performing assets of commercial banks in India

2019 ◽  
Vol 45 (3) ◽  
pp. 399-412 ◽  
Author(s):  
Sirus Sharifi ◽  
Arunima Haldar ◽  
S.V.D. Nageswara Rao
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Management Practices ◽  
Primary Data ◽  
Credit Risk Management ◽  
Content Type ◽  
Indian Economy ◽  
Indian Banks ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of credit risk components on the performance of credit risk management and the growth in non-performing assets (NPAs) of commercial banks in India. Design/methodology/approach The data are obtained from primary and secondary sources. The primary data are collected by administering questionnaire among risk managers of Indian banks. The secondary data on NPAs of Indian banks are from annual reports and Prowess database compiled by the Centre for Monitoring Indian Economy. Multiple linear regression is used to estimate the models for the study. Findings The results suggest that the identification of credit risk significantly affects the credit risk performance. The results are robust as credit risk identification is negatively related to annual growth in NPAs or loans. There is evidence in support of a priori expectation of better credit risk performance of private banks compared to that of government banks. Practical implications The study has implications for Indian banks suffering from a high level of losses due to bad loans. In addition, it will have implications for the implementation of new Basel Accord norms (Basel III) by the Reserve Bank of India. Social implications The high and rising level of NPAs will have adverse consequences for credit flow in the economy in the absence of appropriate intervention by government and central bank in the form of changes in institutional and regulatory infrastructure. The problems in banking and financial services sector will lead to lower industrial and aggregate economic growth, and lower (or negative) growth in employment. Originality/value There is little evidence on credit risk management practices of Indian banks, and its relationship with credit risk performance and NPA growth. The need for an effective risk management system to manage credit risk assumes importance and urgency in the context of high and rising NPAs of Indian banks, and the consequences for the Indian economy.

scholarly journals The Relationship between Credit Risk Management and Profitability between Investment and Commercial Banks in Palestine

2015 ◽  
Vol 7 (11) ◽  
pp. 163
Author(s):  
Mohammed Bayyoud ◽  
Nermeen Sayyad
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Regression Model ◽  
Commercial Banks ◽  
Banking Sector ◽  
Structured Interview ◽  
Investment Banks ◽  
Credit Risk Management ◽  
Bank Managers ◽  
The Relationship

<p>Credit risk management is one of the vital aspects of the financial institutions regardless of their nature. For a more comprehensive analysis of Palestine banking sector, investment and commercial banks both were chosen for assessing the relationship between credit risk management and profitability. Explanatory design of study helped in assessing the casual effect relationship between the research variables. The regression model was used for gathering quantitative findings while structured interview from bank managers was selected for gathering qualitative data. The findings of the regression model in the current study confirmed that there is no consequence of credit risk on profitability of commercial and investment banks of Palestine. Additionally, it was also found that there is no difference between the Palestinian commercial and investment banks concerning the relationship.</p>

Sign in / Sign up

Export Citation Format

Share Document