scholarly journals Capital Adequacy In The Albanian Banking System; An Econometrical Analysis With A Focus On Credit Risk

2016 ◽  
Vol 12 (1) ◽  
pp. 271
Author(s):  
Kledian Kodra ◽  
Drini Salko
Keyword(s):  
Central Bank ◽  
Credit Risk ◽  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Regulatory Capital ◽  
Nonperforming Loans ◽  
Bank Group ◽  
The Relationship

This paper examines the relationship between regulatory capital and credit risk within the Albanian banking sector. We estimate an equation which tries to capture the relationship among regulatory capital, nonperforming loans, profitability, total assets, liquidity and the level of growth in the GDP. The data is grouped and the analysis is performed in accordance with three banking groups. The grouping of the banks is in accordance with their size in the system and reflects the grouping used by the central bank for regulatory purposes. The model developed can be used to forecast required levels of CAR and it suggests that in the Albanian banking system, as well as for each bank group separately, the relationship between CAR and NPL is negative, the relationship between CAR and assets is negative for an unchanged level of regulatory capital, the relationship between CAR and profitability is positive, whereas the relationship between CAR and liquidity is negative. The effects of the change in the level of NPL on CAR are of a longer term nature, whereas the effect of the change in the level of assets on CAR is more of a shorter term nature.

scholarly journals Bank Regulation and Level of Non performing Loans in Commercial Banks in Nakuru County Kenya

2020 ◽  
Vol 2 (2) ◽  
pp. 59-76
Author(s):  
Geoffrey Indeje Muhanji ◽  
Joseph Theuri
Keyword(s):  
Central Bank ◽  
Commercial Banks ◽  
Bank Regulation ◽  
Capital Adequacy ◽  
Liquidity Management ◽  
Macroeconomic Factors ◽  
Nonperforming Loans ◽  
Management Efficiency ◽  
Asset Quality ◽  
The Relationship

The study sought to determine the effect of bank regulation and level of nonperforming loans in commercial banks in Nakuru County Kenya. The specific objectives of the study were to explore the effect of capital adequacy on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to find out the effect of asset quality on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to evaluate the effect of liquidity management on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to examine the effect of management efficiency on the level of nonperforming loans in commercial banks in Nakuru County Kenya and to determine the moderating effect of macroeconomic factors on the relationship between bank regulation and level of nonperforming loans. The literature review focused on portfolio theory of investment, capital asset pricing theory and the capital buffer theory of capital adequacy. The primary data was collected using structured questionnaires and secondary data was collected from the banking survey 2017 and central bank of Kenya annual supervisory reports. The study employed multiple linear regression analysis and the finding revealed that there exist a negative and statistically insignificant relationship between capital adequacy and non-performing loans. It was also observed that there exist a negative and statistically insignificant relationship between liquidity management and non-performing loans. On the other hand, there exist a positive and statistically significant relationship between asset quality and non-performing loans. Similarly, there exist a positive and statistically insignificant relationship between management efficiency and non-performing loans. Finally, the findings indicated that macroeconomic factors have moderating effect on the relationship between bank regulations and non-performing loans in commercial banks in Nakuru County. It was concluded that asset quality positively influences non-performing loans while management efficiency influence positively the non-performing loans. Similarly, liquidity management exerts a negative influence on non-performing loans. Finally, capital adequacy influence negatively on non-performing loans. The study recommends that Central Bank of Kenya should regularly access lending behavior to ensure compliance with banking regulations to avoid increasing incidences of non-performing loans. In addition, Central Bank of Kenya should closely monitor banks with deteriorating asset quality. Further, Central Bank of Kenya should strictly monitor the economic sector and ensure that banks provide adequate provisions for loans to mitigate risks of default. Furthermore, banks should maintain a good balance on deposits and lending out loans and adhere to regulators decisions about monetary policies. Finally, banks should increase the operational efficiency of operation weakness and improve corporate governance on the sanction of loans and Central Bank of Kenya should focus on managerial performance in order to detect banks with potential increases in non-performing loans.

scholarly journals Analysis of the Relationship between Credit Risk and Bank Performance of Some Commercial Banks in Ghana

2020 ◽  
Vol 8 (2) ◽  
pp. 34-51
Author(s):  
Joseph Acquah ◽  
Yusif Arthur ◽  
Damianus Kofi Owusu
Keyword(s):  
Credit Risk ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Quantitative Research ◽  
Banking Sector ◽  
Sampling Technique ◽  
Capital Adequacy ◽  
Research Approach ◽  
Independent Entity ◽  
The Relationship

This study analysed the relationship between credit risk and bank financial performance of selected commercial banks in Ghana for the period 2010 - 2014, using the banks respective financial statements. The study employed the quantitative research approach. The sample was Ghana Commercial Bank Limited, Zenith Bank Limited, UT Bank and Ecobank Plc. These four banks were selected using stratified random sampling technique. The data were primarily secondary and quantitative in nature. Both descriptive and inferential statistics were used to analyse the data. When the banks were compared, Ghana Commercial Bank Limited was found to be more liquid than Zenith Bank Limited. That of Zenith bank was also higher than UT bank and Ecobank Plc .However, profitability indicators showed that Zenith Bank Limited and Ecobank Plc utilised its assets better than Ghana Commercial Bank Limited and UT bank resulting in the two banks higher scores over the period. The findings show further that Ghana Commercial Bank Limited showed higher ratios for investment in the future while Zenith Bank Limited showed higher ratios of higher dividend immediately. However, Zenith Bank Limited capital adequacy level was far higher than the legal requirement of Banking sector while its counterparts fell slightly below it in terms of average. Based on the main findings and conclusions, it is recommended that Ghana Commercial Bank Limited should find a means of reducing its expenditure, introducing prudent assets management, should be cautious when assisting government in time of economic difficulty, and operate as an independent entity.

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.

scholarly journals REGULATORY CAPITAL MODELING FOR CREDIT RISK

2015 ◽  
Vol 18 (05) ◽  
pp. 1550034 ◽  
Author(s):  
MAREK RUTKOWSKI ◽  
SILVIO TARCA
Keyword(s):  
Credit Risk ◽  
Banking Sector ◽  
General Setting ◽  
Capital Adequacy ◽  
Dependence Structure ◽  
Regulatory Capital ◽  
Loss Distribution ◽  
Portfolio Loss Distribution ◽  
Portfolio Loss ◽  
Irb Approach

The Basel II internal ratings-based (IRB) approach to capital adequacy for credit risk plays an important role in protecting the banking sector against insolvency. We outline the mathematical foundations of regulatory capital for credit risk, and extend the model specification of the IRB approach to a more general setting than the usual Gaussian case. It rests on the proposition that quantiles of the distribution of conditional expectation of portfolio percentage loss may be substituted for quantiles of the portfolio loss distribution. We present a more compact proof of this proposition under weaker assumptions. Then, constructing a portfolio that is representative of credit exposures of the Australian banking sector, we measure the rate of convergence, in terms of number of obligors, of empirical loss distributions to the asymptotic (infinitely fine-grained) portfolio loss distribution. Moreover, we evaluate the sensitivity of credit risk capital to dependence structure as modeled by asset correlations and elliptical copulas. Access to internal bank data collected by the prudential regulator distinguishes our research from other empirical studies on the IRB approach.

scholarly journals Banking sector reforms in Kenya: Progress and challenges

2012 ◽  
Vol 10 (1) ◽  
pp. 88-96
Author(s):  
Sheilla Nyasha ◽  
Nicholas M. Odhiambo
Keyword(s):  
Central Bank ◽  
Financial Institutions ◽  
Commercial Banks ◽  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Financial Systems ◽  
African Countries ◽  
High Interest Rate ◽  
The Past

This paper gives an overview of the banking sector in Kenya; it highlights the reforms since the country‟s independence in 1963; it tracks the growth of the banking sector in response to the reforms implemented over the past four decades; and finally, it highlights the challenges facing the banking sector in Kenya. The country‟s banking sector consists of more than 40 commercial banks, with the Central Bank of Kenya, which is the country‟s central bank, at the apex. Since the 1980s, the Kenyan government has implemented a number of banking sector reforms – in order to safeguard and improve the banking sector. The response to these reforms by the banking sector has been varied. As a result of these reforms, there has been a shift in the dominance from the State-owned banks to the private commercial banks. There has also been an improvement in the Central Bank‟s oversight of the financial institutions, and an enforcement of the banks‟ capital-adequacy requirements. By the standards of African countries, Kenya currently has one of the most developed banking systems in Africa. The country has enjoyed a substantial bank-based financial sector development over the years, and its institutional framework has also grown stronger. However, like many other developing countries‟ financial systems, the Kenyan banking system still faces wide-ranging challenges, such as high interest rate spreads and financial inclusion challenges

scholarly journals Methodological Aspects of the Financial Stability of Iraq’s Banking System

2020 ◽  
pp. 208-218
Author(s):  
Haider H. Dipheal Shubbar ◽  
Keyword(s):  
Central Bank ◽  
Financial Distress ◽  
Financial Stability ◽  
Banking Sector ◽  
System Development ◽  
Banking System ◽  
Capital Adequacy ◽  
Financial Monitoring ◽  
High Level ◽  
Methodological Aspects

This article discusses the methodology the Central Bank of Iraq developed to assess the financial stability of commercial banks. This topic is relevant because, in modern economic conditions, the Central Bank of Iraq is forced to tighten requirements to credit institutions. Banks use not only their own funds, but also the funds of the population, legal entities, so they must be reliable and stable. Financial stability directly characterises the reliability of banks, so it must be strictly controlled. The Central Bank of Iraq has created its own methodology for assessing the financial stability of the banking sector. Its use should improve the quality of the created banking system development strategies and the financial monitoring of these strategies’ implementation. The Iraqi banking sector has a high level of capital adequacy, which helps to reduce the likelihood of financial distress in it.

Determinants of Nonperforming Loans in Emerging Markets: Evidence from the MENA Region

2019 ◽  
Vol 22 (04) ◽  
pp. 1950026
Author(s):  
Imad Jabbouri ◽  
Maryem Naili
Keyword(s):  
Emerging Markets ◽  
Credit Risk ◽  
Banking Sector ◽  
Emerging Countries ◽  
Capital Adequacy ◽  
Operating Efficiency ◽  
Mena Region ◽  
Panel Data Estimation ◽  
Nonperforming Loans ◽  
Bank Managers

Credit risk has severe impacts on banks’ performance, leading to financial and economic distress. To highlight this interesting issue, this study explores bank-specific and macroeconomic determinants of banks’ credit risk, denoted by the level of nonperforming loans (NPLs). The study includes 98 banks from 10 Middle East and North African (MENA) emerging countries spanning the period between 2003 and 2016. The analysis employs panel data estimation technique. Our results reveal that bank size, capital adequacy ratio, bank operating efficiency, profitability, GDP growth, unemployment, inflation, and public debt represent the main determinants of NPLs in MENA emerging markets. The results of this research have practical implications for bank managers, regulators, investors, and financial analysts. This study provides significant insights on the determinants of NPLs, which will allow bank managers to design credit policies that minimize borrowers’ defaults. The findings of the study are useful to policy makers to establish new and reinforce existing regulations to maintain the steadiness of the banking sector in MENA emerging countries.

Strategies of Russian Banks in the Context of Economic Sanctions and the Pandemic Shock

2021 ◽  
Vol 27 (4) ◽  
pp. 304-310
Author(s):  
O. L. Bezgacheva ◽  
V. N. Samotuga
Keyword(s):  
Central Bank ◽  
Russian Federation ◽  
Financial Stability ◽  
Banking Sector ◽  
Banking System ◽  
Equity Capital ◽  
Capital Adequacy ◽  
Russian Government ◽  
Capital Adequacy Ratio ◽  
The Russian Federation

Aim. The presented study aims to examine measures taken by the Russian government, actions of the Central Bank of the Russian Federation (CBR, Bank of Russia), and strategies of banks in the context of continuing anti-Russian sanctions and the coronavirus pandemic while also assessing whether they are sufficient to strengthen the country’s banking system.Tasks. The authors determine what measures are taken by the Central Bank of the Russian Federation to maintain the financial stability of the banking sector and an acceptable equity capital adequacy ratio; analyze the strategies of banks and the way they are adjusted in the context of sanctions and the pandemic; show the role of subordinated bonds as a source of the banks’ own funds.Methods. This study uses general scientific methods of cognition to analyze the problems of the banking system as well as the policy of the Central Bank of the Russian Federation and the Russian government aimed at overcoming the recession and maintaining financial stability in the banking sector.Results. As a result of unconventional decisions taken by the Central Bank of the Russian Federation, the total assets of the banking sector exceeded the pre-crisis level by the beginning of this year. Optimistic forecasts indicate that banks are adapting to changing conditions, adjusting their strategies accordingly.Conclusions. The Russian banking system passed the endurance test during the pandemic, generally maintaining an acceptable capital adequacy ratio. Due to large-scale government support, the economic decline in Russia has slowed down, and there are signs of recovery growth. Banks entered 2021 with an obvious headstart. Almost all banks in the top 200 made a profit.

scholarly journals Assessment of the banking system financial stability based on the differential approach

2018 ◽  
Vol 13 (3) ◽  
pp. 120-133 ◽  
Author(s):  
Anzhela Kuznyetsova ◽  
Nataliya Pogorelenko
Keyword(s):  
Central Bank ◽  
Financial Stability ◽  
Banking Sector ◽  
Dynamic Change ◽  
Banking System ◽  
Stability Index ◽  
Capital Adequacy ◽  
Financial Risks ◽  
Differential Approach ◽  
Multiplicative Convolution

In this paper, the banking system financial stability is assessed based on the differential approach. The differential approach provides for taking into account the specificity of the banking system structural organization (from the standpoint of the central bank and the second-level banks) and the sets of financial stability indicators, different in terms of their structure, and their volatility measures, according to this approach.The banking system financial stability is assessed based on the two groups of indicators: the first one characterizes the central bank financial stability (indicators of gross international reserves, effectiveness of monetary policy and foreign exchange regulation, ability to create favorable conditions in order to ensure the effectiveness of the banking sector); the second one defines the financial stability level for state banks, banks with private and foreign capital (indicators of the capital adequacy, liquidity, structure of assets and liabilities, effectiveness of the activity, financial risks). The differences between the sets of financial stability indicators for different groups of banks and the expediency of taking them into account during the assessment are revealed and substantiated according to the results of using the principal components method.The developed procedure of assessing the banking system financial stability provides for: constructing the banking system financial stability index (by multiplicative convolution of central bank financial stability subindex and three banks’ financial stability subindices); defining its high, medium and low level according to its quantitative values (according to interval scales, developed according to the rule “3σ”; interpreting the assessment results based on the scenario analysis, which is based on taking into account the dynamic change of the financial stability index during the analyzed period and allows to identify the state of the banking system (stable, conventionally stable or critical).

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