scholarly journals Regulatory assessment of the bank market risk: international approaches and Ukrainian practice

2018 ◽  
Vol 13 (4) ◽  
pp. 73-84 ◽  
Author(s):  
Yana Kuznichenko ◽  
Serhiy Frolov ◽  
Fedir Zhuravka ◽  
Mykola Yefimov ◽  
Volodymyr Fedchenko
Keyword(s):  
Banking Sector ◽  
Market Risk ◽  
Capital Requirements ◽  
Basel Ii ◽  
International Standards ◽  
Regulatory Capital ◽  
Alternative Scenarios ◽  
Optimal Approach ◽  
Method R ◽  
Risk Coverage

The implementation of international standards for the bank risk assessment and market risk, in particular, in Ukrainian banking practice is aimed at achieving common standards for regulating banking activities in different countries. This should help to increase the banking sector stability in Ukraine and, accordingly, increase the interest of foreign investors.The article deals with the methodological approaches to assessing the bank market risk (in particular, SA, IMA and R-SbM approaches) recommended by the Basel Committee on Banking Supervision in terms of standardization and unification of the normative framework of capital requirements for Ukrainian banks. Considering the analysis results, it was determined that the choice and implementation of an optimal approach in the context of Ukrainian banking practice can be carried out in one of two alternative scenarios: 1) a simplified version of a sensitivity based method (R-SbM); and 2) a recalibrated version of the Basel II standardized approach. In this case, the Basel II recalibrated version is more acceptable for use by banks, since it is most relevant to volume and complexity of transactions carried out by Ukrainian banks.The obtained results are aimed at improving the existing methodology for calculating the adequacy ratio of banks' regulatory capital (N2), which currently considers only the needs for credit risk coverage, and at refining the methodology in terms of considering banks' market-risk coverage needs.

scholarly journals Asymmetric Procyclicality of Chinese Banking and the Countercyclical Buffer of Basel III

2015 ◽  
Vol 2015 ◽  
pp. 1-9
Author(s):  
Yufeng Li ◽  
Zhongfei Li
Keyword(s):  
Financial Crisis ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Capital Requirements ◽  
Basel Iii ◽  
Time Varying ◽  
Regulatory Capital ◽  
Economy Growth ◽  
The Global Financial Crisis ◽  
Chinese Banking

Since the global financial crisis of 2007-2008, the importance of the procyclicality in the banking sector has been highlighted. One of the Basel III objectives is to promote countercyclical buffers and reduce procyclicality. We apply time-varying copula combined with GARCH model to test the existence of asymmetric procyclicality of Chinese banking. The results show that the procyclicality of Chinese banking is asymmetric, where the dependence between loan and economy growth is more correlated during the decline stage than the rise stage of economy. Based on this asymmetry, we suggest that the authority can use high frequent index for signalling the start point of releasing countercyclical buffer and accelerate the releasing pace to avoid the supply of credit being constrained by regulatory capital requirements in downturns.

Bank Capital Requirements after the Financial Crisis

2019 ◽  
pp. 706-735
Author(s):  
Mark E. Van Der Weide ◽  
Jeffrey Y. Zhang
Keyword(s):  
Financial Crisis ◽  
Structural Changes ◽  
Banking Sector ◽  
Balance Sheet ◽  
Banking System ◽  
Capital Requirements ◽  
Bank Capital ◽  
Regulatory Capital ◽  
Stress Tests ◽  
Global Banking

Regulators responded with an array of strategies to shore up weaknesses exposed by the 2008 financial crisis. This chapter focuses on reforms to bank capital regulation. We first discuss the ways in which the post-crisis Basel III reforms recalibrated the existing framework by improving the quality of capital, increasing the quantity of capital, and improving the calculation of risk weights. We then shift to the major structural changes in the regulatory capital framework—capital buffers on top of the minimum requirements; a leverage ratio that explicitly accounts for off-balance-sheet exposures; risk-based and leverage capital surcharges on the largest banks; bail-in debt to facilitate orderly resolution; and forward-looking stress tests. We conclude with a quantitative assessment of the evolution of capital in the global banking system and in the US banking sector.

scholarly journals Pakistan

2020 ◽  
pp. 105-125
Author(s):  
Natalya Naqvi
Keyword(s):  
World Bank ◽  
Financial Services ◽  
Banking Sector ◽  
Basel Ii ◽  
International Standards ◽  
Basel Iii ◽  
The World Bank ◽  
The World ◽  
Over Time

Pakistan has the highest level of implementation among our case study countries. The impetus for converging on international standards has come from different actors over time. The adoption of Basel I adoption in the 1980s was driven by the World Bank and IMF. In the 1990s and early 2000s, the adoption of Basel II was driven first by politicians promoting the expansion of financial services, and then by banking sector regulators. Most recently, as banks have internationalized, they have championed the implementation of Basel III. Pakistan is one of the few cases where all three major actors—politicians, regulators, and major banks—are now aligned behind the implementation of the standards, leading to a high and ambitious level of implementation.

A probabilistic approach to IT risk management in the Basel regulatory framework

2017 ◽  
Vol 25 (2) ◽  
pp. 176-195 ◽  
Author(s):  
Semir Ibrahimovic ◽  
Ulrik Franke
Keyword(s):  
Risk Management ◽  
Banking Sector ◽  
Operational Risk ◽  
Capital Requirements ◽  
Basel Ii ◽  
Direct Impact ◽  
Content Type ◽  
Operational Risk Management ◽  
It Risk Management ◽  
It Risk

Purpose This paper aims to examine the connection between information system (IS) availability and operational risk losses and the capital requirements. As most businesses today become increasingly dependent on information technology (IT) services for continuous operations, IS availability is becoming more important for most industries. However, the banking sector has particular sector-specific concerns that go beyond the direct and indirect losses resulting from unavailability. According to the first pillar of the Basel II accord, IT outages in the banking sector lead to increased capital requirements and thus create an additional regulatory cost, over and above the direct and indirect costs of an outage. Design/methodology/approach A Bayesian belief network (BBN) with nodes representing causal factors has been used for identification of the factors with the greatest influence on IS availability, thus helping in investment decisions. Findings Using the BBN model for making IS availability-related decisions action (e.g. bringing a causal factor up to the best practice level), organization, according to the presented mapping table, would have less operational risk events related to IS availability. This would have direct impact by decreasing losses, related to those events, as well as to decrease the capital requirements, prescribed by the Basel II accord, for covering operational risk losses. Practical implications An institution using the proposed framework can use the mapping table to see which measures for improving IS availability will have a direct impact on operational risk events, thus improving operational risk management. Originality/value The authors mapped the factors causing unavailability of IS system to the rudimentary IT risk management framework implied by the Basel II regulations and, thus, established an otherwise absent link from the IT availability management to operational risk management according to the Basel II framework.

scholarly journals Ways to Increase the Financial Security of Ukrainian Banks in the Context of Globalization

2020 ◽  
Vol 9 (512) ◽  
pp. 254-262
Author(s):  
L. Y. Shevtsiv ◽  
◽  
B. B. Senyshyn ◽  
Keyword(s):  
Banking Sector ◽  
Legal Protection ◽  
International Standards ◽  
Capital Adequacy ◽  
Financial Security ◽  
Regulatory Capital ◽  
Return On Assets ◽  
External Threats ◽  
Capital Adequacy Ratio ◽  
Main Components

The purpose of the article is to study the basics of financial security of banking with the identification of threats, their systematization into a single classification to determine ways to increase the financial security of the banking sector. Theoretical bases of financial security of banks are substantiated. The approaches are generalized and the concept of "financial security of the bank" is defined. The main components of the bank's financial security have been formed and the classification of internal and external threats to the banking security system has been carried out. Measures have been identified to prevent external and internal threats to Ukraine's banking sector, which should be developed with minimal resources and time to achieve the desired result. The banking sector of Ukraine (operating banks) for the period 2016–2020 is analyzed, which indicates a tendency to decrease (by 42), and the number of banks with 100% foreign capital increased by 6. To properly assess the level of financial security of Ukrainian banks, the main performance indicators for the period 2016–2020 were studied and it was established that: the banks' assets increased by 18.5% to UAH 1,532,671 million; customer lending decreased from 80% to 68%; return on assets increased by 6.04% and in 2020 amounted to 5.23%, improving the efficiency of banks in 2020 by 1.52. The dynamics of the regulatory capital adequacy ratio, the dynamics of credit risk ratios of banks and the dynamics of financial results of the banking sector of Ukraine are analyzed. Measures to increase the level of financial security of banks, based on the unification of the core indicators of banking and their methodology of calculation according to international standards, which will strengthen legal protection of creditors, maintain low inflation and a stable exchange rate, create a favorable investment climate.

scholarly journals Ethiopia

2020 ◽  
pp. 327-348
Author(s):  
Toni Weis
Keyword(s):  
Banking Sector ◽  
Basel Ii ◽  
International Standards ◽  
Financial Industry ◽  
Financial Repression ◽  
Asian Tiger ◽  
National Bank ◽  
Ethiopian Government ◽  
Domestic Banks ◽  
Regulatory Convergence

Ethiopia has chosen to diverge from international standards and not to adopt any aspect of Basel II or III. Ethiopia has the least internationalized banking sector among our case countries. Despite significant exposure to the Basel standards through donors and the IMF, banking supervisors at the National Bank of Ethiopia (NBE) have little use for Basel II and III. Ethiopia’s decision to diverge from the international Basel framework results from a strong preference for political control over the financial industry. The Ethiopian government seeks to emulate the example of East Asian ‘tiger’ economies, for whom financial repression was a key tool in the pursuit of rapid industrialization. However, as Ethiopia’s domestic banks struggle to sustain transformative growth, pressures for greater financial openness (and, by extension, for increased regulatory convergence) are beginning to mount.

Regulatory hypothesis and bank dividend payouts: Empirical evidence from Italian banking sector

2015 ◽  
Vol 02 (01) ◽  
pp. 1550009 ◽  
Author(s):  
Badar Nadeem Ashraf ◽  
Sidra Arshad ◽  
Mohammad Morshedur Rahman ◽  
Muhammad Abdul Kamal ◽  
Khalid Khan
Keyword(s):  
Banking Sector ◽  
Agency Cost ◽  
Capital Requirements ◽  
Unintended Consequences ◽  
Lower Amount ◽  
Regulatory Capital ◽  
Regulatory Pressure ◽  
Capital Ratios ◽  
Fama And French ◽  
Direct Regulation

This study examines the regulatory hypothesis for bank dividend payouts using a panel dataset of 229 Italian banks over the period 2005–2012. Regulatory hypothesis suggests that undercapitalized banks face more regulatory pressure for increasing capital levels by paying lower amount of dividends. Empirical results support the regulatory hypothesis by finding that the Italian banks having lower equity to total assets ratios or lower regulatory capital ratios retain more profits and pay lower amount of dividends. Results also suggest that dividend payer banks try to maintain dividends at previous level by not skipping or reducing dividends. Results further support that Fama and French (2001)'s three characteristics of dividend payers are also applicable to banks. That is, big-in-size, more profitable and low growth Italian banks pay higher amount of dividends. Findings of this study have important implications for recent regulatory proposals that suggest a direct regulation of dividends. A direct regulation of dividends, on one hand, and regulatory pressure on dividend payout decisions through capital requirements, on the other hand, may have unintended consequences for dividends as signaling and agency cost reducing tools.

Failure of capital requirements regulation in the banking industry: evidence from a bank-based financial system

2020 ◽  
Vol 35 (1) ◽  
pp. 63-79
Author(s):  
Eleonora Muzzupappa ◽  
Leone Leonida ◽  
Michele Limosani
Keyword(s):  
Banking Sector ◽  
Banking Industry ◽  
Financial System ◽  
Capital Requirements ◽  
Basel Ii ◽  
Competitive Advantages ◽  
The Impact

This article studies the impact of Basel I and Basel II regulation in a bank-based financial system on the degree of competition in the banking sector, as measured via the Panzar and Rosse statistic. Strikingly, our results suggest that, contrary to the regulator’s expectation, stability-oriented regulation reduces competition in the banking sector. Further analysis suggests that while Basel does not have a significant impact on the large banks, it reduces competition among other banks, which move towards uncompetitive dynamics. This shift towards monopoly is aligned with the hypothesis of this regulation to create competitive advantages for large banks at the expense of the others.

scholarly journals Kenya

2020 ◽  
pp. 218-238
Author(s):  
Radha Upadhyaya
Keyword(s):  
Central Bank ◽  
Driving Force ◽  
Banking Sector ◽  
Financial Sector ◽  
Policy Networks ◽  
Basel Ii ◽  
International Standards ◽  
International Policy ◽  
Policy Ideas

In Kenya the impetus for Basel implementation has come from the regulator, the Central Bank of Kenya (CBK), which is highly independent, has strong links to international policy networks, and is very receptive to international policy ideas. Since 2003, the incumbent politicians have also been keen to adopt the latest international standards in order to attract investment into Kenya’s financial sector. Meanwhile, as the banking sector is relatively well capitalized, there has been little opposition from banks, with some international and large local banks being mildly in favour of Basel II and III adoption. In the Kenyan case the regulator has been the driving force for Basel adoption, supported by internationally oriented politicians and banks.

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