scholarly journals Impact of Macroeconomic Shocks on the Individual Banks: Case of Madagascar

2021 ◽  
Vol 7 (3) ◽  
pp. p99
Author(s):  
Prof. Jean Razafindravonon
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Assessment Tool ◽  
Stress Test ◽  
Banking System ◽  
Financial Sector ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Macroeconomic Shocks ◽  
Dynamic Panel Model

The successive financial crises have highlighted the interdependence between the financial system and the real economy. Prudential measures to limit the negative repercussions of the financial crisis, through the Basel I and Basel II agreements, have shown their limits and the Basel III agreements have consequently integrated the macro-prudential component which aims to ensure the stability of the financial sector as a whole within the economy. The financial stability assessment tool known as the “stress test” has also been developed in various forms and its application to the financial sector, particularly the banking sector, is strongly recommended by the Bank for International Settlements. Indeed, the purpose of this study is to assess the resilience of the Malagasy banking sector to macroeconomic shocks and to evaluate its impact on the capitalization of the banking system through the macroeconomic stress test tool. To do so, we used a dynamic panel model. Non-performing loan forecasts are used to obtain capital projections at both the banking system and bank levels under adverse scenarios. The results show that most banks were able to hold capital above the minimum regulatory threshold of 8% under Basel III standards. However, only one bank fails to meet the minimum capital adequacy threshold. Non-performing loan forecasts are used to obtain capital projections at both the banking system and bank levels under adverse scenarios.

Maintaining Financial Stability in the Banking Sector

2019 ◽  
pp. 30-48
Author(s):  
Meltem Gurunlu
Keyword(s):  
Risk Management ◽  
Management System ◽  
Financial Stability ◽  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Basel Accords ◽  
Risk Management System ◽  
Strategic Approach ◽  
Global World

Maintaining financial stability in the banking sector through a well-functioning risk management system is a strategic approach in today's global world where the risks have become much more diversified than ever. This chapter was undertaken in order to investigate the risk management topic by focusing on the experiences learned from the banking crises up-to-date and implications of the Basel Accords which outlined capital adequacy standards to prevent such crises. With paying special attention to the case of Turkish banking system, main challenges and possible solutions are also discussed.

scholarly journals Transformation of the Ukrainian banking system regulation: a new horizon of compliance with the international framework

2019 ◽  
Vol 14 (4) ◽  
pp. 22-33
Author(s):  
Lyubov Khudoliy ◽  
Oleg Bronin
Keyword(s):  
Systematic Approach ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Banking System ◽  
Basel Iii ◽  
Banking Supervision ◽  
Macroeconomic Shocks ◽  
Bank Supervision ◽  
Banking Institutions ◽  
The Global Financial Crisis

This article discusses the latest methodological recommendations of the Basel Committee on Banking Supervision developed in response to the effects of the global financial crisis and known as Basel III. The purpose of the study is to explore scientific approaches to justifying bank regulation as a key condition for overcoming the economic crisis and improving financial sustainability. The object of research is Basel III instruments that will be implemented in the bank regulatory policy of Ukraine. The systematic approach and systemic thinking used in the article allow one to substantiate the expediency of Ukrainian banking institutions’ governance based on the risk-oriented approach and to determine the strategy of bank supervision for the next 1-3 years. The study evaluates the results of stress testing of the largest banks in Ukraine. Thus, the results confirm that the banking sector in Ukraine is sufficiently capitalized in the absence of macroeconomic shocks, but in case of a crisis, some of these banks are not protected. Therefore, the article formulates recommendations for improving the regulation of these banks, the phased implementation of Basel III, the application of new principles, standards, tools and methods, corporate governance and risk management in Ukrainian banks.

scholarly journals Financial Sustainability Assessment of the Largest Systemically Important Credit Institutions in the Context of the Global Instability

2021 ◽  
Vol 12 (2) ◽  
pp. 10
Author(s):  
Oksana V. Savchina ◽  
Ekaterina A. Sidorina ◽  
Olga V. Savchina ◽  
Petr S. Shcherbachenko
Keyword(s):  
National Economy ◽  
Financial Stability ◽  
Banking Sector ◽  
Sustainability Assessment ◽  
Banking System ◽  
Capital Adequacy ◽  
Business Strategies ◽  
Financial Sustainability ◽  
Management Efficiency ◽  
Asset Quality

The national banking system is the driver for the national economy that unites various types of credit organizations that operate within a single monetary mechanism. The banking system is a part of the economic “organism”, whose condition determines the stable development of society. The problems that currently exist in the banking sector reflect instability of the entire economic situation in the country. The reasons are a reduction in budget support for organizations and the inability of some of them to adapt to changing external conditions. In crisis conditions, it is of particular interest to assess the financial sustainability of the activity of the largest systemically important banks in the country, which are the “circulatory system” of the national economy. This article assesses the financial stability of PJSC “Sberbank of Russia” based on an analysis of the main groups of its performance indicators for 2007-2019: capital adequacy, asset quality, management efficiency, profitability and liquidity. According to the research results, it is revealed that during the period under review, the activity of Sberbank is stable with respect to such indicators as capital adequacy, profitability, management efficiency and liquidity. Bank activity is unstable relative to asset quality indicators. The high value of the asset quality ratio characterizes the increased degree of riskiness of operations conducted. The ratio of overdue debt is above the norm, which adversely affects the financial stability of the bank. The most important achievement of Sberbank of Russia in 2019 - the launch of a new digital platform of the bank. The use of artificial intelligence technologies has already become an important driver of Sberbank business. Due to the pandemic of COVID-19, the Russian banking sector may face a number of problems. By 2021-2022, the growth is expected only by those banks that will build an effective risk management system and will be able to adapt their business strategies to the new economic realities and tougher requirements of the regulator.

scholarly journals Stress-testing as a method of macroprudential policy and information security in banking sector

2019 ◽  
Vol 65 ◽  
pp. 06004
Author(s):  
Olena Berezina ◽  
Iryna Honcharenko ◽  
Lesya Berezhna ◽  
Valentina Kunchenko-Kharchenko
Keyword(s):  
Integrated Assessment ◽  
Financial Stability ◽  
Stress Testing ◽  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Quantitative Risk Assessment ◽  
Macroprudential Policy ◽  
Prudential Policy ◽  
Integral Indicator

The article contains an overview of the essence, history, components, scenarios, methodology and results of stress testing of the Ukrainian banking system. The purpose of this paper is to explore and analyze existing approaches to stress testing as a method of macro-prudential policy of the Central Bank, to determine the results of quantitative risk assessment and financial stability of banks and their readiness to have sufficient capital to cover losses in various macroeconomic scenarios, as well as to develop a model of integrated assessment and rating of banks based on the results of stress testing. In order to summarize the results of the study, a model of integrated assessment was developed and a rating of banks was built based on the analysis of their financial stability, capital adequacy and readiness to withstand the crisis. To solve the problem of qualitative analysis of the stress-testing results in terms of a significant number of indicators and calculations a simulation of the integral indicator is proposed which helps information users group the data, obtain a generalized assessment and form a rating of banks according to the financial stability reserve.

scholarly journals Stress Testing of the Montenegrin Banking System with Aggregated and Bank-Specific Data

2014 ◽  
Vol 3 (2) ◽  
pp. 85-119
Author(s):  
Sanja Vuković
Keyword(s):  
Stress Testing ◽  
Management Practices ◽  
Banking Sector ◽  
Stress Test ◽  
Banking System ◽  
Capital Adequacy ◽  
Loan Loss ◽  
Aggregated Data ◽  
Loan Loss Provision ◽  
Capital Adequacy Ratio

Abstract There are many different approaches to the process of stress testing and two of them will be investigated in this paper. The first one is a stress test performed on aggregated data i.e. the banking system as a whole. The variable of interest in both exercises is the Loan Loss Provision ratio (hereinafter: the LLP). The main goal of the thesis is to find an answer to the following question: what are the macroeconomic variables that influence LLP the most and how will LLP, as a variable of interest, behave in a situation when all these variables were to experience negative performance at the same time? The resilience of the banking system to such scenario will be tested through the capital adequacy ratio. In order to find out more about the management practices of banks, microlevel data on banks were also used in the analysis. The focus was to see which of the variables are able to explain the LLP ratio for each bank individually and how is this information helpful for possible improvements in the banking sector. The relations between these variables will be able to explain some of the banks’ losses and some of the banks’ practices regarding credit activities. The analysis there will provide for some recommendations for the banks but also for the Central Bank and its way to influence the practices in the banking sector.

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.

scholarly journals MACROPRUDENTIAL STRESS-TESTING THE INDONESIAN BANKING SYSTEM USING THE CREDIT RISK MODEL

2020 ◽  
Vol 23 (1) ◽  
pp. 121-138
Author(s):  
Shilvia Kurniawati ◽  
Deddy Priatmodjo Koesrindartoto
Keyword(s):  
Stress Testing ◽  
Banking Sector ◽  
Risk Model ◽  
Stress Test ◽  
Banking System ◽  
Capital Allocation ◽  
Capital Adequacy ◽  
Capital Adequacy Ratio ◽  
One Year ◽  
Credit Risk Model

This study implements a macroprudential stress test and develops the EconomicRisk Weighted-Capital Adequacy Ratio (ERW-CAR) to evaluate the resilience of theIndonesian banking sector. The results show that the historical and one-year aheadpredicted ERW-CARs are currently three percent lower than the Indonesia regulatoryCAR, and continue to decrease by nearly two percent following an exchange rate shock.However, the capital adequacy requirement stands above the eight percent thresholdand the banks are still able to optimize their capital allocation.

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 PENERAPAN PERMODALAN BASEL III DAN IMPLIKASINYA TERHADAP KINERJA PERBANKAN DI INDONESIA

2019 ◽  
Author(s):  
Komang Agus Rudi Indra Laksmana
Keyword(s):  
Financial Crisis ◽  
Impact Analysis ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Balance Sheet ◽  
Banking System ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Negative Effect ◽  
The Global Financial Crisis

The global financial crisis that occurred in 2007/2008 has encouraged state leaders who are membersof the G-20 to declare international efforts aimed at increasing transparency, accountability and regulation ofthe financial sector through strengthening the quantity and quality of the banking sector capital. This was basedon the occurrence of the global financial crisis in 2008, one of which was caused by the excessive level of leveragein the banking system both for the position recorded on the balance sheet (on-balance sheet) and inadministrative accounts (off-balance sheet). The final results of the recommendations are thenissued by Basel III:A global regulatory framework for more resilient banks andbanking systems on December 2010. In general, theBasel III agreement has threemain components, namely capital, liquidity and leverage ratio. The applicationofBasel III capital has an impact that will vary in various countries depending onthe number of exposures affected.This study conducted an impact analysis on theperformance of Basel III capital towards the performance of banksin Indonesiaduring the period of 2018 based on capital adequacy (CAR), and on the liquidity(NSFR, LCR) on growthin profitability (ROA). The study involved 11 banks withthe largest assets in Indonesia in 2018. The results showedthat CAR had asignificant negative effect on ROA, while the NSFR had a significant positiveeffect on ROA,and LCR had a significant negative effect on ROA. This study waslimited in terms of the number of samples anddata used, therefore furtherresearch is expected to increase the amount of data and samples and researchvariables.Keyword: Basel III; CAR; LCR

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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