scholarly journals KONSTRUKSI INDEKS KESTABILAN SISTEM KEUANGAN INDONESIA

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Anhar Fauzan Priyono
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Principal Component ◽  
Stability Index ◽  
System Stability ◽  
Equal Weight ◽  
Market Sector ◽  
Index Measurement ◽  
Managing Risk ◽  
The Interest Rate

Financial system stability is necessary to ensure a sustainable economic development. It undertakes 3 major functions: (i) payment system, (ii) financial intermediation, and (iii) managing risk. Data showed that the Indonesian economy experienced a negative correction in the event of financial instability, e.g bank panic in 1992, Asian financial crisis (1997), and Sub-prime mortgage crisis (2008). Therefore, it is necessary in having a method of financial stability index measurement, which in turn can be used to predict the direction of future financial stability. This research was conducted in order to provide an option incalculating the index of financial stability of Indonesia by two methods, namelyAggregation with Variance Equal Weight with Principal Component Analysis (PCA). The results show that the trend of Indonesian financial stability index which constructed through these two techniques have similar trend with a different magnitude. PCA method was employed in making reductions on variable dimensions without losing the information on the movement of the variable’s variation. There are four sectors to be included in the index. Those four sectors are banking sector, money market sector, capital market sector,and monetary sector. We found that the contribution of the financial performance of banks in Indonesia and the interest rate is the highest among other sector to the Indonesia financial stability.

scholarly journals Panel modeling of z-score: evidence from Islamic and conventional Saudi banks

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hassan Belkacem Ghassan ◽  
Abdelkrim Ahmed Guendouz
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Stability Index ◽  
Z Score ◽  
Strong Concentration ◽  
Content Type ◽  
Quarterly Data ◽  
Annual Frequency ◽  
Conventional Banks ◽  
The Stability

Purpose This paper aims to measure the stability extent of the banking sector in Saudi Arabia, including Islamic and conventional banks (CBs), using quarterly data. Design/methodology/approach The paper uses seemingly unrelated regressions to estimate the determinants of the z-score. Findings The panel data model shows that Islamic banks (IBs) reduce the financial stability index relatively; meanwhile, they contribute efficiently to enhance the financial stability through the diversification of their assets. The Saudi banking sector exhibits strong concentration affecting the financial stability negatively. Research limitations/implications The paper’s topic can be extended to cover the recent period. Practical implications The limited presence of IBs in the Saudi banking sector jeopardizes any effort to improve the financial stability. Social implications By attracting more clients, IBs would contribute more to the financial stability in the Saudi economy. Also, the monetary authority has to expand the share of IBs in the financial system at least 50-50 compared to CBs. Originality/value The z-score is mostly analyzed with yearly data; in this paper we use quarterly data to describe at infra-annual frequency the variability of the z-score index. Also, we consider in detail the statistical properties of the banks’ data.

scholarly journals Financial Stability – Comparative Analysis: Montenegro, Serbia and the Netherlands

2015 ◽  
Vol 4 (1) ◽  
pp. 63-93 ◽  
Author(s):  
Milena Vučinić
Keyword(s):  
Comparative Analysis ◽  
The Netherlands ◽  
Financial Stability ◽  
Global Economy ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Financial System ◽  
System Stability ◽  
Major Influence ◽  
The Global Financial Crisis

Abstract The global financial crisis has had far-reaching effects on financial systems and economies all over the world, thus putting the importance of safeguarding financial stability in the focus of interest of the global economy. This paper presents the importance of safeguarding financial stability and building a strong financial system with developed early identification and successful management of risks, i.e. a system resilient to shocks and capable of overcoming them. The paper focus is on the issue of financial stability of Montenegro, given through comparative analysis of the financial stability safeguarding frameworks in the Netherlands and the Republic of Serbia. The paper aims to present the regulatory institutional framework for safeguarding financial stability, and the measures that the countries take in order to achieve stability of their macroeconomic environment and financial system. The comparison of the characteristics and the approach to safeguarding the banking sector is particularly emphasised due to its major influence on the financial system stability.

China’s Monetary and Macroprudential Policies: Are They Complementary or Substitutive?

2020 ◽  
Author(s):  
Peter Sinclair ◽  
Lixin Sun
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Dynamic Stochastic General Equilibrium ◽  
Macroeconomic Policies ◽  
Macroprudential Policies ◽  
Policy Experiments ◽  
Quantitative Results ◽  
Dynamic Stochastic ◽  
The Interest Rate ◽  
Reserve Ratio

Abstract This paper develops a calibrated dynamic stochastic general equilibrium model incorporating a banking sector and some unique features of China’s macroeconomic policies to simulate China’s monetary and macroprudential policies. The quantitative results show, first, that the interest rate is a better instrument for China’s monetary policy than the required reserve ratio (RRR) when the central bank is solely concerned about price stability; second, that the loan-to-value ratio is a very useful macroprudential tool for China’s financial stability, and the RRR could be used as an instrument for both objectives; third, monetary and macroprudential policies could be either complements or substitutes in China, depending on the choices of instruments for the two policies. Our policy experiments recommend three combination choices of instruments for China’s monetary and macroprudential policies. (JEL codes: E52, E61and G18)

scholarly journals Comparative Analysis of Financial Stability Policy of The National Bank of Serbia and The European Central Bank

2015 ◽  
Vol 53 (2) ◽  
pp. 142-161
Author(s):  
Mirjana Jemović ◽  
Borko Krstić
Keyword(s):  
European Union ◽  
Financial Services ◽  
Financial Stability ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
System Stability ◽  
The European Union ◽  
National Bank ◽  
The Global Financial Crisis ◽  
The Eu

AbstractThe Republic of Serbia has successfully completed the first part in the European Union integration process, being granted candidate status for membership in the European Union (EU). The stage of accession negotiations is in progress, and it includes the full harmonization with the EU acquis, whereby the analytical review of legislation, the so-called screening is being carried out in 35 chapters. The global financial crisis that affected our country in 2008 has required a timely reaction of the National Bank of Serbia (NBS) in order to preserve the financial system stability, especially the banking sector as its most important segment. As the financial services sector adjusts within chapter 9, the aim of this paper is to assess the level of compliance of national legislation with the EU legislation regarding banking sector. Along with the regulatory initiatives in the field of preserving financial stability in the EU countries, the NBS has paid great attention to the harmonization of its financial stability policy with the financial stability policy of the European System of Central Banks (ESCB).

scholarly journals ESTIMATION OF Z-SCORE FOR UKRAINIAN BANKING SYSTEM

10.23856/3003 ◽  
2018 ◽  
Vol 30 (5) ◽  
pp. 43-51
Author(s):  
Bohdan Kyshakevych ◽  
Ivan Klymkovych
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Banking System ◽  
System Stability ◽  
Z Score ◽  
Macroeconomic Factors ◽  
Explanatory Variables ◽  
Banking Business ◽  
Score Model ◽  
Bank System

The article analyzes the problematic aspects of evaluating the financial stability of banking systems on the basis of the Z-score methodology. The econometric model estimation of Z-score for the Ukrainian banking system was constructed where the following indicators were chosen in role of explanatory variables:  the share of foreign capital in bank system, inflation, change in nominal GDP and share of overdue loans in credit portfolio. We have conducted the analysis of the banking sector in Ukraine on the base of the constructed Z-score model and determined macroeconomic factors that have the most significant impact on the Z-score assessment and banking system stability.  Drawbacks and limitations of the Z-score methodology usage in banking business are discussed.

Do bank regulations matter for financial stability? Evidence from a developing economy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Antony Rahim Atellu ◽  
Peter Muriu ◽  
Odhiambo Sule
Keyword(s):  
Low Income ◽  
Financial Stability ◽  
Measurement Errors ◽  
Banking Sector ◽  
Financial System ◽  
System Stability ◽  
Series Data ◽  
Estimation Technique ◽  
Content Type ◽  
Bank Regulations

Purpose This paper aims to establish the effect of bank regulations on financial stability in Kenya. Specifically, the study seeks to uncover the effect of micro and macro prudential regulations on financial stability and their trade-offs or complementarities. Design/methodology/approach Using annual time series data over the period 1990–2017, the study uses structural equation model (SEM) estimation technique. This solves the problem of approximating measurement errors, using both latent constructs and indicator constructs. Findings Study findings reveal that macro and micro prudential regulations are significant drivers of financial stability. Further, prudential regulations are more effective when they complement each other. Research limitations/implications This study centers on how bank regulations affect financial stability. Future research could be carried out on the effect of Non-Bank Financial Institutions regulations on financial system stability. Practical implications Complementing macro and micro prudential regulation is more effective and efficient in ensuring stability of the financial system other than letting the two policy objectives operate independently. Social implications Regulatory authorities should introduce prudential regulations that would encourage innovations in the banking sector. This ensures easy deposit mobilization that enhances financial inclusion. Prudential regulations that ensure financial stability will be effective when low income earners are included in the financial system. Originality/value To the best of the authors’ knowledge, this study is the first to investigate the role of banking regulations on financial stability. This study is also pioneering in the use of SEM estimation technique, in examining how prudential regulations affect financial stability. Previous cross-country studies have focused on macro prudential regulations ignoring the importance of micro prudential regulations.

scholarly journals Effect of Bank Competition on Financial Stability: Empirical Evidence from Nepal

2018 ◽  
Vol 13 ◽  
pp. 19
Author(s):  
Surya Bahadur G.C. ◽  
Gyaneswar Sharma
Keyword(s):  
Financial Stability ◽  
Fixed Effects ◽  
Banking Sector ◽  
Banking System ◽  
System Stability ◽  
Annual Data ◽  
Bank Competition ◽  
Financial Industry ◽  
Banking Competition ◽  
The Impact

<p>There are two hypotheses about the relationship between competition and financial stability in the banking system: “competition-fragility” view argues that competition makes banks more likely totake excessive risks, thereby leading to fragility, while “competition-stability” view suggests that higherinterest rates in less competitive environments may cause borrowers to take higher risks,resulting in higher probability of non-performing loans and a more fragile system. This paper empirically examines the impact of competition on Nepalese banking system employing annual data of commercial banks from 1999 to 2012 period using fixed effects panel data model. The study period represents the era of rapid growth in financial institutions in Nepal. The HHI and n-bank concentration ratios are used as measure of competition while Z-index and nonperforming loans ratioare used as proxies of financial stability. The effects of macroeconomic factors and bank specific indicators are also taken into account. The results reveal that there is apositive relationship between greater banking competition and financial stability in Nepal, supporting the “competition-stability” view. Competition in banking sector is found to result in decrease in credit risk and contribute for financial stability. Mixed results have been achieved incase of the impact of bank competition on overall stability. The findings indicate that both higher concentration and higher competition are detrimental for stability. Hence, policymakers should facilitate further consolidation in the financial industry, however, it should be ensured that excessive consolidation doesn’t result in an environment that hinders competition. In addition,besides competition level in the banking system, macroeconomic situation of the country is found to be an important determinant of banking system stability.</p><p><em> </em><strong><em>Economic Literature</em></strong><em>, </em>Vol. XIII August 2016, page 19-31</p>

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).

scholarly journals Peran Inklusi Keuangan melalui Integrasi Fintech dalam Stabilitas Sistem Keuangan Indonesia

2018 ◽  
pp. 150
Author(s):  
Fitri Rusdianasari
Keyword(s):  
Financial Services ◽  
Financial Stability ◽  
Banking Sector ◽  
Financial System ◽  
Financial Inclusion ◽  
System Stability ◽  
Performance Technology ◽  
Bank Branches ◽  
Long Run ◽  
The Stability

Financial inclusion is a banking instrument that plays an important role in financial system stability through access and financial services. To improve financial performance, technology integration is now an interesting issue. This study aims to determine the role of fintech (financial technology) and other financial inclusion instruments such as MSME credit in influencing the stability of the Indonesian financial system. Error Correction Model (ECM) estimation is used to determine the long and short term effects through cointegration values ??between independent variables in influencing the dependent variable. The results of the analysis show that the number of bank branches has a significant long-term influence on financial stability through NPL performance, so direct investment directed at the banking sector also has a significant influence on financial system stability in the long run. However, fintech instruments such as ATMs and e-money have no significant effect on financial system stability. This condition was motivated by the limited reach of fintech development in the financial sector, especially for the unbankable community

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