scholarly journals A financial Stability Index for Jordan

2021 ◽  
Vol 10 (2) ◽  
pp. 157-178
Author(s):  
Samer A.M. AL-Rjoub
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Composite Index ◽  
Banking System ◽  
Stability Index ◽  
Capital Adequacy ◽  
Economic Conditions ◽  
Policy Makers ◽  
Monetary Stability ◽  
The Impact

Abstract Financial stability is an important part of the Central Bank of Jordan (CBJ) role in parallel with maintenance of monetary stability. The impact of the global financial crises from 2007-2009 and the economic slowdown has left the Jordanian banking sector in a generally weaker position than before. This paper constructs an index of financial stability of the Jordanian banking sector that will adequately reflects the effects of the crises in 2008-2009 and measure the resilience of the banking sector against negative shocks. The index is based on the aggregation of the fifteen announced soundness indicators into four main categories: (i) Capital Adequacy, (ii) Earnings and Profitability, and (iii) liquidity to build one aggregate composite index. Using two weighting schemes the Financial Stability Index (FSI) proved to be a good indicator of banking reactions to shocks and changing economic conditions. FSI is intuitively attractive as it could enable policy makers to better monitor the banking sector’s resilience to shocks and can help further in anticipating the sources and causes of financial stress to the system. The index of financial stability of the banking sector in Jordan shows that the banking system has been consciously resilient against shocks and negative economic conditions.

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 Assessing the Impact of Corporate Governance Index on Financial Performance in the Romanian and Italian Banking Systems

2021 ◽  
Vol 13 (10) ◽  
pp. 5535
Author(s):  
Marco Benvenuto ◽  
Roxana Loredana Avram ◽  
Alexandru Avram ◽  
Carmine Viola
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Banking Sector ◽  
Research Question ◽  
Interactive Effect ◽  
Banking System ◽  
Capital Adequacy ◽  
Banking Systems ◽  
Governance Index ◽  
The Impact

Background: Our study aims to verify the impact of corporate governance index on financial performance, namely return on assets (ROA), general liquidity, capital adequacy and size of company expressed as total assets in the banking sector for both a developing and a developed country. In addition, we investigate the interactive effect of corporate governance on a homogenous and a heterogeneous banking system. These two banking systems were chosen in order to assess the impact of corporate governance on two distinct types of banking system: a homogenous one such as the Romanian one and a heterogeneous one such as the Italian one. The two systems are very distinct; the Romanian one is represented by only 34 banks, while the Italian one comprises more than 350 banks. Thus, our research question is how a modification in corporate governance legislation is influencing the two different banking systems. The research implication of our study is whether a modification in legislation, thus in the index of corporate governance, is feasible for two different banking sectors and what the best ways to increase the financial performance of banks are without compromising their resilience. Methods: Using survey data from the Italian and Romanian banking systems over the period 2007–2018, we find that the corporate governance has a significant, positive and long-lasting effect on profitability and capital adequacy in both countries. Results: Taking the size of the company into consideration, the impact of the Index of Corporate Governance (ICG) on a homogenous banking system is positive while the impact on a heterogeneous banking system is negative. Conclusions: Our study provides evidence of the impact of IGC on financial performance and sheds light on the importance of the size of the company. Therefore, one can state that the corporate governance principles applied do not encourage the growth of large banks in heterogeneous banking sectors, thereby suggesting new avenues of research associated with new perspectives.

scholarly journals EVALUATION OF FUNCTIONAL PERFORMANCE OF THE BANKING SYSTEM OF UKRAINE IN CONDITIONS FINANCIAL INSTABILITY

2021 ◽  
Author(s):  
Nataliia Danik ◽  
Kateryna Novak ◽  
Anastasiia Yakovenko
Keyword(s):  
Economic Crisis ◽  
Financial Stability ◽  
Structural Changes ◽  
Banking Sector ◽  
Synergistic Effects ◽  
Banking System ◽  
Scientific Article ◽  
Financial Instability ◽  
Industrial Complex ◽  
The Impact

The article covers the problems of the functioning of the banking sector of Ukraine during 2018-2021, as one of the main sectors of the financial market and the national economy as a whole. When analyzing the state of the banking sector, regularities and general trends in the functioning of the banking sector of Ukraine have been established, and appropriate calculations have been made. The impact of global financial crises on the activities of banking structures, which must operate in conditions of constant financial instability, is described. Today, the whole world, including Ukraine, is on the verge of a global financial and economic crisis. This raises the question of whether Ukrainian banks have the necessary margin of resilience to vulnerabilities to the financial and economic crisis. In recent years, the functioning and development of the banking system has been characterized by increased financial stability, the level of bank capitalization, liquidity, some improvement in asset quality, reducing risks in banking, as well as the presence of positive structural changes. Today, Ukraine's banking system operates in a complex socio-economic and legal environment, most of which - macroeconomic instability, irrational structure of the industrial complex, the crisis of science and technology, imperfect fiscal and monetary policy, low level of effective demand - complicate sustainable development banking sector and increase competitiveness. In conditions of instability, intensification of turbulent processes, the development of the banking system requires new innovative approaches to determining the mechanisms of effective functioning and stable development based on a system-synergetic approach, which led to the choice and relevance of the chosen topic of this scientific article. Efficiency of banks is a multicomponent, multifaceted, multidimensional system characteristic that depends on many factors and is an effective indicator of performance of functions and achievement of goals and objectives of banks development provided financial stability based on financial stability and dynamic balance, achievement of multiplicative and synergistic effects.

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 Factors Affecting Cost Efficiency in the Banking Sector of Kyrgyzstan

2017 ◽  
Author(s):  
Dastan Aseinov
Keyword(s):  
Economic Efficiency ◽  
Cost Efficiency ◽  
Financial Stability ◽  
Banking Sector ◽  
Banking System ◽  
Foreign Banks ◽  
Data Set ◽  
Factors Affecting ◽  
Domestic Banks ◽  
The Impact

Instabilities in the banking sector have had an adverse effect on the economy as a whole, since the largest share in the financial system and financial intermediation in Kyrgyzstan have been captured by banking sector. Economic efficiency in banking can be viewed as a source of financial stability of banking system. Economic efficiency of the banking is more important challenge not only for shareholders and managers of banks, and also for regulation and supervision authorities, and public and potential investors. The aim of this study is to examine factors affecting the banking cost efficiency for Kyrgyz banks. It is also important to choose the appropriate approach in measurement of banking cost efficiency, since there are many different methods. In this study preferred stochastic frontier approach which assumes random error term which captures sampling, measurement and specification errors. We adopted stochastic cost frontier model proposed by Battese ve Coelli (1995) which also allow to examine investigate the impact of variables on efficiency. We used unbalanced panel data set captured 17-23 Kyrgyz commercial banks for period of 2000-2013. Obtained results suggest that capitalization, foreign ownership, credit risk, liquidity risk and currency risk have most influence on cost efficiency scores of banks calculated averagely at level of 0,766. Overall results indicate that domestic banks more cost efficient than domestic private and foreign banks. Average cost efficiency scores of domestic banks, foreign and separately public banks are 0,848; 0,649 and 0,875, respectively.

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 Финансовая устойчивость банковского сектора Казахстана

2020 ◽  
pp. 124-132
Author(s):  
D. Kerimkulova ◽  
G. Alina ◽  
M. Zholamanova ◽  
Д.Д. Керимкулова ◽  
Г.Б. Алина ◽  
...  
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Equity Capital ◽  
Capital Adequacy ◽  
Theoretical Development ◽  
National Bank ◽  
Second Tier ◽  
Relationship Of ◽  
The Impact

Today, the banks’ financial stability remains one of the most important problems in both scientific and practical aspects. Various factors play a role in achieving financial stability. The most important of which are the adequacy and quality of equity capital, which also serves as an indicator of financial stability. Based on this, this article examines the relationship of the Bank's equity capital with indicators of financial stability. Based on the study of previously published literature, the authors show the degree of scientific and theoretical development of the problem by both domestic and foreign scientists. Based on the materials of the Kazakhstan’ second-tier banks, was conducted a statistical analysis of the domestic second-tier banks equity capital for 2014-2019. A detailed analysis of the structure, quality and capital adequacy ratios of the banking sector of Kazakhstan for a five-year period was carried out. The article also examines the impact and role of the regulator-the National Bank on the financial stability of the country's banking sector. На сегодняшний день финансовая устойчивость банков остается одной из важных проблем как в научно-теоретическом так и практическом аспекте. В достижении финансовой устойчивости играют роль различные факторы. Важными из которых являются достаточность и качество ссудного портфеля, что также служит индикатором финансовой устойчивости. Исходя из этого в данной статье рассмотрена взаимосвязь собственного капитала банка с показателями финансовой устойчивости. На основании изучения ранее изданной литературы авторы показывают степень научно-теоретической разработанности проблемы как отечественными, так и зарубежными учеными. На материалах банков второго уровня Республики Казахстан проведен статистический анализ собственного капитала отечественных банков второго уровня за 2014-2019 годы. Проведены детальный анализ структуры, качества и рассчитаны коэффициенты достаточности собственного капитала банковского сектора Казахстана за пятилетний период. В статье также рассматривается влияние и роль регулятора – Национального Банка на финансовую стабильность банковского сектора страны. На основе анализа литературы и практической ситуации обосновываются задачи и перспективы деятельности банков по стабилизации финансового состояния и повышению качества собственного капитала. Авторы также проводят аналитический обзор текущей ситуации в банковском секторе в целом, деятельности Национального банка по повышению финансовой устойчивости банковского сектора и результатов оценки качества активов.

scholarly journals Bank challenges in the context of the COVID-19 pandemic

2020 ◽  
pp. 119-124
Author(s):  
Zhanna Dovhan
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Banking System ◽  
Research Problem ◽  
Customer Engagement ◽  
Current Crisis ◽  
Virtual Communication ◽  
Analysis And Synthesis ◽  
Article Analysis ◽  
The Impact

Purpose. The aim of the article is highlighting the main problematic aspects of the activities of the subjects of the banking sector in the context of the COVID-19 pandemic. Methodology of research. The theoretical basis of the study is the scientific works of foreign and domestic scientists on the research problem. The following methods are used in writing the article: analysis and synthesis – in the study of foreign and domestic experience in identifying problems in banks provoked by COVID-19; settlement and analytical – in the analysis of the impact of crisis phenomena on the activities of banks; abstract and logical – in substantiating theoretical generalizations and conclusions. Findings. The problems of functioning of banks in the conditions of COVID-19 distribution are investigated. It is substantiated that the priority directions of changes in the current principles of the banking system are providing services through digital channels, credit risk assessment and management, use of a range of digital opportunities to increase customer engagement, implementation of the concept of working world 4.0, which provide for the development of quality management, which, in turn, includes interaction with its employees and the creation of rules for virtual communication. Originality. Measures to avoid the consequences of the coronary crisis for banking institutions, in particular to monitor corporate borrowers and develop a strategy for working with retail customers, taking into account the specifics of the current crisis, and by introducing additional warning signals characterizing borrowers' vulnerability to COVID-19 are proposed. Practical value. The obtained results of the study can be used for further scientific research on the development of ways to overcome the crisis in the banking system caused by the pandemic, as well as in the practice of banks to ensure their financial stability. Key words: bank, banking system, banking sector, manager, COVID-19, crisis, remote service.

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 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.

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