Stress-testing Russian Banking System: Will Banks Need Government Assistance Again?

2010 ◽  
pp. 61-81 ◽  
Author(s):  
O. Solntsev ◽  
A. Pestova ◽  
M. Mamonov
Keyword(s):  
Stress Testing ◽  
Banking Sector ◽  
Stress Test ◽  
Banking System ◽  
Government Assistance ◽  
Methodological Issues ◽  
Loan Portfolio ◽  
Macroeconomic Indicators ◽  
Remote Stress ◽  
Capital Injections

The article analyzes factors that affect growth of the share of non-performing loans in the loan portfolio of Russian banks and proposes approaches for this share forecasting on the basis of dynamics of macroeconomic indicators. It also deals with methodological issues of remote stress-test of lending agencies. Using the results of conducted stress-test of Russian banks the authors assess their perspective capital needs in 2010 and estimate the share of government assistance in capital injections. Furthermore, the authors define the scale of vulnerable banks groups in the Russian banking sector.

scholarly journals MODEL OF ASSESSMENT OF THE IMPACT OF MAIN CHALLENGES OF MODERNITY ON EMPLOYMENT IN BANKING SECTOR ACCORDING TO STRESS TESTING METHODOLOGY

2021 ◽  
pp. 214-227
Author(s):  
O.O. Domuz ◽  
Keyword(s):  
Stress Testing ◽  
Banking Sector ◽  
Extreme Values ◽  
Stress Test ◽  
Banking System ◽  
Macroeconomic Factors ◽  
Criteria And Indicators ◽  
Banking Institutions ◽  
System 2 ◽  
The Impact

According to results of the study, globalization factors that require specific approaches to analysis in the context of changes and transformations that occur in socio-economic sphere of banking system; A model of stress testing to assess the impact of global factors on changes in the level and structure of employment of employees of banking institutions, based on the use of tools to find extreme values ​​at the level of individual banking institutions and the banking system as a whole are showen; In order to test the model, the stages of its application are formed: 1. selection of criteria for stress testing of changes in the bank's employment system; 2. the choice of indicators that characterize changes in the level and structure of employment of a bank; 3. conducting stress testing of criteria and indicators based on the use of tools for detecting extreme quantities; 4. construction of a stress test map by periods; 5. comparison of stress test maps of impact criteria and indicators, analysis of common sensitivity points in order to identify the causes and degree of influence of global factors; Within the framework of the model, special attention is paid to analytical methods to determine the impact and sensitivity of the employment response to trends and changes in the macro- and microeconomic environment; Using the method of determining extreme values, the existence of a relationship between the criteria that characterize the financial and economic performance of national banks and the degree of transformational changes in bank employment; As a result of the construction of stress test maps, it was determined that the criteria of financial and economic activity of banks and employment indicators in banking sector are highly sensitive to crises in respective periods, but respond differently to macroeconomic factors of different periods; The proposals on the expediency and necessity of using the model of stress testing in national banking system are formed.

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 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.

scholarly journals Macro Stress Testing Credit Risk: Case of Madagascar Banking Sector

2020 ◽  
Vol 9 (2) ◽  
pp. 199-218 ◽  
Author(s):  
Miora Rakotonirainy ◽  
Jean Razafindravonona ◽  
Christian Rasolomanana
Keyword(s):  
Credit Risk ◽  
Stress Testing ◽  
Banking Sector ◽  
Stress Test ◽  
Banking System ◽  
System Level ◽  
Risk Indicator ◽  
Macroeconomic Shocks ◽  
Vector Autoregressive ◽  
Risk Equation

AbstractThis study proposes to assess the vulnerability of banking sector’s credit portfolio under macroeconomic shocks and to evaluate its impact on banking system capitalization. Our method uses the Global Vector Autoregressive (GVAR) Model to generate adverse macroeconomic scenarios. The GVAR model is combining by the satellite credit risk equation to find the non-performing loan under stress conditions. The advantage of using GVAR model is that on the one hand, it captures the transmission of global, external and domestic macroeconomic shocks on banks non-performing loans. On the other hand, this model considers the nonlinear pattern between business cycle and the bank credit risk indicator during the extreme events as highlighting by the macro stress test literature. The forecast of non-performing loan is then used to obtain stress projections for capital requirement for the banking system level. This article attempts to fill the lacks concerning the stress testing works about Madagascar which study is a recent framework, whose no study on dynamic macro stress testing was treated before. The Results outline the interaction of aggregate non-performing loan with macroeconomic evolution. The horizon of capital prediction shows that banking sector reacts most to a GDP shock. Also, Madagascar banking sector is quite resilient and remains sufficiently capitalized under all macroeconomic scenarios designed with a solvency ratio higher than the minimum regulatory CAR ratio.

CONSOLIDATION WITHIN THE BANKING SECTOR AND SAVINGS DEPOSITS: EFFECTS ON LIQUIDITY, OUTPUT, AND PROFITABILITY WITHIN THE NIGERIAN ECONOMY

2015 ◽  
Vol 10 (01) ◽  
pp. 1550001 ◽  
Author(s):  
OGHENOVO ADEWALE OBRIMAH ◽  
CHIDINMA EDITH EBERE
Keyword(s):  
Social Welfare ◽  
Interest Rates ◽  
Banking Sector ◽  
Banking System ◽  
System Structure ◽  
Efficiency Frontier ◽  
Loan Portfolio ◽  
Welfare Benefits ◽  
Banking Structure ◽  
Effectiveness Of Regulation

In this study, we find savings deposits have contributed significantly to the effectiveness of regulation induced consolidation within the banking sector in so far as improvements in banking system structure, output, profitability and competitiveness are concerned. Specifically, we find savings deposits are key parameters in the transition from a banking structure within which profitability is primarily determined by liquidity during the pre-consolidation period (2007–2008) to a banking structure within which profitability is primarily a function of loan portfolio growth (output) during the post-consolidation period (2010–2012). In spite of the increase in importance of savings deposits for banking system competition, output, or profitability during the post-consolidation period, savings deposit rates have decreased by about 50% between the pre- and post-consolidation periods. Interest rates on savings deposits also do not lie on the efficiency frontier for loan production. Combined, our findings indicate the benefits of consolidation that accrue from savings deposits have yet to translate into social welfare benefits for banks' retail customers.

scholarly journals PROBLEMS OF ENSURING THE FINANCIAL SUSTAINABILITY OF THE BANKING SYSTEM

2021 ◽  
Author(s):  
Olena Tarasova
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Banking System ◽  
Bank Lending ◽  
Financial Sustainability ◽  
Loan Portfolio ◽  
Bank Deposits ◽  
High Inflation ◽  
The Stability ◽  
Banking Institution

The article explores the problems of ensuring the financial sustainability of the banking sector, which plays a very important role in the functioning of the financial system of the state. The role of the stability of the banking system in ensuring conditions of economic growth is justified. It is noted that it is the financial stability of each banking institution that is a prerequisite for the stable functioning of the entire banking system. It is emphasized that since the financial stability of the banking system is influenced by a large number of internal and external factors, for the effective functioning of the banking system of the country must be ready for any challenges to the macro and microenvironment. The main problems of the banking system in modern conditions should be considered the reduction of deposits of the population, deterioration of the quality of the loan portfolio, significant devaluation of the hryvnia, high inflation rates, loss-making of a significant number of banking institutions. It was concluded that the banking system of Ukraine feels a significant dependence on the funds of depositors - individuals, and therefore on factors that affect their behavior in the financial market. Trends of formation of deposit base of commercial banks of Ukraine and imbalances in the sphere of attraction of banking resources were analyzed. The growth of bank deposits of the population is slow, negative changes in their structure are observed. The share of deposits of individuals after the 2014 crisis has become significantly more volatile and risky in terms of financial stability. The increase in lending is complicated by the presence of large portfolios of problem loans, as a result of which there are a number of tasks to increase the efficiency of the loan portfolio, which should ensure a compromise of profitability, liquidity and credit risk acceptable to the bank. The priorities of monetary policy and the main tasks are formulated, the solution of which will allow to intensify lending to the real sector of the economy. Theoretical and practical recommendations have been developed to improve bank lending, increase the profitability of the banking system and capitalize Ukrainian banks.

scholarly journals Productivity efficiency of the systemic banks: Evidence from Greece

2015 ◽  
Vol 13 (1) ◽  
pp. 362-369
Author(s):  
George Kyriazopoulos
Keyword(s):  
Financial Stability ◽  
Debt Crisis ◽  
Geometric Mean ◽  
Banking System ◽  
Loan Portfolio ◽  
Banking Efficiency ◽  
Bond Portfolio ◽  
Productivity Indices ◽  
Domestic Banks ◽  
Capital Injections

This study delves into the productivity efficiency of Greek systemic banks for the years 2013 and 2014, that is, the two years following the recapitalization process of the Greek banking system. Greece’s ongoing debt crisis has severely inflicted domestic banks by causing significant losses in their bond portfolio through the PSI scheme. The immediate consequences were loan portfolio restructurings and capital injections from the Hellenic Financial Stability Fund (HFSF) in order to rebuild the banking system. Employing Data Envelope Analysis to test banking efficiency, we calculate the Malmquist productivity indices for the post-recapitalization period. Our results display that all Greek systemic banks enjoy a remarkable productivity increase of 17.3% according to the geometric mean approach and 18% according to the weighted mean approach.

Criteria for classifying banks as systemically important in the Russian banking system

2020 ◽  
Vol 26 (10) ◽  
pp. 2385-2406
Author(s):  
E.A. Kalacheva ◽  
A.S. Lamekina
Keyword(s):  
Banking Sector ◽  
Positive Impact ◽  
Banking System ◽  
Securities Market ◽  
Payment Systems ◽  
Correlation And Regression Analysis ◽  
Russian Economy ◽  
Total Capital ◽  
Macroeconomic Indicators ◽  
Systemically Important Banks

Subject. We address the criteria to classify banks as systemically important, their activities and the assessment of their impact on macroeconomic indicators. Objectives. The aim is to determine areas of regulation, based on criteria for classification of a bank as systemically important in the Russian banking sector, and taking into account its impact on the national economy. Methods. The study draws on methods of logical, statistical, and comparative analysis, as well as the correlation analysis to determine the correlation between financial indicators of systemically important banks and the country's GDP. Results. We offer the following criteria to determine systemically important banks, in addition to indicators used in the Russian banking practice: ‘interchangeability’ of a bank (based on the volume of payments in payment systems), ‘complexity’ (based on bank's activity in the securities market). Our correlation and regression analysis shows a significant positive impact of activities of too-big-to-fail banks on the Russian economy. The greatest impact on GDP is noted for indicators, like the volume of total capital, deposits of the population, loans to individuals. Therefore, the regulation can be aimed not only at preventing crisis situations and instability of the financial system, but can also be a tool for increasing the rates of economic growth. Conclusions. If the Bank of Russia uses the proposed additional criteria, it will enable to include in the list of such banks the internationally active credit institutions serving significant volumes of settlements in payment systems, and carrying out transactions with complex high-risk derivatives.

The Devil’s Laugh at Corporate Governance: The Case of Punjab and Maharashtra Co-operative Bank (PMC Bank) India

2021 ◽  
pp. 097468622110473
Author(s):  
Ambuj Gupta
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Banking System ◽  
Chief Executive ◽  
Banking Supervision ◽  
Loan Portfolio ◽  
Reserve Bank ◽  
Crony Capitalism ◽  
Insolvency Proceedings ◽  
Reserve Bank Of India

The trust of depositors in the Indian banking system was shaken in September 2019 when the five-page confession letter written by Joy K Thomas, Managing Director and Chief Executive Officer of Punjab and Maharashtra Co-operative Bank (PMC Bank), one of the ten largest co-operative banks in India revealed gross financial irregularities, collusion and fraud in banking operations of PMC Bank from 2008 onwards. The Reserve Bank of India (RBI) came into swift action and placed curbs on routine banking activities and restricted the withdrawal of money to a limited amount. Succumbing to the shock, depositors protested at several places and even, eleven depositors lost their lives. With a huge exposure of 73% of the overall loan portfolio to a single borrower, Housing and Development Infrastructure Ltd (HDIL) & group companies, that too facing insolvency proceedings, the recovery of full money was almost impossible. The malice at PMC Bank is the classic case of crony capitalism, collusion and fraud, and failure of corporate governance. The case draws important lessons for reforming co-operative banking sector and strengthening banking supervision in the country.

scholarly journals The Assessment of Systemic Risk in the Kenyan Banking Sector

Complexity ◽  
2018 ◽  
Vol 2018 ◽  
pp. 1-15 ◽  
Author(s):  
Hong Fan ◽  
Allan Alvin Lee Lukaya Amalia ◽  
Qian Qian Gao
Keyword(s):  
Systemic Risk ◽  
Banking Sector ◽  
Stress Test ◽  
Banking System ◽  
Financial Data ◽  
Annual Reports ◽  
Centrality Measures ◽  
Network Centrality ◽  
Regulatory Body ◽  
Stress Tests

The present paper aims to assess the systemic risk of the Kenyan banking system. We propose a theoretical framework to reveal the time evolution of the systemic risk using sequences of financial data and use the framework to assess the systemic risk of the Kenyan banking system that is regarded as the largest in the East and Central African region. Firstly, we estimate the bilateral exposures matrix using aggregate financial data on loans and deposits from annual reports and analyze the interconnectedness in the market using network centrality measures. Next, we extend the Eisenberg–Noe method to a multiperiod setting to the systemic risk of the Kenyan banking system, in which the multiperiod includes the dynamic evolutions of the Kenyan banking system of every bank and the structure of the interbank network system. We apply this framework to assess dynamically the systemic risk of the Kenyan banking system between 2009 and 2015. The main findings are the following. The theoretical network analysis using network centrality measures showed several banks displaying characteristics of systematically important banks (SIBs). The theoretical default analysis showed that a bank suffering a basic default will trigger a contagious default that caused several other banks in the sector to go bankrupt. Further stress test proved that the KCB bank theoretically caused a few contagious defaults due to an unusually high interconnectedness. This methodology can contribute by being part of monitoring system of the Central Bank of Kenya (regulatory body) as well as the implementation of policies (such as bank-internal stress tests) that assist in preventing default contagion.

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