scholarly journals Revisiting the Role of Bank’s Capital, Loan Loss Provisioning and Risky Assets to Credit Risk in Malaysia: An Application of Dynamic Heterogenous Panel Technique

2018 ◽  
pp. 466-471
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Balance Sheet ◽  
Capital Adequacy ◽  
Market Force ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Risky Assets

The issue of credit risk among financial institutions has become de rigueur matter for many years particularly among risk managers, market players, regulators and academia in Malaysia. The negligence over specific credit risk factors in credit risk management could herald to the balance sheet loss as what happened in the US mortgage prime crisis. This paper is presented primarily to investigate the long run and short run relationship between credit risk and bank specific factors such as capital adequacy(CAR), loan loss provisioning(PROV) and risky assets (RWA) across different types of banks comprising Islamic banks, Islamic banking windows, commercial banks and investment banks in Malaysia. The application of heterogeneous panel model namely Pooled mean group (PMG) will allow for heterogeneity effect across non-homogenous banking operations. From our findings, it is evident that an increase in capital level reduces default problem for Islamic banking windows. Further, we find positive association between RWA and NPL and also between PROV and NPL which implies that loan loss provisioning could be important signal of risk taking behaviour. Besides that, our results also suggest that the nature of credit risk among Islamic banks in Malaysia are still following market force given by the fact that their credit risk management routines still follow the conventional practices.

scholarly journals Analysis of Credit Risk, Intellectual Capital and Financial Performance of Listed Deposit Money Banks in Nigeria

2021 ◽  
Vol 06 (12) ◽  
Author(s):  
Rislanudeen Muhammad ◽  
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Intellectual Capital ◽  
Capital Adequacy ◽  
National Bureau ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Management Culture ◽  
Capital Adequacy Ratio

This paper examined the effects of credit risk, intellectual capital as well as credit risk moderated by intellectual capital on financial performance of fifteen listed deposit money banks in Nigeria (DMBs) from 2007 to 2016. Data were sourced from annual reports of banks and Nigerian National Bureau of Statistics and analysed using Generalised Method of Moments (GMM). The study finds that credit risk index by loan loss ratio negatively affects financial performance of the sampled banks; while capital employed efficiency, loan loss provision moderated by intellectual capital, capital adequacy ratio, income and diversification have positive relationship with banks’ financial performance. Thus, the study recommends that banks should strengthen their credit risk management culture to ensure prompt repayment of loans. The banks should operate within the required capital adequacy ratio to serve as buffer against loan loss provisions provided by the Central Bank of Nigeria. A strong credit risk management culture should be embedded within intellectual capital structure of banks, where all persons at all levels appreciate and understand the banks’ risk management policies as well as strategies and incorporate same into decision-making and business processes.

scholarly journals The Relationship Between Credit Risk Management Practices And Profitability In Malaysian Commercial Bank`S

2019 ◽  
Vol 8 (5C) ◽  
pp. 53-59
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Management Practices ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Commercial Activity ◽  
Loan Loss Provision ◽  
Loan Loss Provisions

This research scope looks into credit risk management and its effect on a specific group of banks with intensive commercial activity within Malaysia. Yearly reports from 8 different banks that rely on secondary data gathered from the span of 3 years (2015-2017), form the essence of this research. Return on assets (ROA) was primarily used in this research to measure profitability. Also, two credit risk measuring methods were used, loan loss provisions ratio (LLPR) and ratio of capital adequacy (CAR). From the results we deduced that commercial bank's profitability related positively to capital adequacy ratio and loan loss provision ratio. Therefore, the research calls upon the need of new management structure that optimally keep credit risk in check and boost banks profitability.

scholarly journals The Impact of Credit Risk Management on the Profitability of a Commercial Bank: The Case of BGFI Bank Congo

2020 ◽  
Vol 12 (3) ◽  
pp. 21
Author(s):  
Ossou Ndzila Fred Nelson
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Negative Impact ◽  
Capital Adequacy ◽  
Risk Indicators ◽  
Positive Contribution ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Management Indicators ◽  
The Impact

This study examines the impact of credit risk management on the profitability of BGFI Bank Congo, by identifying credit risk indicators and profitability measurement ratios over the period of 2010-2019. The results indicate that profitability is somewhat affected by credit risk management as measured by its credit risk management indicators. The non-performing loan ratio (NPLR), the capital assets ratio (CAR), and the loan loss provision ratio (LLPR) show a negative impact on ROE. These three ratios contribute negatively, while the CAR makes a positive contribution to Return on assets (ROA) and the ratio of client loans and short-term financing (RCLSTF) on return on equity (ROE). Thus, credit risk management has a significant impact on profitability. The study also shows that other selected credit risk management indicators have a significant impact on the Bank's profitability, such as the loan provision ratio (LLPR) and the clean capital adequacy ratio.

CREDIT RISK MANAGEMENT AND ACCESS TO BANKING SERVICES BY ISLAMIC BANKING CUSTOMERS IN KENYA

2017 ◽  
Vol 2 (6) ◽  
pp. 75
Author(s):  
Hussein Diriye Jimale ◽  
Dr. Ndede, F.W.S F.W.S Ndede
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Internet Banking ◽  
Capital Adequacy ◽  
Primary Data ◽  
Islamic Banking ◽  
Credit Risk Management ◽  
Banking Services ◽  
Banking Service ◽  
Study Results

Purpose: This study sought was to assess the effect of credit risk management on access to banking services by Islamic banking customers in Kenya.Methodology: Descriptive research design was adopted. The target population for this study was 225 employees working in the head offices of the selected Islamic banks. Stratified sampling and simple random sampling were used in generating the sample. This study made use of primary data collected using structured questionnaires. The collected data was entered into the Statistical Program for Social Sciences for windows version 20 because of its ability to analyze data easily and accurately. Multiple regression analysis was used to obtain the model for the study. The study results were presented using percentages, tables and chartsResults: The study findings revealed that asset quality as measured by the non-performing loans ratio had a negative and significant effect on access to banking service by Islamic customers in Kenya. Capital adequacy, market structure and technology adoption were found to have a positive and significant effect on access to banking service by Islamic customers in Kenya. It was concluded that the level of credit risk management in Islamic banking where the level of credit risk was high was crucial for the banks in Kenya if they were to expand the level of access to Islamic banking by Islamic customers.Unique contribution to theory, practice and policy: The study recommended that banks needed to develop strategies on how to deal with credit risk by striving to keep the amount of nonperforming loans low. The study also recommended that these banks should expand their capital bases in order to strengthen their resilience and internal strength to withstand losses especially when faced by a crisis. They needed to pursue diversification across individual customers by increasing the breadth of products they coul offer to their customers. The regulators of the market needed to ensure prudent supervision so as to maintaining healthy competition in this market. It was also recommended that banks needed to promote the use of technological innovations within banking area such as internet banking, mobile banking as well as ATM banking by their customers.

Credit risk management: a case differentiating Islamic and non‐Islamic banks in UAE

2012 ◽  
Vol 4 (2/3) ◽  
pp. 197-205 ◽  
Author(s):  
Omar Masood ◽  
Hasan Al Suwaidi ◽  
Priya Darshini Pun Thapa
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Islamic Banks ◽  
Credit Risk Management

scholarly journals Risk governance: Experience of Islamic banks

2015 ◽  
Vol 5 (2) ◽  
pp. 31-40
Author(s):  
Mat Rahim Siti Rohaya ◽  
Fauziah Mahat
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Structural Equation ◽  
Committee Member ◽  
Bank Lending ◽  
Capital Adequacy ◽  
Risk Governance ◽  
Islamic Banks ◽  
Loan Loss ◽  
Cross Sectional

Risk governance has evolved tremendously in the banking industry. Risk governance recommends the imperative roles of Chief Risk Officer (CRO) to oversee risk. This study explores risk governance influence over the Islamic banks performances. Multivariate analysis techniques measure simultaneously via Structural Equation Modelling (SEM). This study employed cross-sectional sample of 200 Islamic banks across 21 countries for the year 2014. To examine risk governance and Islamic banks performance, the study captures seventeen variables developed from risk management and corporate governance (ROA, ROE, Profit Margin, CRO, Shariah committee member, CEO, board size, remuneration meeting, credit rating, external audit, accounting standard, loan loss provision, capital adequacy ratio, total deposit ratio, GDP, central bank lending rate and inflation). The simulation result reveals, risk governance act as mediating variables towards Islamic banks performance. This study has practical and significance contribution for Islamic banks to understand risk governance, aligning with the fundamental risk management and corporate governance.

scholarly journals Credit Management and Issues of Bad Debts: An Empirical Study of Listed Deposit Banks in Nigeria

2020 ◽  
pp. 32-49
Author(s):  
Peter E. Ayunku ◽  
Akwarandu Uzochukwu
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Random Effect ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Data Set ◽  
Credit Management ◽  
Loan Loss Provision ◽  
The Impact

This study examines the impact of credit management on firm performance amidst bad debts, among Nigerian deposit banks. Five hypotheses were formulated following the dependent variables of Return on Asset and Tobin Q. The independent variables employed for this study include: Loan Loss Provision, Loan to Deposit Ratio, Equity to Asset Ratio, and Loan Write off. This study is based on ex-post facto research design and employed a panel data set collected from fourteen (14) commercial banks over six years ranging from 2014 to 2019 financial year. We analyzed the data set using descriptive statistics, correlation and Ordinary Least Square Regression Technique. The random effect models established that non-performing loan, loan loss provision and equity to asset impact significantly on banks’ performance in both Return on Asset and Tobin-Q models. This suggests that the sampled banks need to establish efficient arrangements to deal with credit risk management. In all, credit risk management indicators considered in this research are important variables in explaining the profitability of Nigerian commercial banks. However, based on the outcome from the empirical analysis, the study carefully recommends that investors and shareholders in these banks should be aware of the possible use of provisions for losses on non-performing loans by managers for smoothening of profits. The shareholders specifically should be ready to meet optimal agency costs to reduce the manager's information asymmetry by hiring competent internal and external auditors.

scholarly journals Effects of Basel III Framework on Capital Adequacy of Commercial Banks in Kenya

2016 ◽  
Vol 1 (1) ◽  
pp. 61
Author(s):  
Kevin Kombo ◽  
Dr. Amos Njuguna
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Financial Stability ◽  
Safety Net ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Credit Risk Management ◽  
Management Staff

Purpose:The purpose of the study was toassess the effects of Basel III framework on capital adequacy requirement in commercial banks in Kenya. The study sought to address the following research questions: why are capital adequacy regulations important in commercial banks in Kenya? What challenges are commercial banks facing in the implementation of capital adequacy requirement? What measures have commercial banks taken to ensure compliance with the capital adequacy requirement?Methodology:A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group.Primary data was gathered using questionnaires which were dropped off at the bank’s head offices and picked up later when the respondents had filled the questionnaires. Descriptive analysis was used to analyze quantitative data while content analysis was used to analyze qualitative data.Results:The findings show that capital adequacy requirement is important in commercial banks because it leads financial stability in the Kenyan economy, improves credit risk management techniques as poor credit risk management requires more capital and leads to reduced vulnerability to liquidity shocks due to the sound capitalization policies being implemented under the Basel III framework. Findings also revealed that capital adequacy affected the balance sheet structure of the commercial banks in Kenya.Unique contribution to theory, practice and policy: The study recommends that banks should continue the pursuit of various strategies to ensure that they are in compliance with Basel III requirements and the Central Bank of Kenya’s Prudential Guidelines. The staff of this committee should be drawn from mainly the finance, legal, compliance and treasury departments. Compliance with the capital requirements will lead to a safety net for all commercial banks as the additional capital will act as a cushion that absorbs losses in case of distress in the commercial banking sector.

scholarly journals The Effect of Credit Risk and Capital Adequacy on the Profitability of Rural Banks in the Philippines

2017 ◽  
Vol 64 (1) ◽  
pp. 83-96 ◽  
Author(s):  
Rufo Mendoza ◽  
John Paolo R. Rivera
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Internal Control ◽  
Management Practices ◽  
The Philippines ◽  
Capital Adequacy ◽  
Control Measures ◽  
Credit Risk Management ◽  
Bank Profitability ◽  
Regulatory Bodies

Abstract This paper examines the credit risk and capital adequacy of the 567 rural banks in the Philippines to investigate how both variables affect bank profitability. Using the Arellano-Bond estimator, we found out that credit risk has a negative and statistically significant relationship with profitability. However, empirical analysis showed that capital adequacy has no significant impact on the profitability of rural banks in the Philippines. It is therefore necessary for the rural banks to examine more deeply if capital infusion would result in higher profitability than increasing debts. The study also implies that it is imperative for the banks to understand which risk factors have greater impact on their financial performance and use better risk-adjusted performance measurement to support their strategies. Rural banks should establish credit risk management that defines the process from initiation to approval of loans, taking into consideration the sound credit risk management practices issued by regulatory bodies. Moreover, rural banks need to enhance internal control measures to ensure the strict implementation of internal processes on lending operations.

scholarly journals Does Credit Risk Management affect the Financial Performance of Commercial Banks in Kosovo?

2018 ◽  
Vol 7 (2) ◽  
pp. 49-57
Author(s):  
Rrustem Asllanaj
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Multiple Regression ◽  
Commercial Banks ◽  
Multiple Regression Model ◽  
Capital Adequacy ◽  
Regression Equations ◽  
Credit Risk Management ◽  
The Impact

This study analyses the impact of credit risk management on financial performance of commercial banks in Kosovo, and comparing the relationship between the determinants of credit risk management and financial performance by using CAMEL indicators. Panel data of 85 observations from 2008 to 2012 of ten commercial banks was analysed using multiple regression model. Findings through multiple regression analysis are presented in forms of tables and regression equations. The study also elaborates whether capital adequacy, asset quality, management efficiency, earnings and liquidity have strong or weak relationship with financial performance of commercial banks. The study concludes that CAMEL model can be used as a system of assessment and rating of credit risk management by commercial banks in Kosovo.

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