scholarly journals Climate Risk with Particular Emphasis on the Relationship with Credit-Risk Assessment: What We Learn from Poland

Energies ◽  
2021 ◽  
Vol 14 (23) ◽  
pp. 8070
Author(s):  
Natalia Nehrebecka
Keyword(s):  
Financial Risk ◽  
Banking Sector ◽  
Carbon Tax ◽  
Capital Requirements ◽  
Bank Loans ◽  
Climate Risk ◽  
Probability Of Default ◽  
Bank Capital ◽  
Stress Tests ◽  
Economic Sectors

This research seeks to identify non-financial enterprises exposed to the climate risk relating to transition risks and at the same time use of bank loans, as well as to conduct stress tests to take account of the financial risk related to climate change. The workflow through which to determine the ability of the banking sector to assess the potential impact of climate risk entails parts based around economic sector and company level. The procedure based on the sectoral level identifies vulnerable economic sectors (in the Sectoral Module), while the procedure based on company level (the Company Module) refers to scenarios presented in stress tests to estimate the probability of default under stressful conditions related to the introduction of a direct carbon tax. The introduction of the average direct carbon tax (EUR 75/tCO2) in fact results in increased expenditure and reduced sales revenues among enterprises from sectors with a high CO2 impact, with the result being a decrease in the profitability of enterprises, along with a simultaneously higher level of debt; an increase in the probability of default (PD) from 3.6%, at the end of 2020 in the baseline macroeconomic scenario, to between 6.31% and 10.12%; and increased commercial bank capital requirements. Financial institutions should thus use PD under stressful conditions relating to climate risk as suggestions to downgrade under the expert module.

Bank Capital Requirements after the Financial Crisis

2019 ◽  
pp. 706-735
Author(s):  
Mark E. Van Der Weide ◽  
Jeffrey Y. Zhang
Keyword(s):  
Financial Crisis ◽  
Structural Changes ◽  
Banking Sector ◽  
Balance Sheet ◽  
Banking System ◽  
Capital Requirements ◽  
Bank Capital ◽  
Regulatory Capital ◽  
Stress Tests ◽  
Global Banking

Regulators responded with an array of strategies to shore up weaknesses exposed by the 2008 financial crisis. This chapter focuses on reforms to bank capital regulation. We first discuss the ways in which the post-crisis Basel III reforms recalibrated the existing framework by improving the quality of capital, increasing the quantity of capital, and improving the calculation of risk weights. We then shift to the major structural changes in the regulatory capital framework—capital buffers on top of the minimum requirements; a leverage ratio that explicitly accounts for off-balance-sheet exposures; risk-based and leverage capital surcharges on the largest banks; bail-in debt to facilitate orderly resolution; and forward-looking stress tests. We conclude with a quantitative assessment of the evolution of capital in the global banking system and in the US banking sector.

Italy’s woes expose euro-area governance failures

2016 ◽  
Keyword(s):  
Euro Area ◽  
Banking Sector ◽  
Capital Requirements ◽  
Bank Loans ◽  
The Political ◽  
Political Uncertainty ◽  
Content Type ◽  
Core Inflation

Significance The political uncertainty in Rome is hampering efforts to restore confidence in MPS and poses a challenge to the implementation of the EU’s controversial ‘bail-in’ rules. Impacts Euro-area core inflation is just 0.8%, less than half the ECB’s 2.0% target despite a gradual pick-up in growth. Despite surging nearly 50% from a July record low, the Stoxx 600, the euro-area’s banking sector index, is still 5% down year-to-date. From 2017 to 2019, 550 billion euros of EU banks' senior debt will mature -- a lifeline, if the most vulnerable can survive until then. Further euro-area capital requirements will come in in 2017, but could be introduced gradually to minimise the disruption. Nearly 18% of Italian bank loans are non-performing, three times the euro-area average.

scholarly journals Bank risk and performance in an emerging market setting: the case of Bangladesh

2018 ◽  
Vol 23 (46) ◽  
pp. 199-229
Author(s):  
Md. Tofael Hossain Majumder ◽  
Xiaojing Li
Keyword(s):  
Banking Sector ◽  
Emerging Market ◽  
Capital Requirements ◽  
Policy Implications ◽  
Bank Capital ◽  
Content Type ◽  
Generalized Methods Of Moments ◽  
And Performance ◽  
One Year ◽  
Bank Capital Requirements

PurposeThis study aims to investigate the impacts of bank capital requirements on the performance and risk of the emerging economy, i.e. Bangladeshi banking sector.Design/methodology/approachThe study applies an unbalanced panel data which comprises 30 banks yielding a total of 413 bank-year observations over the period 2000 to 2015.FindingsUsing generalized methods of moments, the empirical results of this research reveal that bank capital is positively and significantly impressive on bank performance, whereas negatively and significantly impact on risk. The study also finds the inverse relationship between risk and performance in both the performance and risk equations. The results also indicate that there is a persistence of performance and risk from one year to the next year.Originality/valueThis is the unique investigation on Bangladeshi bank industry that considers the simultaneous effect of bank capital requirements on risk and performance. Therefore, it is predicted that the empirical evidence of this research shows policy implications to the regulatory authority of Bangladeshi banking industry to determine relevant policies.

scholarly journals Política Monetária, Macroprudencial e Bancos: Evidências Empíricas usando VAR em Painel

2015 ◽  
Vol 13 (4) ◽  
pp. 691
Author(s):  
Fernando Da Silva Vinhado ◽  
José Angelo Divino
Keyword(s):  
Financial Stability ◽  
Financial Risk ◽  
Banking Sector ◽  
Capital Requirements ◽  
Panel Var ◽  
Impulse Response Functions ◽  
Risk Capital ◽  
Macroprudential Policies ◽  
Section Structure ◽  
The Relationship

The objective of this paper is to investigate the relationship between monetary and macroprudential policies and the banking sector of the Brazilian economy, exploiting its cross-section structure as a source of interrelations between systemic aspects of those policies and the behavior of banks. Impulse-response functions are computed from the estimation of panel-VAR for 56 institutions that were active in the Brazilian banking sector between 2001 and 2013. Among the results, we can highlight the influence of monetary and macroprudential policies on levels of exposure to financial risk, capital and financial stability of banks. There is a complementarity between the instruments of those policies and the stabilization of inflation. The relationships involving banking metrics reveal preference for liquidity in contexts of higher risks, evidence of a competitive banking structure, and formation of capital buffer that lead to financial stability. This confirms the importance of capital requirements as a tool to maintain a stable financial system.

scholarly journals Optimal Capital Requirements over the Business and Financial Cycles

2020 ◽  
Vol 12 (3) ◽  
pp. 139-174 ◽  
Author(s):  
Frederic Malherbe
Keyword(s):  
Banking Sector ◽  
Returns To Scale ◽  
Capital Requirements ◽  
Capital Requirement ◽  
Investment Efficiency ◽  
Bank Capital ◽  
The Social ◽  
Optimal Capital ◽  
Bank Capital Requirement ◽  
Lending Decisions

I study economies where banks do not fully internalize the social costs of their lending decisions, which leads to real overinvestment. The bank capital requirement that restores investment efficiency varies over time. During booms, more investment is desirable, so the banking sector must be allowed to expand. This suggests a loosening of the requirement. However, there is also more bank capital. Since the banking sector exhibits decreasing returns to scale, this suggests a tightening instead. I find that the latter effect, which I dub the “bank capital channel,” dominates: the optimal capital requirement is tighter during booms than in recessions. (JEL E32, E44, G21, G28, G32)

scholarly journals The Impact of COVID-19 on Bank Equity and Performance: The Case of Central Eastern South European Countries

2021 ◽  
Vol 13 (19) ◽  
pp. 11036
Author(s):  
Sylwester Kozak
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Capital Requirements ◽  
Financial Supervision ◽  
Annual Data ◽  
Stress Tests ◽  
Global Database ◽  
Nonperforming Loans ◽  
Central Eastern ◽  
The Impact

The purpose of this article is to examine the impact of the shock increase, in the value of nonperforming loans, on the equity level and profitability of 141 banks in 18 countries of Central Eastern South Europe (CESE). This study is important for assessing the financial stability of banks in this region in the face of the continuing negative effects of the COVID-19 pandemic. Based on the annual data, as of the end of 2020, from the S&P Global database, stress tests were carried out to check what value of NPL growth, over the next year, will lead to breach the regulatory capital requirements in domestic sectors and in individual groups of banks. The results indicate that the banks in CESE were well capitalized and had the ability to maintain capital requirements with a 12% increase in nonperforming loans. The resilience of domestic banking sectors varies, and it is higher in non-EU countries. Smaller and non-public banks show a greater ability to preserve the appropriate level of equity, although there is a risk that they may postpone the time of provisioning credit risk and additionally increase lending to lower the NPL ratio. Larger banks are more profitable in times of crisis. The results of the research are important for assessing the stability of the banking sector in CESE during the crisis and can be used by financial supervision of the region’s countries and banking market analysts.

scholarly journals The safety network system and prospects for the appearance of a financial crisis in Bosnia and Herzegovina

2008 ◽  
Vol 53 (178-179) ◽  
pp. 198-229
Author(s):  
Novo Plakalovic
Keyword(s):  
Financial Crisis ◽  
Bosnia And Herzegovina ◽  
Financial Institutions ◽  
Banking Sector ◽  
Financial Sector ◽  
Bank Capital ◽  
Stress Tests ◽  
Foreign Countries ◽  
Potential Risks ◽  
High Level

The article is on the system of the safety network of the financial sector in Bosnia and Herzegovina (BH) and potential causes of possible financial instability. The network of protection of financial institutions in BH is to a certain extent incomplete but a high level of regulatory and supervisory activities has been present so far, which effects the expressed stability of financial institutions. Potential risks and the vulnerability of the financial system arise from a range of features which are characteristic of the local financial institutions, their activities, the condition of the BH economy, and macroeconomic stability and flows of goods and capital between the country and foreign countries. The sector of financial institutions has been privatized and it is in foreign ownership. Foreign exposure of domestic economy and financial markets is limited to only a small number of countries (Austria, Germany). There are pressures in respect of the increased rates of return on bank capital and there is a very high dynamic of credit growth. Possible unfavourable scenarios could bring about problems in the banking sector, which is shown by stress tests. The deterioration of the macroeconomic imbalance could also be a significant cause of serious problems in the local financial sector. There are no certain indicators that this could happen in the near future and influence the appearance of a financial crisis; however, such a situation cannot be ruled out.

scholarly journals BASEL III LIQUIDITY RISK AND KOSOVO BANKING SYSTEM

2019 ◽  
Vol 34 (5) ◽  
pp. 1329-1335
Author(s):  
Hysen Lajqi
Keyword(s):  
European Union ◽  
Banking Sector ◽  
Financial System ◽  
Liquidity Risk ◽  
Capital Requirements ◽  
Basel Iii ◽  
Bank Capital ◽  
The European Union ◽  
Coverage Ratio ◽  
Basel Committee

The financial crisis 2007-2009 prompted the Basel Committee on Banking Supervision (BCBS) to intensify its efforts to strengthen the principles and standards for capital, as well as for the measurement and management of liquidity risk. Risk management is very important in the financial system, especially in banks. Among various risks Banks face is a liquidity risk it’s managing enables Banks to fulfil their obligationsBasel III consists of set of measures internally agreed. The implementation of Basel III will considerably increase the quality of banks' capital and significantly raise the required level of their capital. In addition, it will provide a "macro prudential overlay" to better deal with systemic risk.Like all Basel Committee standards, Basel III standards are minimum requirements which apply to internationally active banks. Members are committed to implementing and applying standards in their jurisdictions within the time frame established by the Committee.To ensure that banks have sufficient liquidity to survive potential liquidity shocks, as happened few years ago, the Basel Committee has issued two new globally revised minimum standards under the Basel III rules for the first time in the banking history: LCR – Liquidity Coverage Ratio and NSFR – Net Stable Funding Ratio that contain new requirements for bank capital, as well as standardized rules in the liquidity area.Banks need to fully comply with LCR and NSFR rules by January 1, 2019, according to the Capital Requirements Directive & Capital Requirements Regulation (CRD IV & CRR) rules.Basel III rules, in the European Union attain their applicable judicial form through REGULATION (EU) No 575/2013. The regulatory package is due to enter into force on January 1st, 2014, but some provisions will be implemented gradually between 2014 and 2019 and will fully come into force on January 1st, 2019. But these rules are likely to undergo some revisions due to a proposal by European Union (EU), so implementation horizon could go being beyond 2019.Performance of the Kosovo banking sector continued to be positive, thus contributing in maintaining the financial and economic stability of the country. Kosovo’s financial system continues to be characterized with sustainable increase in all its constituent sectors. The banking sector in Kosovo as most successful story is developed by many international institutions, characterized by a large presence of foreign capital, where 89. 2% of all assets are managed by foreign banks and development is based on international standards.Banking sector continued to have good liquidity position, with the main liquidity indicators standing above the minimal level as a required by the regulation.The implementation of Basel III rules in Kosovo related to liquidity depends on the local regulator and Basel III standards.

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