scholarly journals Bank Risk Capital and Its Effectiveness in Selected Euro Area Banking Sectors

2021 ◽  
Vol 14 (11) ◽  
pp. 555
Author(s):  
Irena Pyka ◽  
Aleksandra Nocoń
Keyword(s):  
At Risk ◽  
Euro Area ◽  
Banking Sector ◽  
Research Question ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Bank Capital ◽  
Risk Capital ◽  
Operational Effectiveness ◽  
Capital At Risk

Risk capital or capital at risk (CaR) refers to the amount of capital set aside and maintained by banks to cover different types of risk. For banks, it is used as a buffer against claims or expenses in the event that ordinary capital is not enough to cover them. Thereby, risk capital can also be recognized as risk-bearing capital or surplus funds. Risk capital may generate very high costs, but on the other hand it protects against insolvency. That’s why a bank needs to find the ‘Gold mean’—the optimal value of risk capital that will not lower its efficiency, but still ensure financial security. The main objective of the study is identification of interdependencies between bank risk capital and effectiveness of the aggregated Eurozone banking sector and selected national banking sectors of the euro area. The paper tries to answer the research question whether the risk capital supports or lowers banks’ operational effectiveness. The adopted research hypothesis stated that there is a positive correlation between profitability and size of bank risk capital. To verify the hypothesis regression models were used. The results indicate that the size and structure of bank capital impact on the credit institutions’ effectiveness in the analyzed banking sectors, however with different intensity. Thereby, the article fulfils a research gap in the field of research studies that take into account how capital at risk and specific capital adequacy regulations may impact on a bank’s efficiency.

scholarly journals SECTORAL ANALYSIS OF THE EFFECTIVENESS OF BANK RISK CAPITAL IN THE VISEGRAD GROUP COUNTRIES

2019 ◽  
Vol 20 (3) ◽  
pp. 424-445 ◽  
Author(s):  
Aleksandra Nocoń ◽  
Irena Pyka
Keyword(s):  
Capital Adequacy ◽  
Bank Risk ◽  
Linear Regression Models ◽  
Risk Capital ◽  
Negative Effects ◽  
Econometric Methods ◽  
Study Results ◽  
Net Profit ◽  
Capital At Risk ◽  
Visegrad Group

Bank risk capital (capital at risk) is identified with the value of banks’ own funds maintaining to absorb potential losses and protect against insolvency. It is calculated for the capital adequacy ratios, recommended by the Basel Committee on Banking Supervision. On other words, it is a kind of banks’ capital that financing securing the negative effects of risk occurring. A comparative analysis of effectiveness of bank risk capital in the Visegrad Group countries, constituting the main objective of the study, results from the needs indicated in the already conducted preliminary research. In the article, statistical and econometric methods were used, based on linear regression models. The conducted research were aimed to verify the research hypothesis stating that in the analyzed banking sectors of the Visegrad Group countries there is a positive correlation between banks' profitability and a level of their bank risk capital. The study indicated that net profit of the analyzed banking sectors increases with a growth of total own funds, while profitability is diversified in individual countries. Declining operational efficiency results from the growing cost of obtaining and maintaining risk capital.

scholarly journals SECTORAL ANALYSIS OF THE EFFECTIVENESS OF BANK RISK CAPITAL IN THE VISEGRAD GROUP COUNTRIES

2019 ◽  
Vol 20 (3) ◽  
pp. 446-465 ◽  
Author(s):  
Nhat Tan Pham ◽  
Zuzana Tučková ◽  
Quyen Phu Thi Phan
Keyword(s):  
Capital Adequacy ◽  
Bank Risk ◽  
Linear Regression Models ◽  
Risk Capital ◽  
Negative Effects ◽  
Econometric Methods ◽  
Study Results ◽  
Net Profit ◽  
Capital At Risk ◽  
Visegrad Group

Bank risk capital (capital at risk) is identified with the value of banks’ own funds maintaining to absorb potential losses and protect against insolvency. It is calculated for the capital adequacy ratios, recommended by the Basel Committee on Banking Supervision. On other words, it is a kind of banks’ capital that financing securing the negative effects of risk occurring. A comparative analysis of effectiveness of bank risk capital in the Visegrad Group countries, constituting the main objective of the study, results from the needs indicated in the already conducted preliminary research. In the article, statistical and econometric methods were used, based on linear regression models. The conducted research were aimed to verify the research hypothesis stating that in the analyzed banking sectors of the Visegrad Group countries there is a positive correlation between banks' profitability and a level of their bank risk capital. The study indicated that net profit of the analyzed banking sectors increases with a growth of total own funds, while profitability is diversified in individual countries. Declining operational efficiency results from the growing cost of obtaining and maintaining risk capital.

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.

The macroeconomic impact of shocks to bank capital buffers in the Euro Area

2019 ◽  
Vol 20 (1) ◽  
Author(s):  
Derrick Kanngiesser ◽  
Reiner Martin ◽  
Laurent Maurin ◽  
Diego Moccero
Keyword(s):  
Euro Area ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Decomposition Analysis ◽  
Bank Lending ◽  
Empirical Literature ◽  
Bank Capital ◽  
Macroeconomic Impact ◽  
The Global Financial Crisis ◽  
The Impact

Abstract While the global financial crisis revealed a need for macroprudential policy tools to mitigate the build-up of risk in the financial system, the impact of such policies on the banking sector and the macroeconomy remains largely uncertain. We contribute to the empirical literature that estimates the impact of shocks to bank capital buffers on bank lending and the macroeconomy by estimating a Bayesian VAR model identified with sign restrictions. We use bank-level data for large euro area listed banks to construct an aggregate bank capital buffer for the euro area, which is included as another variable in the model. We estimate three shocks affecting the euro area economy, namely a demand shock, a monetary policy shock and a shock to bank capital buffers. We find that banks curtail lending and reduce their relative exposure to riskier assets in response to a shock to the bank capital buffer. Historical shock decomposition analysis shows that shocks to bank capital buffers have contributed to impair bank lending growth and to widen bank lending spreads, hence depressing economic activity.

scholarly journals FINANCIAL MARKET STABILITY – KEY LEVER ECONOMIC DEVELOPMENT OF THE STATE

2021 ◽  
Author(s):  
Inna Aleksieienko ◽  
Svitlana Leliuk ◽  
Olga Poltinina
Keyword(s):  
Gross Domestic Product ◽  
Financial Market ◽  
Banking Sector ◽  
Equity Capital ◽  
The State ◽  
Capital Adequacy ◽  
Domestic Product ◽  
Bank Capital ◽  
International Liquidity ◽  
The Impact

Economic issues of the state's development at the present stage, largely depend on the development of the financial sphere. That is dictated by the reduction of the role of the real sector in the economy of the development of the state. Based on the experience of developed countries, we can state that the functioning of the effective banking system is the lever of development of the country's economy. The modern Ukrainian economy still cannot demonstrate the adequacy of the development of the financial market. The banking sector is most effective in this area. The issue of regulating the adequacy of bank capital is also relevant for the Ukrainian economy. The solution of this issue, to a certain extent, is embedded in the process of Ukraine's implementation of international standards for regulating the activities of banks. In this direction, the NBU has developed a program of measures to update regulatory requirements for banks. The paper argues the feasibility of a bank-centric financial market model for Ukraine. An analysis of the dynamics of the formation of bank capital has been carried out. The indicators of its sufficiency are considered separately. The results of the analysis of the compliance of Ukrainian banks with international liquidity standards are presented. Analysis of banks' capital security, dynamics of its absolute values with the rate of formation of gross domestic product was carried out. The bank's capital adequacy indicators are used as criteria for assessing their stability. The methodology used to assess the relationship between banks' equity and gross domestic product through sensitivity ratio (β). The level of communication between the indicators was determined by the value of the correlation ratio. Separately, an analysis of the impact of banks' equity on the level of gross domestic product for individual periods was carried out. The purpose of this analysis is to find out the peculiarities of banks' activities. As a result, it was proved that there is a connection between the indicator of the level of banks' equity capital and the gross domestic product. Additionally, the article describes the problems that hinder the development of the financial market in Ukraine. Government support for the banking sector is the basis for its development.

scholarly journals EFFECTIVENESS OF RISK CAPITAL (OWN FUNDS) IN THE POLISH BANKING SECTOR IN THE YEARS OF 2002–2016

2018 ◽  
Author(s):  
Aleksandra Nocoń ◽  
Irena Pyka
Keyword(s):  
Banking Sector ◽  
Bank Risk ◽  
Risk Capital ◽  
Essential Component ◽  
Research Hypothesis ◽  
Econometric Methods ◽  
Net Profit ◽  
Level Of Risk

The analysis of effectiveness of risk capital in the Polish banking sector have become the main aim of the study. In the article, statistical and econometric methods were used, based on a linear regres-sion model of net profit in relation to the value of own funds of the banking sector in Poland in the years of 2002–2016. Next, through the quartile method, there were estimated the relations between effectiveness and a level of risk capital of the largest banks in Poland. Conducted research were aimed to verify the research hypothesis stating that in the Polish banking sector there is a positive cor-relation between net profit and banks’ own funds, which constitute an essential component of bank risk capital.

scholarly journals THE EFFICIENCY OF BANKS IN INDONESIA: SHARIA VS. CONVENTIONAL BANKS

2016 ◽  
Vol 18 (3) ◽  
pp. 307-332
Author(s):  
Mokhamad Anwar
Keyword(s):  
Data Envelopment Analysis ◽  
Technical Efficiency ◽  
Banking Sector ◽  
Capital Adequacy ◽  
Islamic Banking ◽  
Data Envelopment ◽  
Bank Capital ◽  
Tobit Regression ◽  
Small Business Finance ◽  
Conventional Banks

This paper evaluates the performance of Indonesian banking sector, focusing on technical efficiency of sharia and conventional banks along with the determinants of its efficiency during the period 2002-2010. Data Envelopment Analysis is employed to estimate banks technical efficiency and Tobit-regression is used to reveal the determinants of the efficiency over the panel data of 116 banks, including 109 conventional banks and 7 sharia banks. The result shows that sharia banks outperformed conventional banks in one model when it takes into account small business finance (SBF) as one of the output components in the model. Sharia banks have higher average SBF portfolio than those of conventional banks’ portfolio. The result indicates the efforts of Indonesian sharia banks to obey one of the principles in Islamic banking, “the emphasis on Islamic principles of morality”. By observing all models, it is concluded that the size of the bank, capital adequacy and liquidity are of banks characteristic factors which are very important to increase banks’ efficiency

scholarly journals Sustainable Risk Management in the Banking Sector

2014 ◽  
Vol 3 (1) ◽  
pp. 81-100 ◽  
Author(s):  
Ivo Županović
Keyword(s):  
At Risk ◽  
Risk Management ◽  
Financial Markets ◽  
Financial Institutions ◽  
Value At Risk ◽  
Banking Sector ◽  
Negative Consequences ◽  
Operational Risks ◽  
Management Measures ◽  
Capital At Risk

Abstract The globalization of financial markets and negative consequences of the financial crisis resulted in negative connotations in the operation of many financial institutions, businesses and citizens and imposed the need to implement appropriate risk management measures in the banking sector. Evolution of the financial sector makes a lot of news in the field of risk management and particularly the modelling of market, credit and operational risk. The main methodology for risk management is the value-at-risk, which is used in practice with other techniques such as the capital- at-risk method in order to minimize business risks and achieve optimal results in the banking and, generally, financial operations. Accordingly, at all levels of governance in the banking sector, there are prudential policies in place governing the management of all types of financial and operational risks. Based on the abovementioned, the focus of the examination was on the above postulate, and prompt recognition, control and proper management of banking risks.

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