scholarly journals Construction and Empirical Research on the Dynamic Provisioning Model of China’s Banking Sector under the Macro-Prudential Framework

2020 ◽  
Vol 12 (20) ◽  
pp. 8527
Author(s):  
Xiaofeng Hui ◽  
Aoran Zhang
Keyword(s):  
Commercial Banks ◽  
Financial Stability ◽  
Banking Sector ◽  
Contingent Claims ◽  
Gaussian Copula ◽  
Accounting System ◽  
Financial Industry ◽  
Claims Analysis ◽  
Contingent Claims Analysis ◽  
Dynamic Provisioning

Since the international financial crisis in 2008, to achieve the political goal of financial stability, academic circles, financial industry, and regulatory authorities worldwide have deeply reflected on the current economic regulatory theories and policy adjustment tools through introducing the macroprudential policy. The dynamic provisioning system is a counter-cyclical policy tool in the macro-prudential adjustment framework widely used in the world. This paper uses the binary Gaussian Copula function to combine the measurement method of the default distance in the contingent claims analysis method with the risk warning idea based on the Probit model and proposes the contingent claims analysis (CCA)–Probit–Copula dynamic provisioning model based on nine forward-looking indicators. Based on China’s actual conditions, this model solves present problems faced by the current dynamic provisioning system in China, such as insufficient historical credit data reserves of commercial banks, excessive reliance on subjective judgments, and conflicts with the current accounting system. Moreover, this model can put forward corresponding counter-cyclical provisioning requirements according to the influence degree of macro-cyclical factors to different commercial banks’ own default risk, which not only takes into account the security and liquidity of commercial banks, but also ensures their profitability and competitiveness. Based on the empirical test of historical data from listed commercial banks in China, it proves that the dynamic provisioning requirements proposed in this model can effectively adjust the overall credit scale of the banking industry in counter-cyclical ways, thereby achieving the policy goals of counter-cyclical adjustment under the macro-prudential framework and maintaining the security of China’s financial system and the sustainable development of the macroeconomy.

scholarly journals A Comprehensive Approach for Calculating Banking Sector Risks

2020 ◽  
Vol 8 (4) ◽  
pp. 69
Author(s):  
Carmelo Salleo ◽  
Alberto Grassi ◽  
Constantinos Kyriakopoulos
Keyword(s):  
Banking Sector ◽  
Balance Sheet ◽  
Banking System ◽  
Contingent Claims ◽  
Comprehensive Approach ◽  
Real Economy ◽  
Claims Analysis ◽  
Contingent Claims Analysis ◽  
Government Sector ◽  
Risk Metric

We propose a comprehensive approach for the analysis of real economy and government sector risk transmission to the banking system and apply it in ten Euro-Area countries from 2005 to 2017. A flexible methodology is developed to model banks’ assets according to the risk-adjusted balance sheet of the counterparts. The use of distance to distress as a popular risk metric shows that Contingent Claims Analysis underestimates banks risk in stable periods and overstates it during crisis. Furthermore, the approach succeeds in detecting spillovers from households, non-financial corporations and sovereign sectors: for the countries examined the main source of instability comes from the Non-Financial Corporation sector and its increased assets volatility.

scholarly journals The Impact of Banking Competition on Firm Credit Risk and Leverage

SAGE Open ◽  
2021 ◽  
Vol 11 (4) ◽  
pp. 215824402110615
Author(s):  
Chengxiao Feng ◽  
Zhubo Li ◽  
Zhen Peng
Keyword(s):  
Default Risk ◽  
Credit Constraints ◽  
Contingent Claims ◽  
Claims Analysis ◽  
Banking Competition ◽  
Leverage Ratio ◽  
Contingent Claims Analysis ◽  
Credit Risks ◽  
Default Risks ◽  
The Impact

A firm’s default risk is closely related to its macrofinancial stability. As financial reform deepens, banking competition may ease firms’ credit constraints, encouraging them to increase their leverage and default risks. This study uses contingent claims analysis to examine firms’ asset–liability ratio and default distance. We find that companies have low leverage and low overall default risks. Moreover, a pro-cyclical effect exists between leverage and economic growth. As banking competition becomes more intense, the default risk decreases, but firms’ leverage ratio rises significantly. The impact is more prominent for highly leveraged firms. Our findings also indicate that utilizing the contingent claims analysis method to measure firms’ leverage and default risks provides more accurate results. Moreover, we provide empirical evidence of the impact of banking competition on firms’ leverage and credit risks. The results suggest that enhancing financial competition has a positive effect on easing credit constraints and reducing default risks.

scholarly journals Benchmarking and Rating of Private Commercial Banks of Bangladesh Through CAMELS Components

2020 ◽  
Vol 2 (2) ◽  
pp. 40-49
Author(s):  
A H M Ziaul Haq ◽  
Hosnay Nasrin
Keyword(s):  
Commercial Banks ◽  
Financial Stability ◽  
Banking Sector ◽  
Study Data ◽  
Annual Reports ◽  
Continuous Performance ◽  
Financial Failure ◽  
Strong Position ◽  
Composite Rating

The banking sector of Bangladesh is becoming more complicated than before. Ensuring the financial stability of the economy, monitoring, supervision, and continuous performance evaluation of the banking sector are compulsory. The present study, therefore, is an attempt to evaluate and compare the performance of our banks. One of the most effective supervisory techniques, CAMELS rating system has been used to benchmark and rate the banks based on their performance. In this study, 21 private commercial banks (PCBs) have been chosen as samples to meet the purpose of the study. Data for analysis has been collected from the banks’ annual reports for the period of 2008 to 2018. The result shows that none of the banks could achieve a 'strong' position, and only SEBL was able to secure a ‘satisfactory’ mark. Unfortunately, AB bank was rated "marginal" in the composite rating, which is the lowest rating among the sample banks. Hence, AB bank needs to develop reform and follow-up programs as soon as possible to avoid financial failure.

Determinants of Non-Performing Assets of Commercial Banks in India

2021 ◽  
Keyword(s):  
Monetary Policy ◽  
Panel Data ◽  
Commercial Banks ◽  
Financial Stability ◽  
Policy Effectiveness ◽  
Credit Growth ◽  
Dynamic Provisioning ◽  
The Past ◽  
Economic Slowdown ◽  
Monetary Policy Effectiveness

Banks’ credit growth continues to decelerate in India due to huge non-performing assets (NPAs) overhangs in banks. Using the panel data methodology, this study empirically analyzed the determinants of NPAs of scheduled commercial banks in India during 2009-2020. Results indicated that the excessive credit growth in the past increased the surge in the current NPAS. The economic slowdown also aggravated loan delinquencies in Indian commercial banks. While higher priority sector lending created higher loan delinquencies, higher banks size and higher profitability reduced it. This study suggested that counter capital buffer, dynamic provisioning and a sound credit appraisal NPA improved the financial stability and monetary policy effectiveness. These findings are useful for policymakers, bankers and other stakeholders to make appropriate strategies to resolve the NPA issue in India.

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