scholarly journals The Impact of Financial Sector Sustainability Guidelines and Regulations on the Financial Stability of South American Banks

2021 ◽  
Vol 10 (1) ◽  
pp. 111-127
Author(s):  
Pedro Ildemaro Alguindigue Ruiz ◽  
Olaf Weber
Keyword(s):  
Latin America ◽  
Financial Stability ◽  
Banking Industry ◽  
Financial Sector ◽  
South American ◽  
Panel Regression ◽  
Z Score ◽  
Sustainable Finance ◽  
The Impact

Sustainability risks represent a significant concern for the banking industry. Consequently, financial regulators created financial sector sustainability guidelines and regulations. However, the effect of these policies on banks’ financial stability is unclear. Hence, this study analyzes 149 banks in 17 countries in Latin America to explore the impact of financial sector sustainability guidelines and regulations on the banking industry. We use the Z-Score to measure the financial stability of banks in countries with and without financial sector sustainability guidelines and regulations. Based on panel regression, our results suggest significant differences between banks in countries with and without financial sector sustainability guidelines and regulations. We conclude that sustainable finance regulations promote financial stability as well as sustainable banking practices.

scholarly journals Sustainable finance initiatives and their impact on financial stability

2020 ◽  
Vol 20 (4) ◽  
pp. 118-133
Author(s):  
Klaudia Zielińska-Lont
Keyword(s):  
Sustainable Development ◽  
Financial Stability ◽  
Financial Sector ◽  
Financial Instruments ◽  
Potential Threat ◽  
Sudden Loss ◽  
Sustainable Finance ◽  
The Subject ◽  
Potential Impact ◽  
The Impact

The article discusses the potential impact of sustainable finance initiatives on financial stability. A careful literature review on the subject of sustainable development and stability of the financial sector is performed in order to identify potential gaps in policies and regulations. Existing considerations around the impact of sustainable development efforts focus exclusively on the consequences of climate change for the portfolio of assets held by the financial sector, whereas the author examines the growing market for sustainable financial instruments as a potential threat. The results indicate that sustainability features of new financial instruments are not methodically evaluated in the context of their credibility and may therefore suffer from sudden loss of value that is not accounted for under the existing supervisory mechanisms. Inconsistent definitions and no single perception of sustainability further enhance the risk for investors and issuers and that risk needs to be accounted for under the mechanisms safeguarding financial stability.

The impact of credit risk on the financial stability of commercial banks in Vietnam

2021 ◽  
Vol 11 (2) ◽  
pp. 67-80
Author(s):  
Nguyen Quoc Anh ◽  
Duong Nguyen Thanh Phuong
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Financial Stability ◽  
Dynamic Panel Data ◽  
Z Score ◽  
Return On Equity ◽  
Score Analysis ◽  
Negative Effect ◽  
The Difference ◽  
The Impact

This study investigates the impact of credit risk on the financial stability of Vietnamese commercial banks. The paper uses the Z-score to proxy the financial stability of banks. We use the data of 27 Vietnamese commercial banks on BankScope, during 2010 - 2019. The paper applied a dynamic panel data approach; the selected method is the difference GMM (DGMM). The key question discussed is which factor impacts on Z-score. Analysis results show the negative effect of non-performing loans on the financial stability of banks. When commercial banks have higher non-performing loans, the lower the financial stability is. Additionally, bank-specific variables such as equity on asset ratio, the return on equity, the size of the bank and set of macroeconomic variables affect the bank’s financial stability. Based on the analysis results, we imply relevant policies for the State Bank of Vietnam and commercial banks.

scholarly journals The Effect of Credit Derivatives on Financial Stability

2016 ◽  
Vol 1 (1) ◽  
pp. 22 ◽  
Author(s):  
Richard Van Ofwegen ◽  
Willem F.C. Verschoor ◽  
Remco C.J. Zwinkels
Keyword(s):  
Financial Stability ◽  
Credit Derivatives ◽  
Financial Sector ◽  
Financial Products ◽  
The Stability ◽  
The Impact

Due to the recent financial turmoil, questions have been raised about the impact ofcomplex financial products, like credit derivatives, on financial stability. The academicliterature however does not provide a clear answer to this question. This paper empiricallylinks the stability of the financial sector to the use of credit derivatives for the main constituentsof the European financial sector. We find that the use of credit derivatives increases theprobability of default and thus reduces the overall financial sector stability. In addition,we find evidence that this relationship is progressive and economically meaningful.

Does the speed of adjustment in regulation and supervision affect financial stability in developing countries?

2019 ◽  
Vol 27 (4) ◽  
pp. 453-463
Author(s):  
Chadi Azmeh
Keyword(s):  
Developing Countries ◽  
Economic Development ◽  
Financial Stability ◽  
Positive Impact ◽  
Financial Sector ◽  
Content Type ◽  
Speed Of Adjustment ◽  
Regulation And Supervision ◽  
Bank Regulation And Supervision ◽  
The Impact

Purpose This paper aims to examine the impact of bank regulation and supervision on financial stability. Financial sector reform, especially in developing countries, takes the form of a sudden adjustment in regulation and supervision. The main objective of the paper is to examine whether this fast and sudden adjustment in regulation and supervision has an undesirable impact on financial stability. Furthermore, the paper examines the role of real economic development in determining the impact of financial reform on financial stability. Design/methodology/approach Empirically, on a sample of 57 developing countries over the period 2000-2013, the author explored the impact of bank regulation and supervision on financial stability for different sub-groups of countries. The division is based on the real level of economic development and, most importantly, on the speed of adjustment in regulation and supervision. The study uses the cross-sectional–ordinary least square model. Each country has three observations (average 2000-2004, average 2005-2008 and average 2009-2013), which are convenient, with the date of the three surveys on regulation and supervision (2002-2006-2011). The period of the averages is selected to cover periods before and after the survey as regulation and supervision may be adopted before the survey and as its impact may persist for the period after. Findings The major finding of this study is that it supports the important role of the speed of adjustment in regulation and supervision, and its impact on financial stability. Soft adjustment in regulation and supervision has more positive impact on financial stability than fast adjustment. Activity restrictions have positive and significant impact on financial stability in soft adjustment countries’ group. On the other hand, in countries with fast adjustment, results show negative and statistically significant impact on financial stability, especially for supervisory independence. More time is needed for supervisors to adapt to new regulation and supervision and gain expertise to monitor financial condition of banks in a consistent manner. Results also show that the level of economic development is an important factor when testing the impact of regulation and supervision on financial stability. In lower income countries, more room is available for corruption in lending, which has a negative impact on financial stability. Practical implications This study advocates the necessity of taking the speed of adjustment in regulation and supervision by policymakers in developing countries, while initiating reform in the financial sector. Financial sector reform that takes the form of a sudden adjustment in regulation and supervision may have undesirable results in terms of financial stability. On the other hand, soft adjustment in regulation and supervision, which gives more room for supervisors to adapt and gain expertise, may have more positive impact on financial stability. Originality/value This paper is the first paper to explore new methods of calculating the speed of adjustment in regulation and supervision, and to examine whether the high speed of financial reform in developing countries has an undesirable impact on financial stability.

Corporate social responsibility and financial stability: evidence from the Troubled Asset Relief Program

2019 ◽  
Vol 45 (8) ◽  
pp. 1111-1128 ◽  
Author(s):  
Elizabeth Cooper ◽  
Christopher Henderson ◽  
Andrew Kish
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Financial Institutions ◽  
Financial Stability ◽  
Banking Industry ◽  
Content Type ◽  
Troubled Asset Relief Program ◽  
Corporate Social ◽  
Relief Program ◽  
The Impact

Purpose The purpose of this paper is to test the impact of corporate social responsibility (CSR) in the banking industry using Troubled Asset Relief Program (TARP) as an experimental backdrop. Design/methodology/approach The authors match banks that received TARP with CSR data on publicly available firms. Using this data set, the authors are able to perform both univariate and multivariate analyses to determine the impact of CSR on bank management behavior. Findings The authors find evidence that supports stakeholder theory as applied to a sample of large financial institutions. The authors show that banks increased their CSR involvement and intensity following TARP, evidence that CSR is not merely transitory in nature but structural and an important aspect of firm value. The authors also find that capital ratios increase to a greater degree in banks whose CSR ratings were stronger prior to TARP. Finally, while all banks in the sample repaid Treasury, it took strong CSR banks a longer time to repay than banks with weaker CSR. The authors show how CEO compensation played a role in this relationship. Research limitations/implications The findings are limited to large banks. Practical implications Practically speaking, this study helps to discern the motivations and actions of large financial institutions. This is especially important from a regulator perspective, whose function is to maintain overall national financial stability. Originality/value This is the first study to link TARP and CSR literatures. Overall, there are a limited number of studies on CSR in the banking industry, and this paper adds to this burgeoning area. It is important and valuable to managers and policymakers to understand implications of CSR in the financial sector.

scholarly journals Influence of financial sustainability of households on default risks of regulated banks

2020 ◽  
Vol 159 ◽  
pp. 05015
Author(s):  
Zuhra Yergasheva ◽  
Saltanat Kondybayeva ◽  
Ryszhan Kabylkairatkyzy ◽  
Gulmira Yesengeldiyeva
Keyword(s):  
Financial Stability ◽  
Financial Sector ◽  
Financial Sustainability ◽  
The Real ◽  
Household Sector ◽  
Financial Condition ◽  
Credit Risks ◽  
Default Risks ◽  
The Republic ◽  
The Impact

The purpose of the article is to assess the financial sustainability of the household sector of the Republic of Kazakhstan and its impact on the real and financial sector in the context of minimizing the credit risks of the regulated banks of the Republic of Kazakhstan. The paper analyzes various points of view on assessing the financial sustainability of the household sector, makes a successful attempt to assess at a macroeconomic level the financial sustainability of households and the drawing potential of households in Kazakhstan using the OECD and IMF methods. The work made a holistic analysis of the financial condition and solvency of households in Kazakhstan, a forecasted VAR-model for assessing the impact of household financial sustainability on the state of the real sector of the economy has been developed; a regression model for assessing the impact of financial stability of households on the financial sector of Kazakhstan has been developed.

scholarly journals Improving the Resilience of Banking System in Small Open Economy: Is Macroprudential Policy Efficient?

2021 ◽  
Vol 92 ◽  
pp. 07050
Author(s):  
Petra Popek Biskupec ◽  
Suzana Herman
Keyword(s):  
Granger Causality ◽  
Financial Stability ◽  
Granger Causality Test ◽  
Financial Sector ◽  
Bank Credit ◽  
Real Sector ◽  
Causality Test ◽  
The Real ◽  
Bounds Test ◽  
The Impact

Research background: Although macroprudential instruments increase financial stability, it is necessary to test how they affect the overall economic recovery after a global financial crisis. In the post-crisis period, the real sector needed a strong injection of capital in order to be able to start recovery and to encourage economic growth. At the same time, most of the countries introduced strict regulatory measures that strengthen bank capital and the liquidity base. From the standpoint of the financial sector stability, these measures contributed to the overall financial stability, but at the same time, these measures hold up the bank credit activity. Purpose of the article: This paper analyses the impact of macroprudential instruments on the bank credit activity toward the non-financial sector. The analysis is made by using the Granger Causality Test and the ARLDS Bounds Test. Methods: The research was conducted for the period of 2000 – 2019, based on the data of the Croatian National Bank and the Croatian Bureau of Statistics using logarithmic quarterly data. The analysis is made by using the Granger Causality Test and the ARLDS Bounds Test. Findings & Value added: The results confirm the thesis that additional macroprudential measures decrease the bank credit activity toward the real sector, which slows down the real sector recovery and extends the downturn in the business cycle. On the other hand, the macroprudential measures increase the financial stability of the whole economy, which is positive for future investments and recovery of the real sector.

scholarly journals Monetary Policy and Financial Stability in the Nigerian Banking Industry

2019 ◽  
Vol 11 (1) ◽  
pp. 82
Author(s):  
Oparah Felix Chukwudi ◽  
James Tumba Henry
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Banking Industry ◽  
Stability Index ◽  
Open Market ◽  
Long Run ◽  
Market Operation ◽  
The Impact ◽  
Nigerian Banking ◽  
Long Run Equilibrium

This study examined the impact of monetary policy on financial stability in the Nigerian banking industry for the period 2008Q1 to 2016Q2, using an error correction model. Banking industry financial stability index (BIFSI) was computed within the study and was used as a measure of financial stability in the Nigerian banking industry. The study discovered that the impact of monetary policy on financial stability in the Nigerian banking industry was weak. It also revealed a significant long run equilibrium relationship between monetary policy and financial stability in the Nigerian banking industry with a speed of adjustment to long run equilibrium of 66.54%. It was concluded that open market operation and exchange rate channels are more effective channels of transmitting monetary policy to financial stability in the banking industry, than interest rate channel.

Financialization, premature deindustrialization, and instability in Latin America

2021 ◽  
Vol 9 (4) ◽  
pp. 493-511
Author(s):  
Esteban Pérez Caldentey ◽  
Matías Vernengo
Keyword(s):  
Latin America ◽  
Social Development ◽  
Economic Activity ◽  
Financial Stability ◽  
Financial Sector ◽  
Developed Countries ◽  
Advanced Stage ◽  
Investment Growth

The paper analyses the relation between premature deindustrialization in Latin America and what is termed premature financialization. Premature financialization is defined as a turn to finance, organized as an industrial concern, which is a vehicle for accumulation before the process of industrialization has reached maturity. This contrasts with developed countries where financialization occurs after an advanced stage of economic and social development has been reached, and where the growth of the financial sector, beyond a certain threshold, can be detrimental to economic activity. The paper examines the consequences of premature financialization for investment, growth, and financial stability.

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