scholarly journals Determinants of Capital Adequacy of Nigerian Banks

Market Forces ◽  
2020 ◽  
Vol 15 (1) ◽  
Author(s):  
Sanyaolu Wasiu Abiodun ◽  
Alao Adeniyi Abdul-Azeez ◽  
Yunusa Lateef Adewale
Keyword(s):  
Management Practices ◽  
Developing Economies ◽  
Banking System ◽  
Capital Adequacy ◽  
Data Set ◽  
Nonperforming Loans ◽  
Flow Of Funds ◽  
Economic Progress ◽  
The Stability ◽  
Macroeconomic Determinants

A reliable banking system in developing economies like Nigeria is vital for economic progress as it facilitates the flow of funds to productive investment sectors. The capital adequacy requirement of banks is a crucial feature of the stability of the banks globally. Because of its importance, we have examined the antecedents to capital adequacy. We have used the data set of ten leading banks of Nigeria from 2007 to 2017. Our results indicate that ROA and loan to total assets are significantly associated with capital adequacy. However, we found that nonperforming loans and size are negatively associated with the capital adequacy. Our results do not support the association between macroeconomics variables and capital adequacy. Therefore, we recommend that all banking entities should reserve sufficient cash and cash equivalents as a percentage of deposits and apply aggressive risk management practices to reduce the magnitude of nonperforming loans. This study was restricted to one country. Future studies can be carried out in other countries. A comparative data set of more than one country may bring further insight into the phenomenonKeywords: Capital adequacy ratio, banks-specific determinants, macroeconomic determinants, Nigeria.

scholarly journals Bank Specific and Macroeconomic Determinants of Commercial Bank Profitability: Empirical Evidence from Nigeria

2017 ◽  
Vol 6 (1) ◽  
pp. 25 ◽  
Author(s):  
Oluwaseyi Ebenezer Olalere ◽  
Wan Ahmad Bin Omar ◽  
Syahida Kamil
Keyword(s):  
Developing Economies ◽  
Operating Cost ◽  
Capital Adequacy ◽  
Data Set ◽  
Bank Profitability ◽  
Financial Reports ◽  
Return On Equity ◽  
Empirical Results ◽  
Developed Economies ◽  
Macroeconomic Determinants

The study examines the bank-specific and macroeconomic determinants of banks profitability in Nigeria analyzing audited financial reports of selected sixteen (16) commercial banks over the period of 2010 to 2015 making up to 96 observations. The study identified that existing studies are sketchy in developing economies even though many studies have emerge in developed economies. The bank profitability is measured by return on assets and return on equity as function of bank-specific and macroeconomic determinants. Using the balanced panel data set, the empirical results of the study shows that capital adequacy and liquidity have a positive and significant effect on bank profitability. However, efficiency ratio have a negative and significant effect on bank profitability. With regards to macroeconomic variable, GDP growth also have a positive and significant impact on banks profitability. The empirical results of the study suggested that banks can improve their profitability through increasing capital and liquidity, decreasing operating cost with conscious effort to maintain transparency in their operations. In addition, a good economic environment for financial institutions foster increase in bank profitability. Hence, the study recommends that further studies can expand the scope while extending to other industries as well.

The Determinants of Capital Adequacy Ratio: The Case of the Vietnamese Banking System in the Period 2011-2015

2017 ◽  
Vol 33 (2) ◽  
Author(s):  
Ngoc Anh Nguyen
Keyword(s):  
Banking System ◽  
Precious Metals ◽  
Capital Adequacy ◽  
The Other ◽  
Total Asset ◽  
Data Set ◽  
Hand Size ◽  
Net Interest Margin ◽  
Capital Adequacy Ratio ◽  
Positive Effect

The analysis of a data set of observation for Vietnamese banks in period from 2011 - 2015 shows how Capital Adequacy Ratio (CAR) is influenced by selected factors: asset of the bank SIZE, loans in total asset LOA, leverage LEV, net interest margin NIM, loans lost reserve LLR, Cash and Precious Metals in total asset LIQ. Results indicate based on data that NIM, LIQ have significant effect on CAR. On the other hand, SIZE and LEV do not appear to have significant effect on CAR. Variables NIM, LIQ have positive effect on CAR, while variables LLR and LOA are negatively related with CAR.

NPLs — The Solution Recipe for Albania

2015 ◽  
Vol 3 (1) ◽  
pp. 48
Author(s):  
Elona Shehu ◽  
Elona Meka
Keyword(s):  
Interest Rate ◽  
Negative Relationship ◽  
Banking System ◽  
Gdp Growth ◽  
System A ◽  
Analysis Technique ◽  
Recent Financial Crisis ◽  
The Stability ◽  
Asset Quality ◽  
Macroeconomic Determinants

The quality of the loan portfolio in Albanian banking system is facing many obstacles during the last decade. In this paper we look at possible determinants of assets quality. During the recent financial crisis commercial banks were confronted with deteriorating asset quality that threatened not only the banking industry, but also the stability of the entire financial system. This study aims to examine the correlation between non-performing loans and the macroeconomic determinants in Albania during the last decade. NPLs are considered to be of a high importance as they represent the high risk exposure of banking system. A solid bank with healthy assets increases the market efficiency. Our approach is based on a panel data regression analysis technique from 2005-2015. Within this methodology this study finds robust evidence on the existing relationship between lending interest rate, real GDP growth and NPLs. We expect to find a negative relationship between lending interest rate and asset quality. Further we assume an inverse relationship between GDP growth and non-performing loans, suggesting that NPLs decrease if the economy is growing. Furthermore this study proposes a solution platform, which looks deeper into the possibility of creating a secondary active market for troubled loans, restructuring the banking system or implementing the Podgorica model. This research paper opens a new lieu of discussion in terms of academic debates and decision-making policies.

The Risk of Insolvency and its Impact on Romanian Banks

2016 ◽  
Vol 7 (2) ◽  
pp. 97-104
Author(s):  
Elena Violeta Drăgoi ◽  
Larisa Elena Preda
Keyword(s):  
Sustainable Development ◽  
Banking System ◽  
Capital Adequacy ◽  
Beneficial Effects ◽  
The Stability ◽  
The Impact

Abstract The new regulations on capital adequacy aimed to strengthen the stability of financial and banking system because a stable banking system contributes to assure a sustainable development with long term beneficial effects on economy. This article represents a review of the impact on new higher standards for Romanian banks regarding capital adequacy.

scholarly journals MACROECONOMIC AND MACRO-FINANCIAL FACTORS OF THE STABILITY OF THE BANKING SECTOR - THE CASE OF THE REPUBLIC OF NORTH MACEDONIA

2021 ◽  
Author(s):  
Blagica Donev ◽  
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Size Structure ◽  
Developing Economies ◽  
Multiple Linear Regression Model ◽  
Capital Adequacy ◽  
Macroeconomic Factors ◽  
Financial Factors ◽  
The Republic ◽  
The Stability

Banks, as financial institutions, play a vital role in achieving financial stability and economic growth, with their expected contribution through mobilization and allocation of financial resources throughout the economy. Only a reliable and stable banking system that enjoys the trust of economic entities can be an effective intermediary of the resources of the national economy in order to intensify economic development. The role of banks is even more important for developing economies with underdeveloped capital markets. The banking sector is still the primary form of financial intermediation in the Republic of North Macedonia. The study examine the stability of the banking sector in North Macedonia, and explores the macroeconomic, macro financial factors behind stability indicators of banking sector functioning in North Macedonia over the 1996- 2017 period by employing correlations and multiple linear regression model. Results of the analysis showed that macroeconomic factors are not affecting selected bank stability indicators: NPL and capital adequacy. In addition, macro-financial factors (that include the specific determinants of the banking sector that relate to the size, structure, efficiency of the banking sector, competition) are affecting indicators and can be shown to be reliable early warning indicators. There is a broad consensus that strong and effective micro- and macroprudential policies are needed to assure a robust and resilient financial system. Author’s recommendation is implementation regulatory framework and construction of legal, institutional, regulatory landscape for macro-prudential regulation and policies, that act complementing to microprudential and macroeconomic policies, that have an impact on systemic financial stability.

Basel II in India: Compliance and Challenges

2011 ◽  
Vol 36 (4) ◽  
pp. 299-318 ◽  
Author(s):  
Mandeep Kaur ◽  
Samriti Kapoor
Keyword(s):  
Banking System ◽  
Basel Ii ◽  
Capital Adequacy ◽  
Annual Reports ◽  
International Banking ◽  
Risk Sensitive ◽  
Reserve Bank ◽  
Global Banking ◽  
The Stability ◽  
Reserve Bank Of India

The stability of International banking system has emerged as a key concern for regulators in rapidly changing global banking scenario. In order to strengthen the soundness and stability of banks, Basel Committee on Banking Supervision (BCBS) came out with a comprehensive, flexible and risk sensitive framework known as Basel II. This paper attempts to assess in detail the role of Reserve Bank of India, in implementation of Basel II framework in Indian banking Scenario. For this purpose, Annual reports of Reserve Bank of India for the period 2002–03 to 2009–2010 have been analyzed in detail. The study has indicated that RBI has taken significant and structural initiatives to implement the Basel II norms in Indian financial system. It also gives glimpse of New Capital Adequacy framework to strengthen the banking structure. The study further throws light on challenges faced by Indian banking industry for the purpose of envisaged implementation of Basel II Accord.

scholarly journals Stress Testing of the Montenegrin Banking System with Aggregated and Bank-Specific Data

2014 ◽  
Vol 3 (2) ◽  
pp. 85-119
Author(s):  
Sanja Vuković
Keyword(s):  
Stress Testing ◽  
Management Practices ◽  
Banking Sector ◽  
Stress Test ◽  
Banking System ◽  
Capital Adequacy ◽  
Loan Loss ◽  
Aggregated Data ◽  
Loan Loss Provision ◽  
Capital Adequacy Ratio

Abstract There are many different approaches to the process of stress testing and two of them will be investigated in this paper. The first one is a stress test performed on aggregated data i.e. the banking system as a whole. The variable of interest in both exercises is the Loan Loss Provision ratio (hereinafter: the LLP). The main goal of the thesis is to find an answer to the following question: what are the macroeconomic variables that influence LLP the most and how will LLP, as a variable of interest, behave in a situation when all these variables were to experience negative performance at the same time? The resilience of the banking system to such scenario will be tested through the capital adequacy ratio. In order to find out more about the management practices of banks, microlevel data on banks were also used in the analysis. The focus was to see which of the variables are able to explain the LLP ratio for each bank individually and how is this information helpful for possible improvements in the banking sector. The relations between these variables will be able to explain some of the banks’ losses and some of the banks’ practices regarding credit activities. The analysis there will provide for some recommendations for the banks but also for the Central Bank and its way to influence the practices in the banking sector.

scholarly journals Capital Adequacy In The Albanian Banking System; An Econometrical Analysis With A Focus On Credit Risk

2016 ◽  
Vol 12 (1) ◽  
pp. 271
Author(s):  
Kledian Kodra ◽  
Drini Salko
Keyword(s):  
Central Bank ◽  
Credit Risk ◽  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Regulatory Capital ◽  
Nonperforming Loans ◽  
Bank Group ◽  
The Relationship

This paper examines the relationship between regulatory capital and credit risk within the Albanian banking sector. We estimate an equation which tries to capture the relationship among regulatory capital, nonperforming loans, profitability, total assets, liquidity and the level of growth in the GDP. The data is grouped and the analysis is performed in accordance with three banking groups. The grouping of the banks is in accordance with their size in the system and reflects the grouping used by the central bank for regulatory purposes. The model developed can be used to forecast required levels of CAR and it suggests that in the Albanian banking system, as well as for each bank group separately, the relationship between CAR and NPL is negative, the relationship between CAR and assets is negative for an unchanged level of regulatory capital, the relationship between CAR and profitability is positive, whereas the relationship between CAR and liquidity is negative. The effects of the change in the level of NPL on CAR are of a longer term nature, whereas the effect of the change in the level of assets on CAR is more of a shorter term nature.

Part A Regulatory Matters, 6 Capital Adequacy, Liquidity, and Large Exposures

2015 ◽  
Author(s):  
Proctor Charles
Keyword(s):  
Credit Risk ◽  
Risk Mitigation ◽  
Banking System ◽  
Operational Risk ◽  
Market Risk ◽  
Capital Adequacy ◽  
Mitigation Techniques ◽  
The Stability ◽  
Basel 3

This chapter examines the current capital adequacy framework and associated provisions designed to ensure that a bank's business is managed on a prudent basis. It also considers other closely allied topics which may affect the stability of the banking system, namely, liquidity and large exposure requirement. Topics discussed include the origins of the Basel Standards; Basel 2 and Basel 3 rules; the calculation of risk-weighted assets; the nature and effect of credit risk mitigation techniques; market risk; operational risk; and reform on Basel 2.

scholarly journals Macroeconomic Determinants of Nonperforming Loans of Romanian Banks

2020 ◽  
Vol 12 (18) ◽  
pp. 7533
Author(s):  
Teodor Hada ◽  
Nicoleta Bărbuță-Mișu ◽  
Iulia Cristina Iuga ◽  
Dorin Wainberg
Keyword(s):  
Banking Sector ◽  
Critical Issue ◽  
Strong Correlations ◽  
Macroeconomic Factors ◽  
Factors Affecting ◽  
Nonperforming Loans ◽  
The Stability ◽  
Macroeconomic Determinants ◽  
Main Factor

The banking sector plays an important role in the development of any economy. The performance of the loans in bank portfolios is a critical issue for the banking sector. The increased number of nonperforming loans (NPLs) after the financial crisis of 2008 has questioned the robustness of many banks and the stability of the entire sector. Our study aims to present the most important aspects related to NPLs and to investigate some macroeconomic determinant factors affecting the rate of NPLs in Romania. Based on a set of data for the period 2009–2019, the analysis of NPLs was made using linear regression. The results showed that all selected independent variables (exchange rates of the most used currencies (EUR, USD and CHF), unemployment rate, and inflation rate) have a significant impact on the dependent variable NPL. The study reveals strong correlations between NPLs and the macroeconomic factors studied and that the Romanian economy is clearly connected to the quality of the loan portfolios. Additionally, an econometric analysis of the empirical causes of NPLs shows that the RON–CHF exchange rate has been the main factor in increasing the NPL ratio in the last 5 years in Romania.

Sign in / Sign up

Export Citation Format

Share Document