scholarly journals The Nexus among Competition, Risk and Performance in Banking Sector of Saudi Arabia

2021 ◽  
Vol 3 (3) ◽  
pp. 196-201
Author(s):  
Nazish Iftikhar ◽  
Nadeem Iqbal ◽  
Hasan Hanif
Keyword(s):  
Credit Risk ◽  
Positive Relationship ◽  
Banking Sector ◽  
Saudi Arabian ◽  
Method Of Moment ◽  
Z Score ◽  
Lerner Index ◽  
Alternative Measures ◽  
And Performance ◽  
The Stability

The determination behind this research paper is to inspect the relation among competition, risk, and financial performance in the Saudi Arabian banking sector for 2011-2019. This paper used Two steps Generalized Method of Moment (GMM) as an estimation technique. This study focused on Lerner Index and Herfindahl-Hirschman Index to gauge bank competition and used three alternative measures for risk, namely credit risk, liquidity risk, and z-score. The coefficients of the Lerner Index and Herfindahl-Hirschman Index are significant and positive with profitability which signifies that higher competition in Saudi Arabian banks led to a decrease in profitability which is explained in the Structural Conduct Performance Hypothesis. Z-score shows a significant positive relationship with profitability. Credit risk has a positive relationship with profitability reveals that risk-adjusted returns are being targeted by risk-averse shareholders trying to gain more profits to compensate for the higher credit risk. The outcome of the study provides a comprehensive framework to the Central bank and other regulatory authorities to introduce micro and macro prudential policies that are aligned to the stability of the financial system.

scholarly journals How Does Credit Risk Influence Liquidity Risk? Evidence from Ukrainian Banks

2017 ◽  
pp. 21-32 ◽  
Author(s):  
Ruoyu Cai ◽  
Mao Zhang
Keyword(s):  
Credit Risk ◽  
Cash Flow ◽  
Positive Relationship ◽  
Banking Sector ◽  
Liquidity Risk ◽  
Foreign Banks ◽  
Alternative Measures ◽  
High Level ◽  
Bank Risks

This study investigates the link between two major risks in the banking sector: liquidity risk and credit risk. Utilizing a novel sample of Ukrainian banks for the period from Q1 2009 to Q4 2015, we document credit risk as having a positive relationship with liquidity risk. Our findings suggest banks with a high level of non-performing loans might not meet depositors’ withdrawal demands, which could lower cash flow and trigger depreciation in loan assets and consequently increase liquidity risk. Furthermore, we find this positive relationship between credit risk and liquidity risk is more pronounced in foreign banks and large banks. Our results are robust with respect to alternative measures of bank risks.

scholarly journals Political risk and banking sector performance in Nigeria

2021 ◽  
Vol 16 (3) ◽  
pp. 1-12
Author(s):  
Adefemi A. Obalade ◽  
Babatunde Lawrence ◽  
Joseph Olorunfemi Akande
Keyword(s):  
Credit Risk ◽  
Stock Price ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Banking System ◽  
Political Risk ◽  
Political Systems ◽  
Business Outcomes ◽  
Stage System ◽  
The Stability

Political risk is prevalent in Nigeria and tends to influence business outcomes and the stability of the banking system. As a result of this study, it was determined whether political risk matters to the performance of the banking sector in Nigeria. The effect of political risk on different banks’ performance measures, such as return on assets, return on invested capital, credit risk and stock price, were examined in a panel of 12 selected commercial banks for the period 2006–2018. Data was analyzed using a two-stage system of generalized method of moments. The results provided evidence that the effect of political risk on bank performance depends on the performance proxies. Specifically, political risk was found to be negatively related to banks’ returns on invested capital and positively related to deteriorating credit risk. Hence, it can be concluded that political risk induces poor banking system performance in Nigeria. The study provides a critical insight into the management of a country’s political systems in terms of their potential to create unfavorable conditions for banking systems to thrive.

scholarly journals Panel modeling of z-score: evidence from Islamic and conventional Saudi banks

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hassan Belkacem Ghassan ◽  
Abdelkrim Ahmed Guendouz
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Stability Index ◽  
Z Score ◽  
Strong Concentration ◽  
Content Type ◽  
Quarterly Data ◽  
Annual Frequency ◽  
Conventional Banks ◽  
The Stability

Purpose This paper aims to measure the stability extent of the banking sector in Saudi Arabia, including Islamic and conventional banks (CBs), using quarterly data. Design/methodology/approach The paper uses seemingly unrelated regressions to estimate the determinants of the z-score. Findings The panel data model shows that Islamic banks (IBs) reduce the financial stability index relatively; meanwhile, they contribute efficiently to enhance the financial stability through the diversification of their assets. The Saudi banking sector exhibits strong concentration affecting the financial stability negatively. Research limitations/implications The paper’s topic can be extended to cover the recent period. Practical implications The limited presence of IBs in the Saudi banking sector jeopardizes any effort to improve the financial stability. Social implications By attracting more clients, IBs would contribute more to the financial stability in the Saudi economy. Also, the monetary authority has to expand the share of IBs in the financial system at least 50-50 compared to CBs. Originality/value The z-score is mostly analyzed with yearly data; in this paper we use quarterly data to describe at infra-annual frequency the variability of the z-score index. Also, we consider in detail the statistical properties of the banks’ data.

scholarly journals Risks and stability of the banking system of the Republic of Moldova

2021 ◽  
Author(s):  
Grigore Duhlicher ◽  
Keyword(s):  
Financial Markets ◽  
Financial Crises ◽  
Banking Sector ◽  
Banking System ◽  
Republic Of Moldova ◽  
Banking Systems ◽  
The Republic ◽  
And Performance ◽  
The Stability ◽  
Financial Balance

The banking sector is constantly affected by a multitude of risks, which jeopardize its stability and performance. The multiplication, diversification and continuous intensification of banking risks emphasizes the need to define, identify, analyze and manage these phenomena, this process having a major impact on the stability of national banking systems and global financial balance. Efforts to this end must maintain the stability of financial-banking systems, characterized by a lack of major imbalances, which could lead to systemic financial crises, the inability of financial institutions to conduct financial operations, or the collapse of financial markets.

FINANCIAL LITERACY AND FINANCIAL INCLUSION EFFECTS ON STABILITY AND COMPETITIVENESS INDICATORS IN THE BANKING SECTOR: CROSS COUNTRY EVIDENCE FOR AFRICA AND THE WORLD

2021 ◽  
pp. 2150009
Author(s):  
JOÃO JUNGO ◽  
MARA MADALENO ◽  
ANABELA BOTELHO
Keyword(s):  
Credit Risk ◽  
Interest Rates ◽  
Financial Institutions ◽  
Financial Literacy ◽  
Financial Stability ◽  
Banking Sector ◽  
Financial Education ◽  
Financial Inclusion ◽  
The Stability ◽  
The Impact

Financial inclusion has allowed financial products with very high-interest rates and complex conditions to become increasingly affordable. Financial inclusion programs, which aim to reach all social strata, strongly expose financial institutions to risk and particularly credit risk. That said, additional interventions such as financial education of those included are needed. We aim to examine the impact of financial literacy and financial inclusion of households on bank performance. Specifically, we want to examine the impact of financial literacy on credit risk, competitiveness among banks and financial stability. The FGLS estimation results suggest that financial literacy and financial inclusion reduce credit risk and enhance the stability of banks, and regarding competitiveness, our results were inconclusive as they show different effects for each competitiveness indicator, although they point to improved competitiveness in some cases. This research allows policymakers to understand that individual financial attitudes can be reflected in the general welfare of financial institutions and encourages the intensification of programs aimed at improving household financial literacy.

scholarly journals Financial Innovation, Sustainable Economic Growth, and Credit Risk: A Case of the ASEAN Banking Sector

2021 ◽  
Vol 9 ◽  
Author(s):  
Ali Burhan Khan ◽  
Muhammad Fareed ◽  
Anas A. Salameh ◽  
Haroon Hussain
Keyword(s):  
Economic Growth ◽  
Credit Risk ◽  
Banking Sector ◽  
Financial Innovation ◽  
Financial Industry ◽  
Regulatory Bodies ◽  
Asean Countries ◽  
The Stability ◽  
Sustainable Economic Growth ◽  
The Impact

A dynamic and rapidly changing global financial environment is posing various risks for the banking sector. Therefore, the future of the Association of Southeast Asian Nations (ASEAN) banks depends on how efficiently and effectively they manage these risks. Among these risks, a credit risk is the most crucial risk for the banking sector. Thus, the current study aims to analyze the impact of financial innovation and sustainable economic growth on the credit risk of ASEAN banks. For this purpose, a sample of 4 ASEAN countries from 2011 to 2018 is selected, and by applying a panel-corrected standard error (PCSE) approach, both variables were found to be a significant contributor toward the credit risk. Current research will not only be beneficial for the management of ASEAN countries’ banks but also provide help to the overall financial industry and their respective regulatory bodies to understand the behavior of ASEAN banks’ credit risk regarding financial innovation and economic growth. Thus, this study will play an essential role concerning the stability of the banking sector in the ASEAN region.

scholarly journals The evaluation of stability of Czech and Slovak banks

2018 ◽  
Vol 9 (2) ◽  
pp. 205-223
Author(s):  
Kristina Kocisova ◽  
Beata Gavurova ◽  
Marcel Behun
Keyword(s):  
Banking Sector ◽  
Banking System ◽  
Value Added ◽  
Stability Index ◽  
Financial Indicators ◽  
Z Score ◽  
Banking Stability ◽  
Two Measures ◽  
The Stability ◽  
Main Components

Research background: Commercial banks could affect the stability of the whole banking system due to the way they carry out their business activities. The supervision authorities play a key role in protecting banking stability by ensuring banks´ resilience to shocks, ability to recover their position in response to crisis and ultimately the supervision authorities help prevent failure of these banks. Therefore, in recent years’ researchers have been trying to define conditions that could guarantee stability of banks. Purpose of the article: This paper aims to describe the methodology used to measure banking stability, namely banking stability index (BSI) and Z-score. In the first part, we present the literature review, then we try to assess the stability in the condition of the Czech Republic and Slovakia during the period 2006–2016. Methods: The BSI is constructed according to the methodology presented by Ghosh (2011), taking into account the main components, which are described by the set of financial indicators of banks. Findings & Value added: Results showed that the average BSI in the whole sample moved from 0.20454 (in 2015) to 0.2486 (in 2007). The results according to countries have showed that the tendency of development in the Czech and Slovak banking sector was the same. At the beginning of the analyzed period, the Slovak banks were more stable compared to Czech ones. Since 2009 the situation has been different, where the Czech banks could be considered as more stable compared to Slovak ones. The tendency of development of Z-score in both countries could be considered as the same, without the 2009 year, when the Czech banks significantly strengthened their capitalization, which influenced the development of Z-score. The results of correlation analysis between Z-score and BSI pointed to the fact that there was no high correlation between these two measures, therefore it is appropriate to use both methodologies for stability evaluation.

Comparative Analysis on the Sources of Credit Risk in Nepalese Commercial Banks

2017 ◽  
Vol 1 (1) ◽  
pp. 17-27
Author(s):  
Fatta Bahadur K.C ◽  
Indra Kumar Kattel
Keyword(s):  
Comparative Analysis ◽  
Private Sector ◽  
Credit Risk ◽  
Industrial Relation ◽  
Commercial Banks ◽  
Positive Relationship ◽  
Banking Sector ◽  
Business Environment ◽  
Risk Sources

The study was conducted to find out the significant differences between state-owned bank and private sector bank in the practice of measuring the sources of credit risk. This paper attempts to ascertain the perceptions of Nepalese bankers about the importance of identification practice of credit risk sources within the specific borrowers. The result of the study indicates that the collaterals, characters, capacity, capital, condition, legality of the business, economy of the country, business environment and industrial relation were consider as a sources of credit risk in Nepalese banking sector. The result shows that level of the credit risk sources were disparity the Nepalese commercial banks. In addition, Collaterals provided as a security by the borrower, characters of the borrower, capacity, legality of the business, economy of the country and industrial relation were found significant predictor for the sources of credit risk. Moreover, there was a positive relationship between identification practice and sources of credit risk.

scholarly journals The Effects of Credit Growth on Risk and Performance of Conventional Banks in Indonesia

2021 ◽  
Vol 4 (1) ◽  
pp. 140-149
Author(s):  
Mery Mery ◽  
Chalid Abdul Dony
Keyword(s):  
Credit Risk ◽  
Interest Rates ◽  
Commercial Banks ◽  
Dynamic Panel Data ◽  
Method Of Moment ◽  
Financial Service Authority ◽  
Credit Growth ◽  
And Performance ◽  
Conventional Banks ◽  
The Relationship

Indonesia is a developing country with a bank-based country structure. Credit is the largest component of banking assets. Credit growth with the low interest rates and low standard criteria for potential borrowers will have an impact on the credit risk faced by banks. The purpose of this study is to look into the effect of credit growth on the risk and performance of Indonesian conventional banks. This study uses dynamic panel data with the Generalized Method of Moment (GMM) approach. There are 3 hypotheses to be tested: first, the relationship between credit growth and credit risk using a credit loss approach. Second, the relationship between credit growth and bank profitability using a bank interest income approach. Third, the relationship between credit growth and bank solvency using the ratio of capital to assets. The data used in this study is taken from 93 conventional commercial banks registered with the Indonesia Financial Service Authority (Otoritas Jasa Keuangan) in the period of 2009-2019. The results showed that credit growth has a significant negative effect on credit risk and has a significant positive effect on the profitability and solvency of conventional commercial banks in Indonesia.

scholarly journals Credit Risk Versus Performance in the Romanian Banking System

2017 ◽  
Vol 12 (3) ◽  
pp. 171-180
Author(s):  
Ioana Raluca Sbârcea
Keyword(s):  
Credit Risk ◽  
Banking Sector ◽  
Banking System ◽  
Foreign Banks ◽  
Financial Risks ◽  
International Banking ◽  
Banking Activity ◽  
System Versus ◽  
And Performance ◽  
Main Banks

Abstract The Romanian banking sector, predominantly governed by the capital of foreign banks, is, as well as other international banking sectors, under the sign of the necessary balance that should exist between risk and performance. This is a result of banks trying to take risks that they can control, given that they need to generate financial results that are satisfactory for all categories of bank creditors, namely shareholders, depositors and other lenders. In this paper, I wanted to analyze the risk situation assumed by the main banks in the system versus the performance gained in recent years. This article is part of a wider research, so I will refer only to the main risk assumed by a bank, namely the credit risk, I will highlight the evolution of the indicators of this risk, so that I can finally analyze their degree of correlation with indicators for measuring bank performance. The situation of other financial risks in banking activity will be addressed in other works.

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