‘Beggars Can’t Be Choosers’: Spain and the Financial Crisis

2013 ◽  
Vol 15 ◽  
pp. 417-437
Author(s):  
Carlos J Moreiro González
Keyword(s):  
Banking System ◽  
Regulatory Reform ◽  
Legal Framework ◽  
Capital Adequacy ◽  
Banking Union ◽  
Spanish Economy ◽  
Structural Problems ◽  
Relevant Group ◽  
The One ◽  
Social Wealth

AbstractThis contribution analyses the viability of the new Spanish financial landscape which has been drawn by the European authorities and the national administration in order to overcome the progressive deterioration of social wealth in Spain since the beginning of the economic crisis in 2008.The adoption and the implementation of a new legal framework during the last two years, establishing tougher requirements on capital adequacy, leverage ratios and counter-cyclical and other buffers, as well as the shaping of the Banking Union, are not enough to transform the Spanish banking system into the key tool for the creation of wealth.There is a paradox of both legal and institutional outcomes. While, on the one hand, some positive changes in the functioning and the structure of the banking industry have been prompted by the regulatory reform, there are, on the other hand, some uncertainties linked to the recapitalisation costs of a relevant group of credit institutions and the persistence of serious structural problems of the Spanish economy.Moving faster to full banking union will reduce financial market stress in Spain.

‘Beggars Can’t Be Choosers’: Spain and the Financial Crisis

2013 ◽  
Vol 15 ◽  
pp. 417-437
Author(s):  
Carlos J Moreiro González
Keyword(s):  
Banking System ◽  
Regulatory Reform ◽  
Legal Framework ◽  
Capital Adequacy ◽  
Banking Union ◽  
Spanish Economy ◽  
Structural Problems ◽  
Relevant Group ◽  
The One ◽  
Social Wealth

Abstract This contribution analyses the viability of the new Spanish financial landscape which has been drawn by the European authorities and the national administration in order to overcome the progressive deterioration of social wealth in Spain since the beginning of the economic crisis in 2008. The adoption and the implementation of a new legal framework during the last two years, establishing tougher requirements on capital adequacy, leverage ratios and counter-cyclical and other buffers, as well as the shaping of the Banking Union, are not enough to transform the Spanish banking system into the key tool for the creation of wealth. There is a paradox of both legal and institutional outcomes. While, on the one hand, some positive changes in the functioning and the structure of the banking industry have been prompted by the regulatory reform, there are, on the other hand, some uncertainties linked to the recapitalisation costs of a relevant group of credit institutions and the persistence of serious structural problems of the Spanish economy. Moving faster to full banking union will reduce financial market stress in Spain.

scholarly journals Banking system stability in the context of the relationship between banks and the state

2020 ◽  
Vol 3 (45) ◽  
pp. 155-166
Author(s):  
V. O. Kornіvska ◽  
Keyword(s):  
Banking System ◽  
Legal Framework ◽  
The State ◽  
System Stability ◽  
Banking Union ◽  
Real Economy ◽  
The Real ◽  
Euro Zone ◽  
European Experience ◽  
Financial Liquidity

The article presents the results of a study of the banking system stability under the conditions of increased financial support from the state during the financial and economic destabilization. The banking system stability in the euro zone has been analyzed to assess the prospects for monetary and financial development in Ukraine. The European experience proves that strengthening relations between banks and the state amidst the financialization process is harmful. The author of the article treats this relationship as a closed-loop problem of public and financial liquidity circulation, which leads to financial bleeding in the real economy and destabilization of the financial system, as a whole. This problem requires to be fixed by reducing banking transactions with government securities. The article gives facts proving that the search for solutions to this problem made in the European financial space has become one of the factors of financial and institutional transformations in the euro zone and the EU, in general, and has led to the creation of a banking union. The newly introduced legal framework has manifested itself as unable to stimulate efficient financial distribution. It has also been demonstrated that due to the public and financial liquidity circulation the banking system becomes subject to profound redesigning, thus losing its ability to conduct effective financial distribution in the real sector of economy.

scholarly journals Determinants of Portuguese banks' profitability: an update

2021 ◽  
Vol 17 (3) ◽  
pp. 63-70
Author(s):  
Clara Pires ◽  
◽  
Maria Basílio ◽  
Keyword(s):  
Global Financial Crisis ◽  
Positive Impact ◽  
Banking System ◽  
Capital Adequacy ◽  
Return On Equity ◽  
Credit Quality ◽  
Structural Problems ◽  
Report Data ◽  
Main Determinants ◽  
The Global Financial Crisis

In this study, we assess the main determinants of banks' profitability in Portugal over the period 2015–2018. We divide the factors that can influence bank profitability into several groups: management quality, credit quality, capital adequacy, liquidity (internal bank factors), and GDP growth (an external factor). The panel dataset is composed of annual report data for the 18 major banks operating in Portugal, representing about 98% of the Portuguese banking product. Profitability has been a persistent challenge for banks since the global financial crisis. Moreover, the Portuguese banking system had been facing several structural problems, which makes this topic particularly relevant. The profitability proxy used is the return on equity (ROE). The empirical strategy followed was pooled OLS. Variables relevant for explaining Portuguese banks' profitability are capital adequacy, liquidity and credit risk. As expected, the results show that capital adequacy (TIER 1) and credit quality (CVCT) have a negative and significant impact on banks' profitability, whereas liquidity (RAL) has a positive impact.

scholarly journals APPROACHES TO THE CALCULATION OF ECONOMIC CAPITAL UKRAINE BANKING SYSTEM

2017 ◽  
pp. 126-136
Author(s):  
Anton SHEVCHUK
Keyword(s):  
Financial Stability ◽  
Negative Impact ◽  
Banking System ◽  
Economic Capital ◽  
Capital Adequacy ◽  
Resource Base ◽  
Rating Agencies ◽  
Banking Institutions ◽  
The Stability ◽  
The One

Introduction. Indicated that it determines the degree of capital adequacy of financial stability of the bank, so there is the element of the resource base of the bank, which should cover the risks arising in its activities. Therefore, proposed on the one hand say that the greater range of operations conducted by the bank, the greater the volume of investments in it, the more losses it may incur and the more he should be the level of capital adequacy to ensure stability in the implementation of the relevant risks. The attention that the low level of capital adequacy of the bank leading to a dangerous increase risks a negative impact on its financial stability. The comparison of approaches to the calculation of economic capital. The purpose of the study is to determine the best approaches for calculating economic capital in the presence of risk in the banking system arising in connection with the stability of the economy and fluctuations in the banking system. Results. In the sense of economic capital calculation and the effectiveness of its many internal and external stakeholders with regard to banking institutions and organizations, such as the management of bank supervisory authorities, rating agencies and shareholders. Even before the transition to the stage of calculating economic capital of most Ukrainian banks to make a number of steps to ensure that the basic requirements for risk management. Conclusion. The regulation of capital adequacy of the bank must comply with two ends, as overstating this value and reducing its value affects the reliability of the bank

Financial Safety Indicators under Financial Crises and their Impact on Banking Finance: An Applied Study in Iraqi Banks

2021 ◽  
Vol 39 (11) ◽  
Author(s):  
Mazen Dawood Salman ◽  
Amr Hisham Mohammed ◽  
Hakeem Hammood Flayyih
Keyword(s):  
Central Bank ◽  
Banking System ◽  
International Standards ◽  
Capital Adequacy ◽  
Financial Systems ◽  
Applied Study ◽  
Global Standards ◽  
Private Banks ◽  
The Government ◽  
The One

The ability to monitor the integrity of the financial sector assumes that there are valid indicators for detecting the integrity and stability of financial systems, including partial indicators and indicators of macro-prudence; and pressure tests to measure the resilience of financial systems to shocks. The research aims to review the most important financial safety indicators applied by the Central Bank of Iraq, focusing on applying some indicators to both the banking system on the one hand and a sample of Iraqi banks. The research reached several conclusions, the most important of which is the commitment of the Central Bank of Iraq to international standards such as Basel II, which requires some Iraqi banks to develop their banking methods to pursue banking developments and global standards. Capital adequacy ratios in the Iraqi banking system as a whole and private banks, unlike the government, have also increased, although the latter has achieved relatively high and acceptable levels of more than 12% according to this standard.

Basel III: In quest for criteria and scenarios of the banking regulation reform advancement

2016 ◽  
pp. 77-93 ◽  
Author(s):  
E. Dzhagityan
Keyword(s):  
Financial Regulation ◽  
Cost Optimization ◽  
Spillover Effect ◽  
Regulatory Reform ◽  
Banking Regulation ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Eurasian Economic Union ◽  
Downward Pressure ◽  
Crisis Recovery

The article looks into the spillover effect of the sweeping overhaul of financial regulation, also known as Basel III, for credit institutions. We found that new standards of capital adequacy will inevitably put downward pressure on ROE that in turn will further diminish post-crisis recovery of the banking industry. Under these circumstances, resilience of systemically important banks could be maintained through cost optimization, repricing, and return to homogeneity of their operating models, while application of macroprudential regulation by embedding it into new regulatory paradigm would minimize the effect of risk multiplication at micro level. Based on the research we develop recommendations for financial regulatory reform in Russia and for shaping integrated banking regulation in the Eurasian Economic Union (EAEU).

Discretionary Accruals in Italian Private Firms and Non-Linear Bank Loan Granting

2017 ◽  
pp. 83-99
Author(s):  
Elisabetta Mafrolla ◽  
Viola Nobili
Keyword(s):  
Financial Reporting ◽  
Banking System ◽  
Regulatory System ◽  
Discretionary Accruals ◽  
Bank Loans ◽  
Bank Loan ◽  
Banking Union ◽  
Private Firms ◽  
European Banking Union

This paper investigates whether and at what extent private firms reduce the quality of their accruals in order to signal a better portrait to the bank and obtain new or larger bank loans. We measure earnings discretionary accruals of a sample of Italian private firms, testing whether new and larger bank loans are associated with a higher (lower) quality of earnings in borrowers' financial reporting. We study bank loan levels and changes and how they impact discretionary accruals and found that, surprisingly, private firms' discretionary accruals are systematically positively affected by an increase in bank loans, although they are negatively affected by the credit worthiness rating assigned to the borrowers. We find that the monitoring role of the banking system with regard to the adoption of discretionary accruals is effective only when the loan is very large. This paper may have implications for policy-makers as it contributes to the understanding of the shortcomings of the banking regulatory system. This is an extremely relevant issue since the excessive amount of non-performing loans held by Italian banks recently threatened the stability of the European Banking Union as a whole.

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.

Critical Analysis of the Zero Risk Weight Privilege for European Sovereign Debt in Light of Art. 124 TFEU

2020 ◽  
Vol 17 (1) ◽  
Author(s):  
Patrick Hauser
Keyword(s):  
Financial Institutions ◽  
Sovereign Debt ◽  
Banking System ◽  
Financial System ◽  
Significant Risk ◽  
Capital Adequacy ◽  
Individual Member ◽  
Member States ◽  
The Individual ◽  
Credit Institutions

AbstractThe zero risk weight privilege for European sovereign debt in the current capital adequacy requirements for credit institutions incentivises credit institutions to acquire and hold sovereign debt. However, it also poses a significant risk to the stability of the banking system and thus the financial system as a whole. It is argued that this privilege should not only be abolished due to the risk it entails but that it is also non conformant with EU primary law. Art. 124 TFEU prohibits privileged access of the EU and Member States' public sector to financial institutions except for prudential considerations. The protective purpose of Art. 124 TFEU to ensure sound budgetary policies by subjecting public borrowing to the same rules as borrowing by other market participants is thwarted by the uniform zero risk weight privilege. Further, as this privilege does not take into account the varying creditworthiness of the individual Member States it does not promote the soundness of financial institutions so as to strengthen the soundness of the financial system as whole, but rather endangers systemic stability. The zero risk weight privilege is therefore not based on prudential considerations and hence violates Art. 124 TFEU.

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.

Sign in / Sign up

Export Citation Format

Share Document