scholarly journals A Framework for Macro Stress-Testing the Credit Risk of Commercial Banks: The Case of Vietnam

2018 ◽  
Vol 14 (2) ◽  
pp. 1
Author(s):  
Oanh T. K. Vu ◽  
Yen H. Vu ◽  
Trang T. T. Nguyen ◽  
Trung H. Bui
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Stress Testing ◽  
Inflation Rate ◽  
Var Model ◽  
Macroeconomic Shocks ◽  
Real Gdp ◽  
Set Up ◽  
Macro Variables ◽  
The Relationship

In this paper, we assess the capacity of Vietnamese commercial banks to withstand the effects of an increase in credit risk as a result of macroeconomic shocks. Firstly, VAR model is used to estimate the relationship among macro variables (real GDP, real exchange rate, lending interest rate and inflation rate) and from that, macroeconomic scenarios are set up. Next, we employ a GMM model to estimate the relationship between the non-performing loan ratio (credit risk) and macro variables involved in first step. Finally, the new capital requirement ratio (CAR) is recalculated, which is based on the increase in loan provision followed by the rise in non-performing loan. The results show that credit risk which the commercial banks have to face is relatively limited when their risk weighted assets are unchanged. If these numbers, however, increase as banks broaden their lending, all banks’ CAR will reduce remarkably and four large banks will be lack of capital seriously and cannot meet the requirement of Central Bank.

Determinants of commercial bank loan and advance disbursement: the case of private Ethiopian commercial banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tekeste Birhanu ◽  
Sewunet Bosho Deressa ◽  
Hossein Azadi ◽  
Ants-Hannes Viira ◽  
Steven Van Passel ◽  
...  
Keyword(s):  
Credit Risk ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Inflation Rate ◽  
Bank Loans ◽  
Bank Loan ◽  
Portfolio Investment ◽  
Negative Effects ◽  
Content Type ◽  
Lending Rate

PurposeThis paper aimed to investigate the determinants of loans and advances from commercial banks in the case of Ethiopian private commercial banks.Design/methodology/approachThe study randomly selected seven commercial banks to represent the population stratified on their asset, deposit and paid-up capital amounts. The study utilized an unbalanced panel data model as each bank started operation at a different period of time and considered the period 1995–2016 for secondary details.FindingsThe findings showed that the deposit size, credit risk, portfolio investment, average lending rate, real gross domestic product (GDP) and inflation rate had significant and optimistic effects on the lending and advancement of private commercial banks. On the contrary, liquidity ratio had significant and negative effects on private commercial bank loans and advances. Finally, the study forwarded a feasible recommendation for concerned organs to focus on deposit size, credit risk, portfolio investment, average lending rate, real GDP, inflation rate and liquidity ratio. The results of this study will help banking industry policymakers and planners understand how to minimize inflation and unemployment by improving development and sustainable economic growth.Originality/valueThe findings of this study can also affect the general attitudes of a society by increasing knowledge and improve the quality of life for the general public.

scholarly journals Analysis of the Relationship between Credit Risk and Bank Performance of Some Commercial Banks in Ghana

2020 ◽  
Vol 8 (2) ◽  
pp. 34-51
Author(s):  
Joseph Acquah ◽  
Yusif Arthur ◽  
Damianus Kofi Owusu
Keyword(s):  
Credit Risk ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Quantitative Research ◽  
Banking Sector ◽  
Sampling Technique ◽  
Capital Adequacy ◽  
Research Approach ◽  
Independent Entity ◽  
The Relationship

This study analysed the relationship between credit risk and bank financial performance of selected commercial banks in Ghana for the period 2010 - 2014, using the banks respective financial statements. The study employed the quantitative research approach. The sample was Ghana Commercial Bank Limited, Zenith Bank Limited, UT Bank and Ecobank Plc. These four banks were selected using stratified random sampling technique. The data were primarily secondary and quantitative in nature. Both descriptive and inferential statistics were used to analyse the data. When the banks were compared, Ghana Commercial Bank Limited was found to be more liquid than Zenith Bank Limited. That of Zenith bank was also higher than UT bank and Ecobank Plc .However, profitability indicators showed that Zenith Bank Limited and Ecobank Plc utilised its assets better than Ghana Commercial Bank Limited and UT bank resulting in the two banks higher scores over the period. The findings show further that Ghana Commercial Bank Limited showed higher ratios for investment in the future while Zenith Bank Limited showed higher ratios of higher dividend immediately. However, Zenith Bank Limited capital adequacy level was far higher than the legal requirement of Banking sector while its counterparts fell slightly below it in terms of average. Based on the main findings and conclusions, it is recommended that Ghana Commercial Bank Limited should find a means of reducing its expenditure, introducing prudent assets management, should be cautious when assisting government in time of economic difficulty, and operate as an independent entity.

scholarly journals Linkage of Credit on BI Rate, Funds Rate, Inflation and Government Spending on Capital

JEJAK ◽  
2017 ◽  
Vol 10 (1) ◽  
pp. 1-11
Author(s):  
Mangasa Augustinus Sipahutar ◽  
Rina Oktaviani ◽  
Hermanto Siregar ◽  
Bambang Juanda
Keyword(s):  
Government Spending ◽  
Commercial Banks ◽  
Inflation Rate ◽  
Monetary Transmission ◽  
Var Model ◽  
Credit Channel ◽  
Transmission Channel ◽  
Credit Portfolio

Linkage of credit on BI rate, funds rate, inflation, and government spending on capital provides evidence from Indonesia. This paper found advance explanation about banks credit as monetary transmission channel and its role on Indonesian economy. We used credit depth as a ratio of banks credit to GDP nominal, to explain the role of credit in Indonesian economy. We developed a VAR model to measure the response of credit to BI rate, funds rate and inflation rate, and OLS method to find out how banks credit response to government spending on capital. This paper revealed bi-direction causality between credit and BI rate, credit and funds rate, and credit and inflation. There is trade-off between credit and BI rate, credit and funds rate, and credit and inflation, but government spending on capital promotes credit depth. We found that Indonesian banking is bank view, allocated their credit based on their performance, not merely on the monetary policy determined by central bank. For bank view perspectives, we analyzed the link between LDR as an indicator of credit channel mechanism to NPLs and CAR. We found that there is no significant effect of CAR to LDR, but has a strong negatively relationship between NPLs to LDR. This evidence indicates that commercial banks in Indonesia allocated their credit do not related to their capital but merely to the quality of their credit portfolio.

scholarly journals Determinants of Credit Risk: Evidence From Commercial Banks in Malaysia

2021 ◽  
Vol 16 (1) ◽  
pp. 134-143
Author(s):  
Noor Hafizha Muhamad Yusuf ◽  
Mohamad Shukery Mohamad Shamsudin ◽  
Wan Mohd Yaseer Mohd Abdoh ◽  
Noor Sharida Badri Shah ◽  
Rozihanim Shekh Zain
Keyword(s):  
Credit Risk ◽  
Significant Relationship ◽  
Commercial Banks ◽  
Fe Model ◽  
Panel Regression ◽  
Return On Equity ◽  
Factors Affecting ◽  
Independent Variables ◽  
Interest Income ◽  
The Relationship

The purpose of this study is to determine the relationship between microeconomic factors with credit risk among selected commercial banks in Malaysia. For this purpose, a sample of seven out of 27 commercial banks in Malaysia was selected and the microeconomic factors affecting credit risk with six measurements of return on asset (ROA), bank size, leverage, the ratio of capital, interest income and return on equity (ROE) were examined by applying Panel Regression Fixed Effect (FE) Model for a period 20 years from 1998 to 2017. The scope of the study covers seven selected commercial banks in Malaysia namely: Affin Bank Berhad, Alliance Bank Malaysia Berhad, CIMB Bank Berhad, Hong Leong Bank Berhad, Malayan Banking Berhad, Public Bank Berhad and RHB Bank Berhad. This study is using credit risk proxy by non-performing loan for dependent variable while independent variables that have been selected were returned on asset (ROA), bank size, leverage, the ratio of capital, interest income and return on equity (ROE). The findings of the study managed to reject the null hypothesis for return on asset, bank size, leverage, interest income and return on equity which indicates the five microeconomic variables give a significant relationship with credit risk. There are positive relationships between leverage, interest income and return on equity with credit risk while return on asset, bank size and ratio of capital are negatively related to credit risk. However, the study fails to find any significant relationship between the ratio of capital and credit risk for commercial banks in Malaysia.

scholarly journals Credit Information Sharing and Credit Risk Reduction in Kenya Commercial Banks

2016 ◽  
Vol 10 (1) ◽  
pp. 1941-1949
Author(s):  
Tabitha Nasieku ◽  
Rosemary Wanjiku Ngugi
Keyword(s):  
Credit Risk ◽  
Information Sharing ◽  
Risk Reduction ◽  
Financial Institutions ◽  
Commercial Banks ◽  
Theoretical Study ◽  
Financial Risks ◽  
Lending Policy ◽  
The Relationship

Financial Institutions are in the business of mobilizing and lending to borrowers and they assume various kinds of financial risks in the process of mobilizing and lending financial resources.This Theoretical study reviewed the literature to investigate the relationship between credit of information sharing and credit risk reduction in Kenya commercial banks. The literature found that the lending policy is periodically reviewed to reflect the prevailing conditions thus loan characteristics, considers an applicant's bank statements thus borrowers characteristics and the credit collection policy thus lenders characteristics before credit is advanced. The study recommends that banks should incorporate credit information sharing to reduce credit risk.

scholarly journals The Effects Of Ownership Structure And Listed Status On Bank Risk In China

2013 ◽  
Vol 29 (3) ◽  
pp. 695 ◽  
Author(s):  
Maoyong Cheng ◽  
Hong Zhao ◽  
Junrui Zhang
Keyword(s):  
Regression Analysis ◽  
Credit Risk ◽  
Ownership Structure ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Capital Adequacy Ratio ◽  
Asset Quality ◽  
Relationship Of ◽  
The Relationship

This paper investigates the relationship of ownership structure, listed status and risk by using regression analysis based on the relevant data of Chinas commercial banks. Three main results emerge. First, compared to the state-owned banks, foreign-owned commercial banks exhibit better asset quality, lower credit risk and higher capital adequacy ratio; city commercial banks have lower credit risk and joint-stock commercial banks have lower credit risk and capital adequacy ratio. Second, listed status improves the asset quality and capital adequacy ratio. Finally, we also find that the listed status significantly moderates the relationship between ownership structure and risk. In conclusion, this study provides a theoretical reference for the reform of Chinas commercial banks.

scholarly journals Impact of credit risk (NPLs) and capital on liquidity risk of Malaysian banks

2017 ◽  
Author(s):  
Yaman Hajja
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Positive Relationship ◽  
Liquidity Risk ◽  
Dynamic Panel Data ◽  
Bank Capital ◽  
Dynamic Panel ◽  
Macroeconomic Variables ◽  
The Impact ◽  
The Relationship

We investigate the relationship between bank liquidity risk and credit risk and the impact of bank capital on liquidity risk. Using 19 Malaysian commercial banks data over 2002-2011 and applying dynamic panel data GMM estimation after controlling for bank-specific and macroeconomic variables, empirical results document a positive relationship between liquidity and credit risk and a non-linear U-shaped relationship between bank capital and liquidity risk.

scholarly journals Credit risk stress testing in a cluster of Russian commercial banks

2019 ◽  
Vol 13 (3) ◽  
pp. 35-51
Author(s):  
Davit Bidzhoyan ◽  
Tatiana Bogdanova ◽  
Dmitry Neklyudov
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Stress Testing

Examining the Relationship Between Banking Competition and Solvency, Liquidity and Credit Risks in Pakistan

2020 ◽  
Vol 4 (1) ◽  
pp. 29-52
Author(s):  
Sheikh Muhammad Umer Farooq ◽  
Muhammad Zubair Mumtaz
Keyword(s):  
Credit Risk ◽  
Financial Institutions ◽  
Commercial Banks ◽  
Banking Industry ◽  
Liquidity Risk ◽  
Foreign Banks ◽  
Banking Competition ◽  
Credit Risks ◽  
Private Banks ◽  
The Relationship

This study empirically examines the relationship between the banking competition and the risks faced by the financial sector (i.e. solvency, liquidity, and credit risks) considering 31 banks for the period 2001 to 2018. Banks are further sub-divided into three categories i.e. state-owned banks, foreign banks, and private/commercial banks. The results reveal that Pakistan’s banking industry is relatively elastic and an increase in competition is directly associated with solvency risk, liquidity risk and credit risk of financial institutions and these findings corroborate the competition fragility theory. Besides, state-owned banks have a lesser probability to cope with solvency risk, however, foreign banks appear to face the least liquidity risk whereas private banks appear to face the least credit risk among the entire cluster.

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