scholarly journals Non-performing Loans and Banks’ Financial Stability in Kenya; Evidence from Commercial Banks

2020 ◽  
pp. 44-52
Author(s):  
Loice Koskei
Keyword(s):  
Significant Relationship ◽  
Commercial Banks ◽  
Financial Stability ◽  
Inflation Rate ◽  
Global Financial Crisis ◽  
Secondary Data ◽  
Multiple Regression Model ◽  
Vital Role ◽  
Banking Stability ◽  
Loan Growth

The size of non-performing loans plays a vital role in banking stability of any given economy. The paper investigates the resilience and stability of banks amidst the deteriorating quality of its assets since the last Global financial crisis. This study examined the effect of non-performing loans on banks financial stability in Kenya’s commercial banks using secondary data for the period January 2015 to December 2019. A multiple regression model was utilised in analysing the data. Non-performing loans as measured by non-performing ratio had a positive and statistically significant relationship with banks financial stability as measured by Z a-score. The results implied that non-performing loans in Kenya’s commercial banks affects the banks financial stability. Loans to deposit ratio results specified a positive and non-statistically insignificant relationship with banks financial stability. The results inferred that loan to deposit ratio do not affect the banks financial stability. Inflation rate results had a positive but statistically significant relationship with banks’ financial stability indicating that inflation rate affects banks’ financial stability. The results for loan growth had a negative but statistically significant relationship with banks financial stability. The study recommended implementation of measures that curb increase in non-performing loans as they threaten banking financial stability.

scholarly journals Determinants of Banks’ Financial Stability in Kenya Commercial Banks

2020 ◽  
pp. 48-57
Author(s):  
Loice Koskei
Keyword(s):  
Exchange Rate ◽  
Regression Model ◽  
Public Debt ◽  
Significant Relationship ◽  
Financial Stability ◽  
Inflation Rate ◽  
Banking Industry ◽  
Multiple Regression Model ◽  
Return On Assets ◽  
Banking Stability

Introduction: The collapse of several banks in Kenya followed by a possibility of acquisition of struggling banks led to bank runs in Kenya causing customers to withdraw their deposits from stressed banks and taking them to financially stable banks. Aim of the Research: The paper investigated the determinants of Bank’s stability as proxied by asset quality in the Kenyan banking sector. Data Collection: Monthly secondary data spanning from the period January 2015 to December 2019 was collected from central Bank of Kenya and Kenya National Bureau of Statistics. Methodology: A multiple regression model with the help of SPSS statistical software was employed to address the objective of this study. Main Results: The multiple regression model results indicated that liquidity ratio; inflation rate and lending rate results presented a negative but statistically significant relationship with banking stability indicating that a decrease in liquidity ratio, inflation rate and lending rates affect banking stability respectively. The results for loan growth and return on equity exhibited a positive but statistically significant relationship with banking stability indicating that an increase in growth of loans and returns on equity diminishes and enhances banking stability in Kenya respectively. Exchange rate results had a positive and statistically insignificant relationship with banking stability implying that exchange rate does not affect banking stability. Return on assets and public debt results indicated a negative and statistically insignificant relationship with banking stability implying that return on assets and a country’s public debt has no effect on banking stability respectively. Recommendation: Banking financial stability is fundamental in reducing the far-reaching social and economic effect that could occur due to challenges facing the banking industry. The study recommends adoption of policies that minimize the negative effect of microeconomic and macroeconomic factors in the banking industry in Kenya.

scholarly journals Non-Performing Loan and Financial Stability of Banking Industry in Pakistan

2020 ◽  
Vol 9 (4) ◽  
pp. 347-356
Author(s):  
FAZLI RAHMAN KHAN ◽  
MUHAMMAD NISAR KHAN ◽  
SAIMA UROOGE
Keyword(s):  
Commercial Banks ◽  
Financial Stability ◽  
Secondary Data ◽  
Panel Data Models ◽  
Leverage Ratio ◽  
Common Effect ◽  
Effect Model ◽  
Banking Stability ◽  
The Common ◽  
The Stability

The objectives of this study to assess the state of financial stability of commercial banks in Pakistan and then estimate how good, bad and worst economic conditions would influence the stability. Our design of the study is a mix of techniques. Pakistan have not experienced financial crisis due to some shocks, therefore stress events and its effects not included in design. This study examines the effect of non-performing loans on financial stability empirically. Based on the above premise, this thesis investigates the association of financial stability with non-performing loans for all commercial banks of Pakistan for the period of 2014-2018. The study used the 27 commercial banks having 162 bank year observations. The study measured of financial stability (FS) through the financial leverage ratio and liquidity ratio using the common effect model. For the non-performing loans this study uses the non-performing loan ratio. Using secondary data that is panel in nature and applying panel data models for analysis, the study finds out that non-performing loans negatively associated with financial stability of commercial banks in Pakistan. Keywords: Loan, Finance, Banking, Stability, Pakistan.

scholarly journals NON-PERFORMING LOANS AND FINANCIAL STABILITY OF DEPOSIT TAKING SACCOS REGULATED BY SASRA

2021 ◽  
Vol 6 (2) ◽  
Author(s):  
Rahab Ntoiti ◽  
Ambrose Jagongo
Keyword(s):  
Financial Stability ◽  
Financial Intermediation ◽  
Low Cost ◽  
Field Research ◽  
Secondary Data ◽  
Vital Role ◽  
Unique Contribution ◽  
Nonperforming Loans ◽  
Online Journals ◽  
Desk Research

Purpose: The study sought to investigate the effect of non-performing loan on financial stability of deposit taking SACCOs in Kenya. Materials and Methods: The study adopted a desktop methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library Results: Nonperforming loans and their effect on the financial stability of SACCOs using have not been adequately featured in any of the studies reviewed. This leaves a gap that needs to be filled. SACCOs play a very vital role in the financial intermediation in the Kenyan economy and their uniqueness in operations. This study will therefore focus on filling this gap. Unique contribution to theory, practice and policy: the study findings of this study will assist the regulators of Sacco’s SASRA to formulate stringent policies to tame the rising cases of non-performing loans. The findings of this study will be useful to SACCOs within Nairobi County in evaluating how effective their approach to managing NPLs has been. This will enable them to identify the gaps in their management of NPLs and adjust accordingly.

scholarly journals Relationships between Inflation Rate and Market Value per Share of Commercial Banks: Evidence from Bangladesh

2017 ◽  
Vol 6 (2) ◽  
pp. 107-114
Author(s):  
Abu Nomaan Mohammad Minhajul Haque Chowdhury
Keyword(s):  
Commercial Banks ◽  
Inflation Rate ◽  
Market Price ◽  
Secondary Data ◽  
Market Value ◽  
Jel Classification ◽  
Coefficient Of Determination ◽  
Macroeconomic Variables ◽  
Average Percentage ◽  
Classification Code

The market value per share of financial institutions depends on a range of internal and macroeconomic variables. Inflation rate of a country is one of the macroeconomic variables that substantially influence the market price of share of the financial organizations. This study aimed at determining the relationship between inflation and market value per share of commercial banks in Bangladesh. Researchers used market value per share of 10 commercial banks and inflation rate for the period 2011 to 2015 as secondary data. A number of statistical tools (average, percentage change, median, maximum, minimum, standard deviation, coefficient of correlation and coefficient of determination) were used to find out the results. It was found that inflation of a country had significant positive effect on the market value per share of the selected commercial banks. JEL Classification Code: G 21

scholarly journals PENGARUH HARGA PROPERTI RESIDENSIAL DAN KEBIJAKAN FINANCING TO VALUE TERHADAP STABILITAS PERBANKAN SYARIAH DI INDONESIA

2021 ◽  
Vol 7 (2) ◽  
Author(s):  
Ahmad Fatoni
Keyword(s):  
Commercial Banks ◽  
Time Series Data ◽  
Secondary Data ◽  
Series Data ◽  
Residential Property ◽  
Correction Model ◽  
Property Price ◽  
Banking Stability ◽  
The Stability

This study aims to analyze the effect of residential property prices and Financing to Value policies on the stability of Islamic Commercial Banks in Indonesia. This study uses secondary data, namely time series data from all Islamic Commercial Banks in Indonesia during the period March 2010 to December 2020. The model used in this study is the Error Correction Model (ECM). The results of the study found that the Residential Property Price Index of small and medium types in the long term has an influence on the stability of Islamic Commercial Banks. However, each of them supports a different hypothesis, namely the collateral value hypothesis and the deviation hypothesis. Meanwhile, it was found that in the long and short term the Financing to Value policy had an influence on the stability of Islamic Commercial Banks in Indonesia. Keywords: Islamic Banking Stability, Property Price, Financing to Value

Determinants of Net Interest Margin of Commercial Banks in Vietnam

2015 ◽  
pp. 69-82 ◽  
Author(s):  
Khanh Hoang Trung ◽  
Tra Vu Thi Dan
Keyword(s):  
Commercial Banks ◽  
Global Financial Crisis ◽  
Least Squares Method ◽  
Secondary Data ◽  
Ordinary Least Squares ◽  
Policy Implications ◽  
Financial Reports ◽  
Net Interest Margin ◽  
The Global Financial Crisis ◽  
Interest Margin

This study provides an insight into the determinants of net interest margin (NIM) of commercial banks in Vietnam during the recession period. We employ secondary data collected from published audited consolidated financial reports of Vietnamese commercial banks from 2008, the year marking the outbreak of the global financial crisis, to the end of 2012. Altogether, the data constitute 175 panel-data observations. The regression using the ordinary least squares method yields the result that operating expense, management quality, risk aversion, and inflation rate have a positive effect on NIM, while the banking sector’s market concentration affects NIM negatively. Afterwards, some policy implications are derived from those findings to mitigate and put NIM under control, so that the efficiency of the financial intermediary system can be developed.

scholarly journals The Impact of Corporate Governance on Banks Profitability in Nigeria

2021 ◽  
Vol 5 (1) ◽  
pp. 18-28
Author(s):  
Foluso Ololade Oluwole
Keyword(s):  
Corporate Governance ◽  
Significant Relationship ◽  
Commercial Banks ◽  
Regulatory Authority ◽  
Audit Committee ◽  
Secondary Data ◽  
Board Size ◽  
Independent Variables ◽  
Earnings Per Share ◽  
The Impact

The major concern of regulatory authority overtime is on the need to enhance sound practices among banks through the improvement of corporate governance; therefore this research examined the effect of corporate governance on commercial banks profitability in Nigeria. The study covered the period of 2009 to 2018 and secondary data were obtained from the audited financial statement of the selected banks which are Guarantee Trust Bank Nigeria PLC, Zenith Bank PLC and First Bank of Nigeria PLC. Fixed effect regression technique was used to examine the effect of Audit Committee Size (ACS), Board Size (BS), Audit Committee Number of Meeting (ACNM) and Board Number of Meeting (BNM) on earnings per share (EPS) of the selected banks. The independent variables results showed a positive and significant relationship on Earnings per share of the banks with coefficient and probability(prob.) value of the variables as follows: audit committee size(0.6241;0.0109), board size(0.4349;0.007) and board number of meeting(0.0356) had positive and significant effect on earnings per share of the banks respectively. However, negative and significant relationship was established between audit committee number of meeting and earnings per share with a coefficient and probability value of -1.0781 and 0.0001 respectively. With the F-Stat. of 2.84 and a prob. of 0.025, all the null hypotheses were rejected and the alternative hypotheses accepted, indicating that all the independent variables significantly affect the dependent variable. The study concluded that corporate governance enhances commercial banks performance in Nigeria. It therefore recommended that attention should be paid to the audit committee size, board size and board number of meetings since an increase in them leads to increase in the earnings per share while the audit committee number of meetings should be reduced as it affects the earnings per share negatively. The regulatory authority should formulate strong policy frameworks that would ensure that commercial banks constantly comply with corporate governance standard set by the authority.

scholarly journals Indian Banking Sector a Major Contributor to Economy: Constancy Major Concern

2019 ◽  
Vol 8 (4) ◽  
pp. 11596-11608
Keyword(s):  
Financial Stability ◽  
Impact Analysis ◽  
Banking Sector ◽  
Vital Role ◽  
Foreign Banks ◽  
Five Dimensions ◽  
Adequate Fund ◽  
Banking Institutions ◽  
Banking Stability ◽  
Asset Quality

Due to an intermediary role of banks in the economy, they hold a unique locus across all sectors with prudent lending policies, environmental impact analysis, and efficient credit approval systems. The banks play a vital role in the lending process which is dispatched along with the credit risk, that is, when the borrower fails to repay the money borrowed and fails to satisfy the obligations, then the asset is said to be bad or Nonperforming. A poor financial performance in an economy creates a distress in the economic stability leading to an economic crisis. The banking stability has a direct impact on the real output and employability which revolves around the financial stability of an economy. With the global initiatives undertaken, the Reserve Bank of India (RBI) developed Banking Stability Map and published the Financial Stability Report in 2010. It is measured using five dimensions of Stability Map, which are, Soundness(s), Asset Quality (Q), Profitability (P), Liquidity (L) and Efficiency (E).With the upsurge in the deteriorating asset quality and the financial health of banking institutions, lack of adequate fund and pressure of capital regulation makes the balance of stability in the Indian banking sector a challenge. The main objective of the study is to conduct a comprehensive review of all the possible dimensions of financial stability in the country across the Public Sector, Private Sector and Foreign Banks through Statistical tools from a time period of 13 years from 2005-2018. The statistical data and figures will be beneficial for the upcoming researchers and policymakers, as it displays an overview of the banking stability across the three main tiers of the banking world.

scholarly journals Significance and Key Challenges in Conducting Stress Testing for Islamic Commercial Banks

2015 ◽  
Vol 1 (2) ◽  
pp. 085 ◽  
Author(s):  
Jamshaid Anwar Chattha
Keyword(s):  
Risk Management ◽  
Commercial Banks ◽  
Financial Stability ◽  
Stress Testing ◽  
Global Financial Crisis ◽  
Balance Sheet ◽  
Management Tool ◽  
Stress Tests ◽  
Management Tools ◽  
Simple Task

With the current cross-border growth in Islamic finance, Islamic commercial banks (ICBs) are looking forward to being perceived as an industry in the process of becoming mature. This would require the establishment of some basic infrastructure, including sophisticated risk management tools that enhance the soundness and resilience of the ICBS. This paper focuses on the latter that is the role and significance of stress testing as a risk management tool. The stress testing has become part of the regulatory and supervisory authorities within the financial stability analysis. The global financial crisis (2008) has placed the spotlight squarely on stress tests. Though, ICBs operate within the similar financial environment, and their balance sheet composition, however, calls for different treatment in stress testing. Apart from the specificities of ICBs, there are key issues and challenges that should be given due considerations in developing an appropriate stress testing regime. This paper explores key specificities and challenges. The paper argues that in the beginning, conducting the stress testing may not appear a simple task for the ICBs. However, a proper consideration to the challenges identified in the paper would certainly tend to improve the overall effectiveness and credibility of the stress testing programmes.

scholarly journals Determinants of Local Commercial Banks' Performance in Malaysia

2018 ◽  
Vol 7 (3.21) ◽  
pp. 457
Author(s):  
Lee Wee Jeng ◽  
Suganthi Ramasamy ◽  
Devinaga Rasiah ◽  
Peter Yuen Yee Yen ◽  
Shalini Devi Pillay
Keyword(s):  
Economic Growth ◽  
Credit Risk ◽  
Commercial Banks ◽  
Financial Stability ◽  
Inflation Rate ◽  
Liquidity Risk ◽  
Asset Return ◽  
Return On Equity ◽  
Net Interest Margin ◽  
Using Data

Commercial banks play an important role in developing a country’s economy and maintaining its financial stability. Commercial banks will usually receive deposits from customers and lend out the money to people who need the money for their businesses or other legal purposes. Therefore, their performance is extremely important for a country’s financial stability and economic growth. This research examined the determinants of local commercial banks’ performance in Malaysia. Performance was measured using Return on Asset, Return on Equity and Net Interest Margin. Using data from eight local commercial banks in Malaysia from tea 2006 to year 2015, this study found that credit risk, liquidity risk, bank’s size and inflation rate significantly affect banks’ performance.  

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