Banking System
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2021 ◽  
pp. 379-403
Khushboo Tripathi ◽  
Neha Bhateja ◽  
Ashish Dhillon

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Mahmoud Fatouh ◽  
Ayowande A. McCunn

Purpose This paper aims to present a model of shareholders’ willingness to exert effort to reduce the likelihood of bank distress and the implications of the presence of contingent convertible (CoCo) bonds in the liabilities structure of a bank. Design/methodology/approach This study presents a basic model about the moral hazard surrounding shareholders willingness to exert effort that increases the likelihood of a bank’s success. This study uses a one-shot game and so do not capture the effects of repeated interactions. Findings Consistent with the existing literature, this study shows that the direction of the wealth transfer at the conversion of CoCo bonds determines their impact on shareholder risk-taking incentives. This study also finds that “anytime” CoCos (CoCo bonds trigger-able anytime at the discretion of managers) have a minor advantage over regular CoCo bonds, and that quality of capital requirements can reduce the risk-taking incentives of shareholders. Practical implications This study argues that shareholders can also use manager-specific CoCo bonds to reduce the riskiness of the bank activities. The issuance of such bonds can increase the resilience of individual banks and the whole banking system. Regulators can use restrictions on conversion rates and/or requirements on the quality of capital to address the impact of CoCo bonds issuance on risk-taking incentives. Originality/value To model the risk-taking incentives, authors generally modify the asset processes to introduce components that reflect asymmetric information between CoCo holders and shareholders and/or managers. This paper follows a simpler method similar to that of Holmström and Tirole (1998).

Shamsiddin Amanullaevich Allayarov ◽  
Maktuba Ravshanova

In the context of globalization, labor migration, trade and capital movements, tourism, foreign investment, IT are affected by the economic growth rates of countries. Periodic disclosure of reforms in the new Uzbekistan, the beginning of socio-economic relations provided opportunities for modernization, technical and technological re-equipment of the industrial sector. In particular, the need for financial technology in commercial banks is important to conduct research in this area. The influence of fintech is beginning to be felt in the banking sector and capital markets. This article surveys its development and its impact on efficiency, banking market structure, strategies of incumbents and entrants, and financial stability.

2021 ◽  
Vol 27 (8) ◽  
pp. 1694-1709

Subject. The article addresses the non-banking financial intermediation (shadow banking system) as it is successfully expanding nowadays both in developed countries and emerging economics. Objectives. The study aims at conducting a comprehensive analysis of the specifics of non-banking financial intermediation, revealing its impact on economic agents’ activities, causes and consequences, and elaborating the methodological framework for effectiveness of modern monetary policy. Methods. I employ methods of scientific abstraction, induction, deduction, synthesis, and comparative analysis. Results. In the modern national economy, along with the money, created by the central bank and commercial banks, there are highly liquid financial instruments called shadow money. The scope of its application is shadow banking (financial intermediation) outside the banking system. The use of shadow money is caused by high demand for credit resources. Conclusions. The high activity of shadow banking and increased turnover of shadow money resulted from a transfer to Basel standards of banking regulation in the 1990s, which affected the lending activity of commercial banks. Under these conditions, the demand for loans provided by non-bank credit and financial institutions increased. The market of non-bank credit products was formed. However, the process of lending in the shadow banking is associated with high risks and non-stability of shadow money, widely used in this sphere.

2021 ◽  
pp. 1-17
Christopher Mitchell

Abstract Recent developments in the international banking system, especially the 2007–9 crisis and subsequent wave of postcrisis regulation, have drawn increasing attention to the structural power of banks and banking systems. States need a functioning financial system to ensure the overall health of their economies, so states must shape policy to protect their financial firms. National financial systems may be dominated either by banks or by capital markets. In states where banks dominate provision of capital, states must shape policy to protect their banks because of their structural importance, independent of any lobbying or other direct action on the part of banks to exercise instrumental power. The entangling of structural and instrumental power means studying differences in structural power requires either careful case-study work or cross-national comparison of responses to a common shock. The implementation of the 2011 Basel III Accords provides just such an opportunity. This article offers a quantitative analysis of a new dataset of implementation of Basel III components in the Basel Committee on Banking Stability member states from 2011 to 2019 and demonstrates the structural power of banks in bank-based systems to accelerate implementation of favorable policies and slow implementation of unfavorable ones.

2021 ◽  
Vol 14 (9) ◽  
pp. 402
Molla Ramizur Rahman ◽  
Arun Kumar Misra

Interconnectedness among banks is a key distinguishing feature of the banking system. It helps mitigate liquidity problems but on the other hand, acts as a curse in propagating systemic risk at times of distress. Thus, as banks cannot function in isolation, this study uses the Contemporary Theory of Networks to examine banking competition in India for five distinct economic phases, emphasizing upon the Global Financial Crisis (GFC) and the ongoing COVID-19 pandemic. This paper proposes a Market Power Network Index (MPNI), which uses network parameters to measure banks’ market power. This network structure shows a formation of bank clusters that are involved in competition. Specifically, network properties, such as centroid, average path length, the distance of a node from the centroid, the total number of connections in the inter-bank market, and network density, do go on to explain banking competition. It is interesting to note that crisis periods witness a lower level of competition, with GFC bearing the least competition. The ongoing COVID-19 pandemic shows a lower trend, but it is of a higher magnitude than GFC. It was also found that big-sized, profitable, capital adequate, and public banks dominate the banking system. Notably, this study was conducted on a sample of 33 listed Indian banks from April 2008 to December 2020.

2021 ◽  
Vol 9 (3) ◽  
pp. 44
Tu D. Q. Le ◽  
Tin H. Ho ◽  
Dat T. Nguyen ◽  
Thanh Ngo

The expansion of fintech credit around the world is challenging the global banking system. This study investigates the interrelationships between the development of fintech credit and the efficiency of banking systems in 80 countries from 2013 to 2017. The findings indicate a two-way relationship between them. More specifically, a negative relationship between bank efficiency and fintech credit implies that fintech credit is more developed in countries with less efficient banking systems. Meanwhile, a positive impact of fintech credit on the efficiency of banking systems suggests that fintech credit may serve as a wake-up call to the banking system. Therefore, fintech credit should be encouraged by the authorities around the world.

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