Optimization of Credit Activity of a Commercial Bank Based on a Parametric Model

In the past few decades, a line of research focusing on the financial portfolios of banking structures has been actively developed in the world’s economic science. The interest in deposit-and-loan portfolios is caused by the rapid growth of both the banking sector and the entire capital market in the world. This paper presents empirical research in the field of analysis of the credit and investment activities of a commercial bank with an extended set of criteria. The team of authors considered a certain approach to parametric modelling of the optimal banking portfolio taking into account unregulated exogenous (macroeconomic) and endogenous (set by the bank) parameters that affect its structure and composition. As part of the proposed method, a list of monitored parameters of the banking portfolio, which was developed due to financial stability and reliability indicators, was compiled. Accordingly, based on calculations with a modified parametric model and assessment of the level of their financial stability and reliability, shortcomings in the structure and composition of the portfolios of the banking organizations under research were identified with respect to the rationality of resource allocation and the adequacy of equity capital. Thus, it was concluded that taking into account the criteria for managing the banking portfolio, measures of profitability and risk, as well as the reliability of the financial and economic base and financial stability of the bank contributes to the growth of its rating and client base, which is especially important for universal commercial banks. Received: 4 September 2021 / Accepted: 22 November 2021 / Published: 3 January 2022

Evidence from Supervisory Measures for Bank Lending and Npls Control During COVID 19 Crisis

The highest impact of Covid-19 crisis on banks is related to their loan portfolios where many borrowers are facing sharp collapse in their income, and difficulty in repaying their obligations. Regulatory and supervisory authorities have issued statements or guidelines to banks on how to deal with the impact of the outbreak, including relation to easing loan terms and conditions for impacted borrowers. This paper aims to provide some policy views on the appropriate response to Covid-19. Supervisors and regulators should play an integral part contributing to public policy responses to the pandemic. Consistent with their mandate of ensuring safety and soundness, supervisors’ action requires a balancing act where banks are encouraged to restructure loans and use the flexibility embedded in the prudential framework by financing viable firms. This paper presents the state of arts and some considerations about the future banks’ conditions facing NPLs increase and their earnings reduction.

The Impact of Credit Risk Management on the Moroccan Commercial Banking Sector

The study aimed to analyze the credit risk management practices that the commercial banking sector in Morocco is committed to and their impact on the banking sector.Accordingly, the study reached many conclusions about the importance of applying the mechanism of transferring risks into credit opportunities in the market, which can be achieved through diversifying the bank’s revenue schemes in an optimal manner and correct compatibility with market requirements, which allows the bank to use different sources of interest and fees granted from other areas of service that provided by the Bank, rather than focusing primarily on loan portfolios. In addition, the study highlighted the importance of the relevant specialist within the Bank to deal with more macroeconomic research. Designed for market-based economies, other than adopting credit trend analysis alone, therefore, depreciation of bank assets comes from a variety of market drivers, which have a fundamental role in influencing the credit capabilities of the bank.

CURRENT TRENDS IN THE BANKING CREDIT MARKET OF UKRAINE

In recent years, the banking sector of Ukraine has witnessed low lending standards and insufficient protection of creditors' rights. In addition, there were two crises in the country and, as a result, borrowers were unable to repay funds in time. At the same time the quality of loan portfolios deteriorated, therefore more than 50% of all loans became "problematic". Due to the increase in interest rates, most borrowers began to take loans for up to 3 years and in the national currency, because they are less risky. According to statistics, only about 25% of all loans are long-term. In order to encourage borrowers to take long-term loans and borrowings in foreign currency, banking institutions have reduced interest rates on these types of loans, but these actions have given only a slight increase in such loans.

The Vanishing Interest Income of Chinese Banks

Chinese banks likely have more nonperforming loans (NPLs) than officially reported. Banks’ NPLs often deviate from Benford's law. As hidden NPLs earn no interest income, loan quality problems may erode the gross interest income of banks. Using stochastic frontier analysis, we estimate the interest income of a hypothetical profit-maximizing Chinese bank with no credit quality problems. Taking the deviation of actual interest income from the calculated efficient income, we then attempt to reveal the amount of hidden NPLs in Chinese banks. Our results uncover a substantial weakening in the quality of Chinese bank loan portfolios in 2016.

The impact of the Bank of Russia’s macroprudential policy on the risk exposure of banks’ consumer loan portfolios

In this paper, the author examines the efficiency of risk weight add-ons introduced by the Bank of Russia depending on borrowers’ debt burden in terms of discouraging high-risk unsecured rouble consumer lending and the effect of these add-ons on banks’ capital adequacy. The analysis is based on open bank reporting data for the period from October 2019 through August 2020. We show that in this time frame, most banks increased their capital. At the same time, the results obtained do not enable us to confirm the hypothesis that this measure has a pronounced effect on the reduction of the risk profile of consumer loan portfolios. We demonstrate that one of the factors that influenced the efficiency of measures introduced by the regulator is the substantially higher profitability of retail lending as compared to corporate lending.

Market Orchestrators: The Effects of Certification on Platforms and Their Complementors

We study how a multisided platform’s decision to certify a subset of its complementors affects those complementors and ultimately the platform itself. Kiva, a microfinance platform, introduced a social performance badging program in December 2011. The badging program appears to have been beneficial to Kiva—it led to more borrowers, lenders, total funding, and amount of funding per lender. To better understand the mechanisms behind this performance increase, we study how the badging program changed the bundle of products offered by Kiva’s complementors. We find that Kiva’s certification leads badged microfinance institutions to reorient their loan portfolio composition to align with the certification and that the extent of portfolio reorientation varies across microfinance institutions, depending on underlying demand- and supply-side factors. We further show that certified microfinance institutions that do align their loan portfolios enjoy stronger demand-side benefits than do certified microfinance institutions that do not align their loan portfolios. We therefore demonstrate that platforms can influence the product offerings and performance of their complementors—and, subsequently, the performance of the ecosystem overall—through careful enactment of governance strategies, a process we call “market orchestration.”

Factors Affecting Default in the Loan Portfolio of Microfinance Institutions in Cameroon

The main objective of microfinance is to provide funds to those who are excluded from the banking system. But in order to attain this objective they have to deal with the issue of default in their loan portfolios. The aim of this paper is to analysis the factors that affect the default of borrowers in microfinance institutions. The discriminant analysis reveals that 96.6% of the bad borrowers are correctly classified and 92.1% of the good borrowers are correctly classified and that other debts, age of borrower, borrowers income and number of dependents significantly affect the likelihood of default. We suggest that credit officers in microfinance institutions should be keen on these factors when granting loans.