Journal articles on the topic 'Bank failures – Models'
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SEN, Safa, and Sara Almeida de Figueiredo. "Forecasting Bank Failure with Machine Learning Models: A study on Turkish Banks." Journal of Economics, Finance and Accounting Studies 3, no. 2 (September 11, 2021): 51–59. http://dx.doi.org/10.32996/jefas.2021.3.2.6.
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Forecasting bank failures has been an essential study in the literature due to their significant impact on the economic prosperity of a country. Acting as an intermediary player, banks channel funds from those with surplus capital to those who require capital to carry out their economic activities. Therefore, it is essential to generate early warning systems that could warn banks and stakeholders in case of financial turbulence. In this paper, three machine learning models named as GLMBoost, XGBoost, and SMO were used to forecast bank failures. We used commercial bank failure data of Turkey between 1997 and 2001, where we have 17 failed and 20 healthy banks. Our results show that the Sequential Minimal Optimization and GLMBoost provide the same performance when classifying failed banks, while GLMBoost performs better in AUC and SMO when considering total classification success. Lastly, XGBoost, one of the most recent and robust classification models, surprisingly underperformed in all three metrics we used in research.
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Audrino, Francesco, Alexander Kostrov, and Juan-Pablo Ortega. "Predicting U.S. Bank Failures with MIDAS Logit Models." Journal of Financial and Quantitative Analysis 54, no. 6 (October 8, 2018): 2575–603. http://dx.doi.org/10.1017/s0022109018001308.
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We propose a new approach based on a generalization of the logit model to improve prediction accuracy in U.S. bank failures. Mixed-data sampling (MIDAS) is introduced in the context of a logistic regression. We also mitigate the class-imbalance problem in data and adjust the classification accuracy evaluation. In applying the suggested model to the period from 2004 to 2016, we show that it correctly classifies significantly more bank failure cases than the classic logit model, in particular for long-term forecasting horizons. Some of the largest recent bank failures in the United States that had been previously misclassified are now correctly predicted.
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ZHEN-JIA-LIU. "CROSS-COUNTRY STUDY ON THE DETERMINANTS OF BANK FINANCIAL DISTRESS." Revista de Administração de Empresas 55, no. 5 (October 2015): 593–603. http://dx.doi.org/10.1590/s0034-759020150510.
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ABSTRACTBank failures affect owners, employees, and customers, possibly causing large-scale economic distress. Thus, banks must evaluate operational risks and develop early warning systems. This study investigates bank failures in the Organization for Economic Co-operation and Development, the North America Free Trade Area (NAFTA), the Association of Southeast Asian Nations, the European Union, newly industrialized countries, the G20, and the G8. We use financial ratios to analyze and explore the appropriateness of prediction models. Results show that capital ratios, interest income compared to interest expenses, non-interest income compared to non-interest expenses, return on equity, and provisions for loan losses have significantly negative correlations with bank failure. However, loan ratios, non-performing loans, and fixed assets all have significantly positive correlations with bank failure. In addition, the accuracy of the logistic model for banks from NAFTA countries provides the best prediction accuracy regarding bank failure.
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SEN, Safa, and Sara Almeida de Figueiredo. "Predicting Bank Failures with Machine Learning Algorithms: A Comparison of Boosting and Cost-Sensitive Models." Journal of Economics, Finance and Accounting Studies 3, no. 2 (September 5, 2021): 43–50. http://dx.doi.org/10.32996/jefas.2021.3.2.5.
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Predicting bank failures has been an essential subject in literature due to the significance of the banks for the economic prosperity of a country. Acting as an intermediary player of the economy, banks channel funds between creditors and debtors. In that matter, banks are considered the backbone of the economies; hence, it is important to create early warning systems that identify insolvent banks from solvent ones. Thus, Insolvent banks can apply for assistance and avoid bankruptcy in financially turbulent times. In this paper, we will focus on two different machine learning disciplines: Boosting and Cost-Sensitive methods to predict bank failures. Boosting methods are widely used in the literature due to their better prediction capability. However, Cost-Sensitive Forest is relatively new to the literature and originally invented to solve imbalance problems in software defect detection. Our results show that comparing to the boosting methods, Cost-Sensitive Forest particularly classifies failed banks more accurately. Thus, we suggest using the Cost-Sensitive Forest when predicting bank failures with imbalanced datasets.
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Sarkar, Sumit, and Ram S. Sriram. "Bayesian Models for Early Warning of Bank Failures." Management Science 47, no. 11 (November 2001): 1457–75. http://dx.doi.org/10.1287/mnsc.47.11.1457.10253.
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Parnes, Dror. "The search for an optimal RBC regulatory system." Journal of Financial Economic Policy 6, no. 1 (April 1, 2014): 78–92. http://dx.doi.org/10.1108/jfep-05-2013-0021.
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Purpose – The author assembles three hypothetical regulatory regimes and deploys computer simulations to contrast different banking systems based on conventional strategies for appointing risk-based capital minimum thresholds. The paper aims to discuss these issues. Design/methodology/approach – The author instigates cascading failure models within numerous directed graphs and measures the inflicted costs, the accumulated bank failures, and the general robustness of the networks following various economic shocks. Findings – The author finds that a homogeneous regulatory regime is an inferior approach. However, a selected too-big-to-fail scheme portrays the best defensive banking model with the lowest number of total bank failures and the fewest banks' costs and social costs. Research limitations/implications – The author can only theoretically examine this topic. Originality/value – The author overcomes some obstacles in prior studies including the use of a large and complex network and the proportional allocation of funds upon a bank failure.
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Кракович, Виктор, and Daria Udaltsova. "Bank Portfolio Allocation Strategy and Its Probability of Failure: Case of the Russian Banking Sector Purge." Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438 16, no. 2 (September 13, 2022): 32–43. http://dx.doi.org/10.17323/j.jcfr.2073-0438.16.2.2022.32-43.
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This paper aims to discover portfolio allocation strategies that facilitate a bank’s stability. The paper examines the phenomenon of massive failures of Russian banks in the period from 2013 to 2019, in order to identify which of the banks’ strategic decisions regarding assets and liabilities, as well as portfolio structure, lead to higher stability. The dataset contains financial indicators and prudential ratios of 895 commercial banks operating in Russia during that period. 507 banks, or 57% of all banks, lost their license during the considered period. Cases of bank failures were classified depending on whether the Central Bank identified any illegal activities conducted by the failed bank. The high failure rate provides an opportunity to study the differences between failed and non-failed banks in order to determine the factors associated with lowerfailure probability. Following the approach applied in most of the previous studies, we use a logistic regression to model the effect of different asset and liability portfolio structure on the failure probability. The hypothesis that failure probability of a bank is affected by its strategic focus of forming an assets and liabilities portfolio was statistically confirmed. We found that the focus of a bank’s activity on providing loans to individuals and attracting deposits from companies leads to lower failure probability, confirming the results of previous studies. Also, we found that more active cooperation with other banks in terms of both borrowing and lending is associated with lower failure probability. Furthermore, we found that banks are less likely to borrow from or lend money to their fellow banks that later fail with illegal activity accusations.Finally, we found that unlike the EU banks, Russian banks with higher profitability ratios are more stable. The results are relevant for industry practitioners in facilitating the development of a more resilient bank strategy, as well as for regulators for incorporation in early warning models.
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Siakoulis, Vasileios. "Bank failure intensity modeling: an ACD model approach." Journal of Risk Finance 19, no. 5 (November 19, 2018): 454–77. http://dx.doi.org/10.1108/jrf-11-2016-0151.
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PurposeThe purpose of this study is to employ a duration-based approach to model the inter-arrival times of bank failures in the US banking system for the period of 1934-2014, in line with the suggestions of Focardi and Fabozzi (2005), who used a similar model for explaining contagion in credit portfolios.Design/methodology/approachConditional duration models that allow duration between bank failures to depend linearly or nonlinearly on its past history are estimated and evaluated.FindingsThe authors find evidence of strong persistence along with nonmonotonic hazard rates, which imply a financial contagion pattern, according to which a high frequency of bank failures generates turbulence, which shortly after leads to additional fails, whereas prolonged periods without abnormal events signify the absence of contagious dependence, which increases the relative periods between bank failure appearance. Further, the authors obtain statistically significant results when they allow duration to depend linearly on past information variables that capture systemic bank crisis factors along with stock and bond market effects.Originality/valueThe originality of this study consists in proposing a new time series approach for the prediction of bank probability of default by incorporating a default-risk contagion mechanism. As contagious bank failures are a key topic in macroprudential supervision, this study could be of value for supervisory authorities in setting pro-active actions and tightening regulatory measures.
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Liu, Li Xian, Shuangzhe Liu, and Milind Sathye. "Predicting Bank Failures: A Synthesis of Literature and Directions for Future Research." Journal of Risk and Financial Management 14, no. 10 (October 8, 2021): 474. http://dx.doi.org/10.3390/jrfm14100474.
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Risk management has been a topic of great interest to Michael McAleer. Even as recent as 2020, his paper on risk management for COVID-19 was published. In his memory, this article is focused on bankruptcy risk in financial firms. For financial institutions in particular, banks are considered special, given that they perform risk management functions that are unique. Risks in banking arise from both internal and external factors. The GFC underlined the need for comprehensive risk management, and researchers since then have been working towards fulfilling that need. Similarly, the central banks across the world have begun periodic stress-testing of banks’ ability to withstand shocks. This paper investigates the machine-learning and statistical techniques used in the literature on bank failure prediction. The study finds that though considerable progress has been made using advanced statistical and computational techniques, given the complex nature of banking risk, the ability of statistical techniques to predict bank failures is limited. Machine-learning-based models are increasingly becoming popular due to their significant predictive ability. The paper also suggests the directions for future research.
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Hubble, T. C. T. "Slope stability analysis of potential bank failure as a result of toe erosion on weir-impounded lakes: an example from the Nepean River, New South Wales, Australia." Marine and Freshwater Research 55, no. 1 (2004): 57. http://dx.doi.org/10.1071/mf03003.
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The consequences of weirs present on the Upper Nepean River on the long-term slope stability of both vegetated and devegetated riverbanks were investigated using models that account for the reinforcement of bank sediments by tree roots. The effects of the weirs in concert with channel widening and deepening caused by dredging in 1970s and 1980s, as well as natural processes, have turned the Upper Nepean from a small upland river into a series of quiet, narrow lakes, measuring 3–5 m deep, 30–70 m wide and several kilometres long. The surface of these lakes is located currently within the steep mid-bank zone. Wind-generated waves have eroded 1–3-m high scarps in the mid-bank region. These scarps are receding laterally at an average rate of 10 cm per year and this process is gradually undermining and destabilising the upper banks. In contrast, the mass of water impounded by the weirs currently acts to provide lateral support to the banks and improves their stability. Therefore, the existence of the weirs and their impounded lakes has currently both positive and negative effects on bank stability. The retention of the weirs will promote continued erosion at the waterline of the weir lakes that will eventually lead to the destabilisation and collapse of both vegetated and devegetated banks during future large floods. Demolition of the weirs would also lead to a renewed phase of bank failure during future floods as the stabilising effects of the weir lakes on the banks would be removed. The size of eventual failures will be larger and the distribution of such failures probably more widespread if the weirs are retained.
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DOĞANAY, M. METE, NILDAĞ BAŞAK CEYLAN, and RAMAZAN AKTAŞ. "PREDICTING FINANCIAL FAILURE OF THE TURKISH BANKS." Annals of Financial Economics 02, no. 01 (June 2006): 0650005. http://dx.doi.org/10.1142/s2010495206500059.
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Banks are the most important financial institutions in Turkey because other financial institutions are not developed efficiently yet. Turkish banks experienced financial difficulties and a substantial amount of banks failed in the past. This event urged the government to initiate measures to prevent banks from getting into financial difficulties. As a result of these measures, Turkish banking system currently seems to be very attractive for the foreign investors willing to invest in this sector. One of the main concerns of the foreign investors is a possibility of a new banking crisis although it is very remote at this time. The purpose of this study is to develop early warning systems predicting the financial failure at least three years ahead of financial failure date. A number of multivariate statistical models such as multiple regression, discriminant analysis, logit, probit are used. We found that the most appropriate model is logit. The significant variables obtained from the models explain very well the causes of the bank failures. Our models can be used to assist interested parties to predict the probability of financial failure of Turkish banks.
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Olsen, Nils Reidar B., and Stefan Haun. "Numerical modelling of bank failures during reservoir draw-down." E3S Web of Conferences 40 (2018): 03001. http://dx.doi.org/10.1051/e3sconf/20184003001.
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Numerical algorithms are presented for modeling bank failures during reservoir flushing. The algorithms are based on geotechnical theory and the limit equilibrium approach to find the location and the depth of the slides. The actual movements of the slides are based on the solution of the Navier-Stokes equations for laminar flow with high viscosity. The models are implemented in the SSIIM computer program, which also can be used for modelling erosion of sediments from reservoirs. The bank failure algorithms are tested on the Bodendorf hydropower reservoir in Austria. Comparisons with measurements show that the resulting slides were in the same order of magnitude as the observed ones. However, some scatter on the locations were observed. The algorithms were stable for thick sediment layers, but instabilities were observed for thin sediment layers.
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Jing, Zhongbo, and Yi Fang. "Predicting US bank failures: A comparison of logit and data mining models." Journal of Forecasting 37, no. 2 (August 8, 2017): 235–56. http://dx.doi.org/10.1002/for.2487.
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Estes, Kathy. "Diversification and Community Bank Performance during a Financial Crisis." International Journal of Finance & Banking Studies (2147-4486) 3, no. 4 (January 19, 2016): 1. http://dx.doi.org/10.20525/.v3i4.190.
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<p><em>Many U.S. banks failed or performed poorly during the recent financial crisis. Although the costliest failures were large institutions, the majority of failures were community banks (less than $1 billion in total assets). Community banks, which are considered instrumental in small business lending and employment growth, face different risks and challenges than their larger counterparts, including a lack of economies of scale and scope and exclusion from “too-big-to-fail” status. These challenges, coupled with the recent failures, motivate research into potential strategies managers can use to improve performance. This study examined the relationship between three potential diversification strategies and community bank risk-adjusted performance from 2007 to 2011. Understanding these relationships could improve management’s decision-making, allowing them to choose risk-mitigating strategies during a severe economic downturn. Herfindahl-Hirschman Indexes (HHIs) were calculated as proxies for geographic, activity, and asset diversification. Multiple regression models for each of the five years were used to calculate the impact of diversification variables on risk-adjusted ROA. The results show that diversification in all areas is directly related to performance; however, only the asset diversification relationship is significant. To the extent possible for community banks, diversification may improve risk-adjusted performance.</em></p>
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Estes, Kathy. "Diversification and Community Bank Performance during a Financial Crisis." International Journal of Finance & Banking Studies (2147-4486) 3, no. 4 (October 21, 2014): 01–40. http://dx.doi.org/10.20525/ijfbs.v3i4.190.
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Many U.S. banks failed or performed poorly during the recent financial crisis. Although the costliest failures were large institutions, the majority of failures were community banks (less than $1 billion in total assets). Community banks, which are considered instrumental in small business lending and employment growth, face different risks and challenges than their larger counterparts, including a lack of economies of scale and scope and exclusion from “too-big-to-fail” status. These challenges, coupled with the recent failures, motivate research into potential strategies managers can use to improve performance. This study examined the relationship between three potential diversification strategies and community bank risk-adjusted performance from 2007 to 2011. Understanding these relationships could improve management’s decision-making, allowing them to choose risk-mitigating strategies during a severe economic downturn. Herfindahl-Hirschman Indexes (HHIs) were calculated as proxies for geographic, activity, and asset diversification. Multiple regression models for each of the five years were used to calculate the impact of diversification variables on risk-adjusted ROA. The results show that diversification in all areas is directly related to performance; however, only the asset diversification relationship is significant. To the extent possible for community banks, diversification may improve risk-adjusted performance.
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S. Barr, Richard, Lawrence M. Seiford, and Thomas F. Siems. "Forecasting Bank Failure: A Non-Parametric Frontier Estimation Approach." Recherches économiques de Louvain 60, no. 4 (December 1994): 417–29. http://dx.doi.org/10.1017/s0770451800004590.
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SummaryThe dramatic rise in bank failures over the last decade has led to a search for leading indicators so that costly bailouts might be avoided. While the quality of a bank’s management is generally acknowledged to be a key contributor to institutional collapse, it is usually excluded from early-warning models for lack of a metric. This paper describes a new approach for quantifying a bank’s managerial efficiency, using a data-envelopment-analysis model that combines multiple inputs and outputs to compute a scalar measure of efficiency. This new metric captures an elusive, yet crucial, element of institutional success: management quality. New failure-prediction models for detecting a bank’s troubled status which incorporate this explanatory variable have proven to be robust and accurate, as verified by in-depth empirical evaluations, cost sensitivity analyses, and comparisons with other published approaches.
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Bace, Edward. "Vietnamese Commercial Banks and Corporate Governance." Summer 4, no. 2 (July 31, 2019): 73–81. http://dx.doi.org/10.35609/jfbr.2019.4.2(4).
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Objective – Corporate governance is a focus of bank managers and stakeholders, especially after the financial crisis. Contributing to firm and bank difficulties is weakness in managing internally and externally, making governance critical; even more so for banks which play a central role in the economy, allocating capital, lowering risk for businesses and individuals, and ensuring stability and sustainability. Bank failures in the crisis (2008-2016) highlighted governance and risk in developed nations and in developing ones, such as Vietnam. This paper studies governance in bank performance and risk, using theoretical frameworks and empirical study. Methodology – Fundamental governance is reviewed, for banks in particular, in two widely used frameworks. Prior research relates bank performance (share return and return on assets, ROA), risk (capital adequacy ratio, CAR) and governance (board size, BS; number of committees, NC; independent directors to total, NID). Findings – As our models show, NC and NID relate positively to bank performance. CAR has a positive link to governance. Novelty – Our recommendation is that banks in Vietnam must have effective boards to boost performance. Type of Paper: Empirical. Keywords: governance; banking; crises; Vietnam; performance Reference to this paper should be made as follows: E. Bace. 2019. Vietnamese Commercial Banks and Corporate Governance, J. Fin. Bank. Review 4 (2): 73–81 https://doi.org/10.35609/jfbr.2019.4.2(4) JEL Classification: M14; D21; G21; G34
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Mahardika, Zahrashafa, Rizky Banyualam Permana, and Nadia Maulisa. "GOING DIGITAL RUPIAH: SOME CONSIDERATIONS FROM SOVEREIGNTY AND CYBERSECURITY PERSPECTIVES." Journal of Central Banking Law and Institutions 2, no. 1 (January 31, 2023): 25–54. http://dx.doi.org/10.21098/jcli.v2i1.42.
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Central banks worldwide are coming to terms with the bits and bytes of digital money, commonly referred to as Central Bank Digital Currency (CBDC). CBDC has been claimed to be safer, more secure, and inherently less volatile, unlike cryptocurrencies, as it is issued and regulated by central banks. The development of digital currency not only emerged in, and isolated developed countries’ monetary policy but also came from the emerging markets. However, the policy and academic discussion on CBDC is clouded as only a significant minority of states have instituted it. From a regulatory point of view, the basic concept of CBDC is still significantly understudied. Among the emerging scholarship, there remains a paucity of study on the (legal) aspects of cybersecurity risk and resilience of the proposed CBDC. This paper explores the role of Bank Indonesia (BI), as the central bank, in implementing CBDC and conducts a preliminary expose associated with cybersecurity risks. This paper shows that CBDC understood as not only usage of Digital Ledger Technologies, (DLTs), but in all models of electronic payment. There are diverging models for the implementation of CBDC, some models involve multiple actors and electronic systems. However, as a currency the Central Bank would ultimately bear the liability for each transaction. Therefore, it is important for BI, as the central bank, consider cybersecurity risks associated with the implementation of CBDC. Cybersecurity risks in the financial sectors including CBDC, is the potential disruption caused by cyber-attacks, IT failures, personnel, and physical or infrastructure security risks.
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Duró, Gonzalo, Alessandra Crosato, Maarten G. Kleinhans, and Wim S. J. Uijttewaal. "Bank erosion processes measured with UAV-SfM along complex banklines of a straight mid-sized river reach." Earth Surface Dynamics 6, no. 4 (October 25, 2018): 933–53. http://dx.doi.org/10.5194/esurf-6-933-2018.
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Abstract. We apply structure from motion (SfM) photogrammetry with imagery from an unmanned aerial vehicle (UAV) to measure bank erosion processes along a mid-sized river reach. This technique offers a unique set of characteristics compared to previously used methods to monitor banks, such as high resolution and relatively fast deployment in the field. We analyse the retreat of a 1.2 km restored bank of the Meuse River which has complex vertical scarps laying on a straight reach, features that present specific challenges to the UAV-SfM application. We surveyed eight times within a year with a simple approach, combining different photograph perspectives and overlaps to identify an effective UAV flight. The accuracy of the digital surface models (DSMs) was evaluated with real-time kinematic (RTK) GPS points and airborne laser scanning of the whole reach. An oblique perspective with eight photo overlaps and 20 m of cross-sectional ground-control point distribution was sufficient to achieve the relative precision to observation distance of ∼1 : 1400 and 3 cm root mean square error (RMSE), complying with the required accuracy. A complementary nadiral view increased coverage behind bank toe vegetation. Sequential DSMs captured signatures of the erosion cycle such as mass failures, slump-block deposition, and bank undermining. Although UAV-SfM requires low water levels and banks without dense vegetation as many other techniques, it is a fast-in-the-field alternative to survey reach-scale riverbanks in sufficient resolution and accuracy to quantify bank retreat and identify morphological features of the bank failure and erosion processes. Improvements to the adopted approach are recommended to achieve higher accuracies.
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Tekdogan, Omer Faruk, and Burak Sencer Atasoy. "DOES ISLAMIC BANKING PROMOTE FINANCIAL STABILITY? EVIDENCE FROM AN AGENT-BASED MODEL." Journal of Islamic Monetary Economics and Finance 7, no. 2 (April 21, 2021): 201–32. http://dx.doi.org/10.21098/jimf.v7i2.1323.
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Islamic banking has come to the forefront as being one of the fastest growing branch of the global financial industry in recent years. In this study we evaluate whether coexistence of Islamic and conventional banks promote financial stability. In this respect, we evaluate two types of financial systems: (1) A system solely comprised of conventional banks, (2) a dual system in which conventional and Islamic banks coexist and interact with each other. Accordingly, we design two agent-based models representing aforementioned systems and examine possible contagious effects and causes of bank failures by employing the volatility spillover methodology. We find that Islamic banks greatly promote stability by providing liquidity during financial shocks and create more liquidity per asset compared to conventional banks. We also find that they tend to hold more cash than conventional banks, which cushion the effects of a possible liquidity squeeze. Conventional banks, on the other hand, tend to have reserve deficits, which intensify during shock periods. We conclude that coexistence of both bank types creates a win-win situation and contributes to financial stability.
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Li, Xiaofei, Cesar L. Escalante, James E. Epperson, and Lewell F. Gunter. "Agricultural lending and early warning models of bank failures for the late 2000s Great Recession." Agricultural Finance Review 73, no. 1 (May 3, 2013): 119–35. http://dx.doi.org/10.1108/00021461311321357.
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Asutay, Mehmet, and Jaizah Othman. "Alternative measures for predicting financial distress in the case of Malaysian Islamic banks: assessing the impact of global financial crisis." Journal of Islamic Accounting and Business Research 11, no. 9 (August 10, 2020): 1827–45. http://dx.doi.org/10.1108/jiabr-12-2019-0223.
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Purpose The global financial crisis of 2008 still has an impact on the financial systems around the world, for which funding liquidity has been mentioned as one of the main concerns during that period. This study aims to consider the impact of and extent to which the funding structure of Islamic banks along with deposit structure, macroeconomic variables, other bank-specific variables, including alternative funding mix variables (in terms of funding structure measured as financing/deposit ratio), could play a part in explaining the financial conditions and predicting the failures and performances of Islamic banks in the case of Malaysia under the distress created by the global financial crisis. Design/methodology/approach Multivariate logit model was used with a sample including 17 full-fledged Islamic banks in Malaysia for the period from December 2005 to September 2010 by using quarterly data. Findings This study found that the funding mix variable (financing/deposit ratio), the composition of deposits, alternative bank-specific variables and alternative funding mix variables are statistically significant. In contrast, none of the macroeconomic variables is found to have a significant impact on bank liquidity. In the final models, the variables that showed significant performance were selected as explanatory variables. The results of McFadden R-squared for both selected models showed an excellent fit to predict the Islamic banks’ performance. Originality/value This empirical study contributes to the literature in two ways: to the best of the authors’ knowledge, this is the first study to examine the role of the funding structures of Islamic banks in determining their performance; and it also examines the effect of deposit composition (the mudharabah and non-mudharabah deposits) on Islamic banks’ performance.
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Zhao, Cong, Abu Hanifa Md Noman, and Kaveh Asiaei. "Exploring the reasons for bank-switching behavior in retail banking." International Journal of Bank Marketing 40, no. 2 (November 2, 2021): 242–62. http://dx.doi.org/10.1108/ijbm-01-2021-0042.
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PurposeThe development and maintenance of a long-term relationship with customers are essential for banks to bolster their profits and thrive in a competitive environment. This study aims to explore the key factors that influence individuals' bank-switching behavior in the Malaysian retail banking industry to provide insights to bank managers to develop effective customer retention strategies.Design/methodology/approachA convenient sampling technique was used to distribute questionnaires to bank customers in Malaysia. A total of 312 utilizable questionnaires were obtained for further analysis. For the data analysis, the authors used explanatory factor analysis (EFA), confirmatory factor analysis (CFA) and logit and probit models to identify the determinants of bank-switching behavior of bank customers in Malaysia.FindingsThis study revealed that switching costs, effective advertising from competitors, inconvenience, price factor and service failures significantly influence customers' retail bank-switching behavior in the Malaysian context. The findings bring some significant policy implications for bank management decisions.Research limitations/implicationsThe non-probability, convenience online sampling method may not be generalized to the population. However, the descriptive demographic statistics show that the findings provide a reasonable representation of the Malaysian population.Originality/valueThis study empirically investigates the determinants of individual customers' retail bank-switching behavior in the Malaysian context. This study is the first of its kind to observe the unique feature of price factor as a determinant of individual customers' switching behavior in the Malaysian retail banking industry, contrasting previous similar studies in different countries.
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Michael, Bryane. "The Case for an IGAD Development Bank." Journal of Development Policy and Practice 4, no. 1 (January 2019): 35–65. http://dx.doi.org/10.1177/2455133318812987.
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A multilateral development finance institution for the Inter-Governmental Authority on Development (IGAD) region represents the chance to create a strong pro-developmental actor—and energise the IGAD itself. Yet, senior IGAD officials will need to look beyond the traditional development banking model if they hope to make an impact of the scale needed to drag these poorest of countries out of poverty. In this article, the author argues for the design of a development bank modelled after successful role models—like the China Development Bank—instead of proven failures. A mix of government and private sector participation, a widely disbursed capital base and a temporary base in London will help ensure the proposed IGAD Communities Development Bank acts as bridge and vector of pro-developmental capitalism in the IGAD region.
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Pekkurnaz, Didem, and Zeynep Elitas. "A Survival Analysis of Bank Failures in Turkey: Incorporating Unobserved Heterogeneity in Continuous Time Parametric Models." Ekonomik Yaklasim 26, no. 95 (2015): 33. http://dx.doi.org/10.5455/ey.35606.
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Bani, Mahmoud, Mostafa Zadehbagher, Jalal Jalili, and Mohammad Ali Saberimanesh. "Prediction of Bank Failures Based on Zmisky and Toffler Models in the Banking Industry of Iran." Kuwait Chapter of Arabian Journal of Business and Management Review 3, no. 12 (August 2014): 142–52. http://dx.doi.org/10.12816/0018813.
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Akighir, David Terfa, Tyagher Margaret, Jacob Terungwa Tyagher, and Tordue Emmanuel Kpoghul. "An Empirical Analysis of the Impact of Agency Banking on Financial Inclusion in Benue State, Nigeria: Implications for Economic Activities." International Journal of Economics and Finance 14, no. 2 (January 10, 2022): 75. http://dx.doi.org/10.5539/ijef.v14n2p75.
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Twelve (12) out of the Twenty-three (23) local government areas (LGAs) in Benue State do not have the presence of banks over a long period of time. This situation has deprived the inhabitants of these LGAs of access to formal financial services until the advent of agency banking. This study therefore, investigates the impact of agency banking on financial inclusion and economic activities in Benue State focusing on the agency banking activities of First Bank Ltd. The study is anchored on the agency theory and it used a survey design. The study has utilized both primary and secondary data that were analyzed using descriptive statistical tools and structural equation models. Findings of the study have revealed that agency banking activities of First Bank Ltd have immensely enhanced financial inclusion and economic activities in Benue State. However, challenges such as shortages of cash, security problems, network failures, and lack of financial literacy are militating against the smooth operations of the agency banking in the State. On the basis of these findings, the study has recommended among others that, other banks operating in the State should be encouraged to venture into agency banking in the state so as to have a wider coverage of agency banking in the State. Also, government should provide security and partner with the private sector to provide national carrier communication network system to overcome the network failure challenge. Finally, banks should intensify efforts to educate the masses about the validity and potency of agency banking.
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Bagloee, Saeed Asadi, Mohsen Asadi, and Cyrus Mohebbi. "A Model for Screening Vulnerability in the Loan Market in the Context of Credit Rationing." International Journal of Strategic Decision Sciences 5, no. 1 (January 2014): 59–75. http://dx.doi.org/10.4018/ijsds.2014010104.
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The loan market has contributed to the success and failure of economies. Examples of such failures are the US subprime mortgage crisis as well as the global economic meltdown that followed. Many factors influence the loan market, making it volatile and vulnerable. As such, it is important to understand the extent of its vulnerability. Such uncertainties emerge from asymmetric information in the loan market that may lead to credit rationing. Many studies have been devoted to exploring theoretical aspects of the credit market. However, before delving into the theory, it is important to understand and analyze empirical data. Having said that, the literature has yet to provide reliable methodologies for analyzing the empirical data of the loan market. Therefore, given an empirical survey, this study provides a model describing borrowers' behavior in the loan markets. Borrowers are faced with a variety of loan contracts with different terms and conditions from different banks. Logit models can be used to capture the borrowers' choice of bank. Credit is not easily available rather it is rationed and borrowers compete to obtain their required credit via best suited banks offers. The competition is guaranteed by developing a mathematical programming formulation (an objective function subject to constraints) integrated with the logit models for which a solution algorithm using Successive Coordinate Descent was developed. Numerical results of the methodology are presented. Loan terms and conditions as well the borrowers characteristics and preferences are captured in the logit models as explanatory variables. The methodology allows sensitivity analysis on the explanatory variables demonstrating the fluctuation and vulnerability of credit flow.
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Alzoubi, Marwan, Alaa Alkhatib, Ayman Abdalmajeed Alsmadi, and Hamad Kasasbeh. "Bank size and capital: A trade-off between risk-taking incentives and diversification." Banks and Bank Systems 17, no. 4 (October 6, 2022): 1–11. http://dx.doi.org/10.21511/bbs.17(4).2022.01.
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This paper analyzes the importance of size and capital for risk-taking incentives of Jordanian banks using panel data of 13 commercial banks for the period 2007–2017. The results reveal that size and capital add to stability, consistent with the economies of scale and scope hypothesis. In developing countries, banks are more conservative and less involved in market-based activities; however, they are interconnected just as in developed countries. The results of the first model and second model reveal that as size increases by 1 percent, risk decreases by 0.11 percent and 0.03 percent, respectively, implying that too-big-to-fail is not present and that moral hazard is not a serious issue. In both models, large size is driven by diversification not by risk-taking incentives. In terms of capital, the results of the first model and second model reveal that as capital increases by 1 percent, risk decreases by 0.48 and 0.12 percent, respectively. The fact that Jordanian banks are overcapitalized indicates that the central bank regulation is not binding. Banks increase their capital adequacy ratios to reduce risk. It is clear that there is economic benefit from increased size. However, the failures of large banks are systemic due to their interconnectedness. Therefore, regulators need to pay special attention to them in accordance with Basel III Accord.
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Rayo Cantón, Salvador, Juan Lara Rubio, and David Camino Blasco. "Un modelo de credit scoring para instituciones de microfinanzas en el marco de Basilea II." Cuadernos de difusión 15, no. 28 (June 30, 2010): 89–124. http://dx.doi.org/10.46631/jefas.2010.v15n28.04.
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The growth of microcredit worldwide along with international rules on capital requirements (Basel II) are increasing the competition between microfinance institutions (MFIs) and banks for this business segment. The bank system traditionally has relied on adequate credit scoring models to analyze the risk of payment failures, but this has not been the case in supervised MFIs. The objective of this research is to design a credit scoring model for any institution subjected to supervision and specialized in microcredit as the Development Agency for Small and Micro Enterprise (Entidad de Desarrollo de la Pequeña y Micro Empresa - Edpyme) of the financial system in Peru. The results of this research includes a methodology and the steps needed to design the model, and the assessment and validation process that can be applied in the business area, in particular, to establish an interest rate policy with customers. Eventually, the paper also explains how the model can be used to develop credit risk management under the Basel II IRB approaches.
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Uddin, Shahzad, Kelum Jayasinghe, and Shaila Ahmed. "Scandals from an island: Testing Anglo-American corporate governance frameworks." critical perspectives on international business 13, no. 4 (October 2, 2017): 349–70. http://dx.doi.org/10.1108/cpoib-09-2016-0036.
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Purpose The purpose of this paper is to provide an account of banking scandals in relation to corporate governance (CG) failures in an emerging economy, arguing that Anglo-American ideas of CG are misplaced in traditional settings. Design/methodology/approach Semi-structured interviews were conducted with key stakeholders. Observations of annual general meetings (AGMs) and the personal working experience of one of the researchers, along with documentation, provided triangulating data on CG practices. Findings The authors have found that both of the banks studied had adopted CG practices contrary to the expectations of the Sri Lankan CG codes. Key features of CG practices that emerged from their investigations of these two scandals are ineffectual central bank regulations, familial boards of directors, ceremonial board meetings, biased auditing practices and manipulative AGMs, relying on traditional structures of accountability centred around families, kin and social networks. Research limitations/implications The authors argue, drawing on Weber (1958, 1961, 1968, 1978), that the traditionalist culture mediates the process of rationality in bank governance codes and regulatory frameworks Therefore, practices fall far short of expectations. Originality/value The paper builds on the extended critique of shareholder-centric CG models and their transferability to alien contexts. It contributes to the CG studies calling for more appreciation of the need to move beyond the conventional view of CG problems as simply down to conflicts of interests. The authors complement and advance the decoupling debate in CG studies drawing on the Weberian notion of traditionalism.
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Abou-El-Sood, Heba, and Osama El-Ansary. "Asset-liability management in Islamic banks: evidence from emerging markets." Pacific Accounting Review 29, no. 1 (February 6, 2017): 55–78. http://dx.doi.org/10.1108/par-04-2016-0050.
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Purpose Motivated by massive bank failures during the financial crisis and the remarkable resilience of Islamic banks (IBs), this paper aims to analyze the interdependencies between asset/liability portfolio choices of IBs in emerging markets. Design/methodology/approach The authors collect data from the financial statements of IBs in the Middle East and North Africa region and Southeast Asia during the period 2002-2012. Using canonical correlation analysis, the authors investigate the degree of interdependencies between the asset/liability accounts unique to IBs and how their ALM models work at times of economic turmoil. Findings IBs tend to make decisions on sources of finance based on their asset portfolio choices. The interdependencies are stronger for small banks. IBs direct more of their investments to risk-mitigating instruments that share the risk with the borrower/client and are based on the purchase and sale of real goods rather than financial instruments. Additionally, banks tend to rely less on equity to finance their investments during economic boom and increase their equity holdings during economic bust. Practical implications This paper contributes to research on an under-researched, globally growing finance sector. It extends research on ALM while providing novel evidence using non-standardized asset/liability accounts unique to IBs. Originality/value The analysis of unique accounts has not been discussed in prior studies, which mainly used standardized account balances to compare Islamic and conventional banks. Moreover, the resilience of IBs and whether their ALM models are superior at times of turmoil has remained a black box. The results of this study are relevant to unravel this unanswered question.
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Cartocci, Nicholas, Marcello R. Napolitano, Gabriele Costante, and Mario L. Fravolini. "A Comprehensive Case Study of Data-Driven Methods for Robust Aircraft Sensor Fault Isolation." Sensors 21, no. 5 (February 26, 2021): 1645. http://dx.doi.org/10.3390/s21051645.
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Recent catastrophic events in aviation have shown that current fault diagnosis schemes may not be enough to ensure a reliable and prompt sensor fault diagnosis. This paper describes a comparative analysis of consolidated data-driven sensor Fault Isolation (FI) and Fault Estimation (FE) techniques using flight data. Linear regression models, identified from data, are derived to build primary and transformed residuals. These residuals are then implemented to develop fault isolation schemes for 14 sensors of a semi-autonomous aircraft. Specifically, directional Mahalanobis distance-based and fault reconstruction-based techniques are compared in terms of their FI and FE performance. Then, a bank of Bayesian filters is proposed to compute, in flight, the fault belief for each sensor. Both the training and the validation of the schemes are performed using data from multiple flights. Artificial faults are injected into the fault-free sensor measurements to reproduce the occurrence of failures. A detailed evaluation of the techniques in terms of FI and FE performance is presented for failures on the air-data sensors, with special emphasis on the True Air Speed (TAS), Angle of Attack (AoA), and Angle of Sideslip (AoS) sensors.
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Alhammadi, Salah, Simon Archer, and Mehmet Asutay. "Risk management and corporate governance failures in Islamic banks: a case study." Journal of Islamic Accounting and Business Research 11, no. 9 (September 2, 2020): 1921–39. http://dx.doi.org/10.1108/jiabr-03-2020-0064.
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Purpose The purpose of this paper is to show how the choice and ongoing evaluation of a firm’s business model, as a matter of strategic guidance, are key aspects of corporate governance (CG), with particular reference to risk management (RM) in Islamic banks. Design/methodology/approach This research uses a case study approach, with a single case, which was chosen as it fits very well the purpose of this research. The data collection was based largely on documentary evidence. Company data were collected from company annual reports, press releases and legitimate web sites. The ORBIS Bank Focus database was also used to produce a comparative financial analysis. Findings The study findings illustrate how an apparently successful business model may fail due to an inherent instability that could have been identified through the application of careful risk analysis (including stress testing) in the choice and ongoing evaluation of the business model, which robust CG and strategic guidance require. In particular, Arcapita’s problems illustrate the dangers to Islamic financial institutions (IFI) from business models that involve undue exposure to liquidity risk. Practical implications The issues raised in the paper are important in that Islamic banking and finance is an integral part of the global banking and finance industry. Investors and regulators are now requesting corporate management to provide improved service to shareholders and other stakeholders alike. IFI rely on the confidence of investors and market participants, just like conventional institutions and when this confidence erodes, it may prove difficult to regain. Social implications The global credit crisis of 2008 caused significant difficulties to firms, especially financial institutions, even with substantial government intervention in the economy, which raised some issues of CG and ethics. Originality/value This paper extends the knowledge of the potential effects of weaknesses in CG and RM, with specific reference to strategic guidance in the choice and ongoing evaluation of a firm’s business model, especially in relation to the Islamic banking sector. It also provides a telling illustration of the need for the enhancements of the Basel Committee’s prudential requirements set out in the various Basel III documents.
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Laidler, David. "Financial Stability, Monetarism and the Wicksell Connection." Review of Economic Analysis 1, no. 1 (November 22, 2009): 60–79. http://dx.doi.org/10.15353/rea.v1i1.1479.
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In today's discussions of central banking, maintaining macro-financial stability has only recently appeared along-side the pursuit of low inflation as an important policy goal. This is in strong contrast to the earlier literature, where financial stability was often the main concern of the theory of central banking. This theme is explored here first from the point of view of the monetarist tradition, which treated an excess demand for money which the central bank in its capacity as lender of last resort had an obligation to relieve as a central feature of financial crises; and then from that of a later Wicksellian tradition, where co-ordination failures in the inter-temporal allocation of resources that it was monetary policy's task to avoid, were emphasized. Though there are no long-lost sure cures for financial instability awaiting discovery in the older literature, its emphasis on the potential for markets to fail to clear provides a helpful perspective on the phenomenon, often missing from modern models of the conduct of monetary policy.
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Muriithi, Robert Githua. "Distressed Debt Management & Lessons Learnt Through Case Management: Banking Industry in Kenya." European Journal of Business and Management Research 7, no. 1 (January 27, 2022): 134–46. http://dx.doi.org/10.24018/ejbmr.2022.7.1.1252.
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Deteriorating and troubled assets must be subjected to enhanced risk oversight and monitoring to ensure that appropriate action is taken in a timely manner, allowing a high level of obligor turnaround success and reduced risk of loss for the Lender/Financial Institution/Bank. It’s important for a Bank to harmonize Distressed Debt Management approach, called the Watch List (WL) Framework, and details the requirements to ensure timely adherence to regulatory requirements. The impairment requirements of International Financial Reporting Standards (IFRS 9) Financial Instruments, effective as of 1 January 2018, are based on an Excepted Credit Loss (ECL) model and replace the IAS 39 Financial Instruments; Recognition and Measurement incurred loss model. IFRS 9, recognizes impairment allowances on either a 12-month or lifetime ECL basis, dependent on whether there was a significant increase in credit risk (SICR) since initial recognition (being either asset origination date or ‘base date’, whichever is most recent). The measurement of ECL reflects both a probability-weighted outcome and the time value of money, using the best available forward-looking information. There should be relevant policies that would require to be read in conjunction with relevant manuals and Accounting Standards. It’s equally important to detail the monitoring objectives for consistent management of wholesale impairment and the provisions necessary to meet regulatory requirements. It is imperative that when dealing with Distressed Debt/Assets, that attention is given to the requirements detailed under Conduct Risk and that client confidentiality is maintained. Mostly, business failure is a result of financial and/or economic distress. A firm in financial distress experiences a shortfall in cash flow needed to meet its debt obligations. Its business model does not necessarily have fundamental problems and its products are often attractive. In contrast, firms in economic distress have unsustainable business models and will not be viable without asset restructuring. In practice, many distressed firms suffer from a combination of the two. Many factors contribute to the high number of business failures. Some common failures include and are not limited to the below. Poor operating performance and high financial leverage. A firm's poor operating performance may result from many factors, such as poorly executed acquisitions, competition, overcapacity, new channels of competition within an industry (e.g., retail), commodity price shocks (e.g., energy), and cyclical industries (e.g., airlines). High financial leverage exacerbates the effect of poor operating performance on the likelihood of corporate failure. Lack of technological innovation. Technological innovation creates negative shocks to businesses that do not innovate. The arrival of a new technology often threatens the survival of firms that possess related, yet less competitive, technologies. There needs for a business to strategically position itself in the market through digital transformation in its processes, product development and operations Liquidity and funding shock. In periods of weak credit supply, some businesses are unable to roll over maturing debt because of illiquidity in credit markets. Relatively high new business formation rates in certain periods. New business formation is usually based on optimism about the future. But new businesses fail with far greater frequency than do more seasoned entities, and the failure rate can be expected to increase in the years immediately following a surge in new business activity. Deregulation of key industries. Deregulation removes the protective cover of a regulated industry (e.g., airlines, financial services, HealthCare, energy) and fosters larger numbers of entering and exiting firms. Competition is far greater in a deregulated environment. Unexpected liabilities. Businesses may fail because off-balance sheet contingent liabilities suddenly become material on-balance sheet liabilities.
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Pereira, Adalmiro Andrade, and Ângela Vaz. "Corporate Governance and banking performance in Portugal: The impact of variable - RAC_IMP (Impairments)." Journal of Information Systems Engineering and Management 7, no. 4 (October 18, 2022): 18121. http://dx.doi.org/10.55267/iadt.07.12548.
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Effective corporate governance practices are essential to achieving and maintaining societal trust in the banking system, which is essential for the smooth functioning of the financial sector and the economy.<br /> Much of the literature associated with Corporate Governance considers, in addition to concepts, the implementation cycle and the corresponding models. Corporate Governance cycles are related to corporate bankruptcies and the negligence of the board of directors, which are more common when a long period of economic expansion is followed by a period of crisis, which demonstrates failures in Corporate Governance. The main objective of the research is to analyze the impact of variables associated with governance, structure, and economy on the economic and financial performance of banking institutions in Portugal. In the model, a risk measure is used to determine whether Corporate Governance has an impact on a bank's risk-taking, the Impairment Ratio for Credit to Customers in relation to Assets.<br /> After performing the significance test for each of the variables (student t test), it is possible to determine that the following variables will be excluded: Bank Size (LNAT), Customer Deposits (LNDEP), Interest Rate (TXJUR). We accept the following variables Corporate Governance (CG); Financial Autonomy (CPAT); Return on Average Assets (ROAA); GDP Rate Variation (TXPIB) and Inflation Rate (TXINF).
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Hasan, Mohammed Faez, Hashim Sahib Hadi, and Noor Alhuda Hayder Jasim. "The Validity of Altman’s Models in Predicting Iraqi Private-Banks Soundness." Journal of Management and Accounting Studies 9, no. 01 (March 8, 2021): 79–89. http://dx.doi.org/10.24200/jmas.vol9iss01pp79-89.
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Nowadays, banks play a significant role in the economy. Thus, its fail extends beyond stakeholders, companies and organization. But may reach to threaten the entire economy. Such an institution better to depend on an early warning system to prevent the costly fail of it. Financial distress prediction (FDP) refers to a method of utilizing statistical models to predict business failure or difficulties that may face banks. A famous earlier model suggested by Altman in which use by the current study to assess the soundness of Iraqi private banks and to find out if such a model could be appropriate to predict financial failure. The model applied to two groups of Iraqi private banks. The first group involves already failure banks; in contrast, the second group comprises Non-failure banks. The study finds that the Altman model unable to predict financial distress in Iraqi private bank with worthwhile accuracy. Therefore, it is inapplicable as applied in other business environments.
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Hastenteufel, Jessica, and Sabrina Kiszka. "What do German bank customers want? The importance of customer expectations and the failure of the integral customer advisory service." Managerial Economics 21, no. 1 (October 16, 2020): 7. http://dx.doi.org/10.7494/manage.2020.21.1.7.
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Banks and financial service providers are currently facing numerous challenges due to the ongoing cheap money policy of the European Central Bank, an increasingly regulated market environment and a rapidly progressive digitization. The ongoing decline in interest income and the stagnating of a banks commission income are currently leading to a reduction of a banks total income. In addition, there is digitization that brings numerous new competitors into the market and changes the core business models of banks. As a result, the general conditions in the financial sector change fundamentally and continue to do so in the near future. Moreover, the behaviour and expectations of bank customers have changed in a way that factors such as “convenience”, “flexibility” and “speed” have become increasingly important for them. For this reason, we will start with a theoretical overview of the status quo and the current challenges banks are facing and then present the results of our customer survey to highlight the current expectations of bank customers. Based on this, we formulate recommendations for banks on how to meet their customers’ expectations.
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Sanni, Mubaraq, Abdulai Agbaje Salami, and Ahmad Bukola Uthman. "Determinants of Bank Performance in Nigeria: Do they Behave Differently with Risk-Adjusted Returns?" Studia Universitatis „Vasile Goldis” Arad – Economics Series 30, no. 3 (September 1, 2020): 1–34. http://dx.doi.org/10.2478/sues-2020-0015.
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AbstractThe failure of banks in Nigeria has hitherto become a recurring phenomenon. Worried by the syndrome, this paper examines the determinants of bank performance in Nigeria taking into cognizance the duality of financial measures of bank performance. From an analysis of 115 bank-year observations of a sample of 17 Nigerian deposit money banks and macroeconomic data for the period 2012-2018 using Arellano-Bover one-step system GMM estimation approach, differences in the explanatory potential of these factors between the models with risk-neutral and risk-adjusted measures of performance as dependent variables are empirically established. This suggests that there is a higher probability of investors, depositors and other stakeholders being indecisive when analyzing the performance of banks. However, relying on the assumptions of risk-return hypothesis and level of risk embedded in banks’ operations could warrant them opting for determinants of risk-adjusted returns in their decision making. This study is exceptional in the bank performance literature for its long list of measures and drivers of bank performance.
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Dash, Mihir. "A Model for Bank Performance Measurement Integrating Multivariate Factor Structure with Multi-Criteria PROMETHEE Methodology." Asian Journal of Finance & Accounting 9, no. 1 (May 11, 2017): 310. http://dx.doi.org/10.5296/ajfa.v9i1.11073.
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The global financial crisis and the subsequent Euro-zone crises have resulted in widespread failure of banking systems worldwide. The Indian banking system, which was initially hailed to be unaffected by the crises, was affected indirectly, mainly on account of growing trade and financial integration with the global economy. Although Indian banks were not pushed to the point of insolvency, bank performance benchmarking and evaluation have become important in the dynamic banking environment in India in order to ensure sustained profitability and avoid undue risks.The CAMELS model is one of the most widely-used frameworks for bank performance evaluation (Sahajwala and van der Bergh, 2000). The CAMELS methodology provides a broader view of bank performance than single ratios such as return on equity, particularly as it takes account of both profitability and risk factors in representing bank performance. Several studies have proposed multi-criteria decision models for bank performance measurement (Doumpos and Zopounidis, 2011).The objective of the present study is to integrate multivariate and multi-criteria decision models in bank performance measurement. The study uses the factor structure of the CAMELS model to derive weights for the different criteria in the PROMETHEE methodology. The resulting PROMETHEE scores are used to rank banks under different dimensions, and to compare the performance of public sector and private sector banks in India.
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Miklaszewska, Ewa, Krzysztof Kil, and Małgorzata Pawłowska. "Is reputational risk important for bank performance? Evidence from CEE-11 countries." Argumenta Oeconomica 2020, no. 2 (2020): 31–51. http://dx.doi.org/10.15611/aoe.2020.2.02.
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The 2007-2009 revealed the weaknesses of the growth foundation and failure of risk management systems in large global banks. Consequently, there has been renewed interest in the creation of stable and functional risk culture. Protecting a financial institution’s reputation is among the most significant challenges facing financial firms. Thus the aim of this paper is to analyze why reputational risk is important for banks, and to trace its sources and consequences. In the empirical part, the paper proposes a new method to measure reputational risk: Stakeholder Reputation Score (SRS). The panel regression models are used to examine the impact of the SRS indicator on bank performance, for listed banks in the CEE-11. The estimation results indicate that the efforts to enhance bank reputation may not have a positive effect on bank performance, which may explain why many banks deal with reputational risk mainly in the context of minimizing loss after a scandal, rather than treating it as a strategic, long-term goal
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Zubarev, Andrey, and Olga Bekirova. "Analysis of Bank Default Factors in 2013–2019." Economic Policy 15, no. 3 (June 2020): 106–33. http://dx.doi.org/10.18288/1994-5124-2020-3-106-133.
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This paper studies bank defaults in the Russian Federation in recent years. Firstly, the Central Bank of Russia tightened prudential regulation in 2013. Secondly, a decrease in oil prices and economic sanctions resulted in a crisis in 2014–2015 with a huge depreciation of the national currency, which influenced the Russian banking sector substantially. Almost half of banks in Russia have been closed in the last 6 years. Through binary logistic models of bank defaults based on data for Q3 2013 through Q1 2019, the paper reveals the key factors which had an influence on the sustainability of Russian banks. The main result is that involvement in classical banking exposes banks to default risks. Excessive reserves appeared to be an important indicator of default as well. A special measure of liquidity creation was constructed. We found that high levels of liquidity creation increased the probability of bank failure. It is also worth mentioning that excessive liquidity creation put higher risks on a given bank in the crisis period. We can conclude that regulatory authorities should pay attention to high liquidity creators, especially in the group of small and medium-sized banks. We also found some evidence of an improvement in prudential regulation by the Bank of Russia. Separate models were estimated for the sample of 150 larger banks, which is more homogeneous and is of primary interest for the regulator. A number of variables, including the level of liquidity creation, turned out to be insignificant; however, high reserve values for possible losses still increase the probability of default to a large extent. Logistic panel regressions were also considered as an alternative specification.
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Looney, Stephen W., James W. Wansley, and William R. Lane. "An examination of misclassifications with bank failure prediction models." Journal of Economics and Business 41, no. 4 (November 1989): 327–36. http://dx.doi.org/10.1016/0148-6195(89)90029-5.
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Zahair Ahmed Ali Ahmed and Ameen Abdulgaleel Saeed Saeed. "The Role of Financial Analysis in Mitigating Banking Default " Study on Yemeni Islamic Banks"." Journal of Social Studies 26, no. 4 (March 2, 2021): 29–55. http://dx.doi.org/10.20428/jss.v26i4.1741.
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The study problem was that Yemeni Islamic banks did not rely on the results and outputs of financial analysis to predict failure before it occurs. Accordingly, the study aimed to find out to what extent Yemeni banks depend on financial analysis as a tool for predicting the default, and the extent of its ability to mitigate bank default at these banks. It also aimed to identify whether these banks use all financial analysis tools for making credit decisions. The researchers used the descriptive analytical method and distributed a questionnaire to the sample (50) of the credit employees at Yemeni Islamic banks. The data were analyzed using SPSS. The findings revealed that the Yemeni Islamic banks depend on financial analysis as a basis for disclosure of default, which has a main role in mitigating banking default. The banks usually use multi financial analysis tools when evaluating the credit status of clients; they do not use predicting financial default models as a main tool to predict failure before it occurs; and they do not have early warning systems to predict any possibility of customers’ default.
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Dr. Zahair Ahmed Ali Ahmed and Ameen Abdulgaleel Saeed Saeed. "The Role of Financial Analysis in Mitigating Banking Default " Study on Yemeni Islamic Banks"." مجلة الدراسات الاجتماعية 26, no. 4 (March 2, 2021): 29–55. http://dx.doi.org/10.20428/jss.26.4.2.
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The study problem was that Yemeni Islamic banks did not rely on the results and outputs of financial analysis to predict failure before it occurs. Accordingly, the study aimed to find out to what extent Yemeni banks depend on financial analysis as a tool for predicting the default, and the extent of its ability to mitigate bank default at these banks. It also aimed to identify whether these banks use all financial analysis tools for making credit decisions. The researchers used the descriptive analytical method and distributed a questionnaire to the sample (50) of the credit employees at Yemeni Islamic banks. The data were analyzed using SPSS. The findings revealed that the Yemeni Islamic banks depend on financial analysis as a basis for disclosure of default, which has a main role in mitigating banking default. The banks usually use multi financial analysis tools when evaluating the credit status of clients; they do not use predicting financial default models as a main tool to predict failure before it occurs; and they do not have early warning systems to predict any possibility of customers’ default.
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Kiyak, Deimena, and Laura Paulionienė. "Activity evaluation of Lithuania credit unions." Buhalterinės apskaitos teorija ir praktika, no. 15A (July 9, 2014): 118–32. http://dx.doi.org/10.15388/batp.2014.15a.10.
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The bank of Lithuania in its supervisory functions evaluates how credit unions carries out the prudential norms (capital adequacy, liquidity, maximum open position in foreign currency, the maximum loan amount per borrower, large loan requirements), examine the overall financial condition of the credit union, is watching whether the credit union's activities comply with laws, regulations, statutes and internal union document requirements. However, the steady growth of the credit union's capital, loan number and size of credit unions operating regulations limiting still does not measure the credit union's business risk profile and operational efficiency, protect against failures, errors or loss. The analysis of scientific literature also shows that there is no unanimous and undisputed methodology for enterprises performance evaluation. Moreover, there is no company's evaluation models adapted to specifically interested persons group and one to of the financial institutions, i.e. credit unions. Therefore, performance evaluation of credit union and prediction research of their financial parameters in this area is valuable, relevant and new, in both theoretical and practical terms. The aim - to perform Lithuanian credit unions comparative performance evaluation. The scientific literature suggests that credit unions' assessment can be carried out both traditional (dynamics, structure, relative indicators, business continuity) and the innovative modern methods. It should be emphasized that the evaluation of the activities is individual for each business enterprise, because it depends on many factors, such as: object of assessment, the assessment purpose; the assessment period; assessment of the required information and the availability of data, the evaluation period, the users of evaluation results and other. It should be noted that the main users of credit unions performance assessment results are the owners (partners), creditors and future owners and lenders and borrowers. According to the Securities stock exchange NASDAQ OMX Vilnius (2010) proposed financial ratios calculation methodology were calculated and compared 76 credit unions operating in Lithuania profitability, efficiency, and financial leverage ratios. By using linear and exponential trend methodology analysed the mean trends of Lithuanian credit unions key performance indicators. It should be noted that setup of complex financial indicators, tailored specifically to the financial institution with the opportunity to compare it with other relevant authorities of the credit unions' assessment and performance expected.
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Gregory, Katina, and Gerhard Hambusch. "Factors driving risk in the US banking industry." International Journal of Managerial Finance 11, no. 3 (June 1, 2015): 388–410. http://dx.doi.org/10.1108/ijmf-02-2015-0017.
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Purpose – The purpose of this paper is to investigate how several key risk factors, including capital-to-asset ratio (CAR), franchise value and lobbying, affect various measures of risk in the US banking industry before, during and after the financial crisis. The empirical analysis covers the period 2004-2013. Design/methodology/approach – Using recent bank holding company data, this research explores several factors driving risk in the US banking industry. The authors follow recent regulatory models and use a cross-sectional approach that can be employed as a complement to established regulatory bank failure and early warning models to detect and prevent bank crisis and to guide policy intervention over time. Findings – The findings provide evidence that the CAR has a negative relationship with bank risk. The authors also show that banks’ franchise values exhibit a positive relationship with bank risk in non-crisis years and a negative relationship during the crisis. The authors further find evidence suggesting that lobbying decreases bank risk in non-crisis years and increases risk during the crisis. Originality/value – Previous studies have controversially discussed the effect of factors driving bank risk. The authors contribute to the discussion and provide the first empirical study to analyze the effects of lobbying activities by bank holding companies on bank risk before, during and after the financial crisis.
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Huang, Derek-Teshun, Betty Chang, and Zhien-Chia Liu. "Bank failure prediction models: for the developing and developed countries." Quality & Quantity 46, no. 2 (November 15, 2010): 553–58. http://dx.doi.org/10.1007/s11135-010-9386-9.
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Mvula Chijoriga, Marcellina. "Application of multiple discriminant analysis (MDA) as a credit scoring and risk assessment model." International Journal of Emerging Markets 6, no. 2 (April 12, 2011): 132–47. http://dx.doi.org/10.1108/17468801111119498.
Full textAbstract:
PurposeThe purpose of this research is to investigate whether inclusion of risk assessment variables in the multiple discriminant analysis (MDA) model improved the banks ability in making correct customer classification, predict firm's performance and credit risk assessment.Design/methodology/approachThe paper reviews literature on the application of financial distress and credit scoring methods, and the use of risk assessment variables in classification models. The study used a sample of 56 performing and non‐performing assets (NPA) of a privatized commercial bank in Tanzania. Financial ratios were used as independent variables for building the MDA model with a variation of five MDA models. Different statistical tests for normality, equality of covariance, goodness of fit and multi‐colinearity were performed. Using the estimation and validation samples, test results showed that the MDA base model had a higher level of predictability hence classifying correctly the performing and NPA with a correctness of 92.9 and 96.4 percent, respectively. Lagging the classification two years, the results showed that the model could predict correctly two years in advance. When MDA was used as a risk assessment model, it showed improved correct customer classification and credit risk assessment.FindingsThe findings confirmed financial ratios as good classification and predictor variables of firm's performance. If the bank had used the MDA for classifying and evaluating its customers, the probability of failure could have been known two years before actual failure, and the misclassification costs could have been calculated objectively. In this way, the bank could have reduced its non‐performing loans and its credit risk exposure.Research limitations/implicationsThe valiadation sample used in the study was smaller compared to the estimation sample. MDA works better as a credit scoring method in the banking environment two years before and after failure. The study was done on the current financial crisis of 2009.Practical implicationsUse of MDA helps banks to determine objectively the misclassification costs and its expected misclassification errors plus determining the provisions for bad debts. Banks could have reduced the non‐performing loans and their credit risks exposure if they had used the MDA method in the loan‐evaluation and classification process. The study has proved that quantitative credit scoring models improve management decision making as compared to subjective assessment methods. For improved credit and risk assessment, a combination of both qualitative and quantitave methods should be considered.Originality/valueThe findings have shown that using the MDA, commercial banks could have improved their objective decision making by correctly classifying the credit worthiness of a customer, predicting firm's future performance as well as assessing their credit risk. It has also shown that other than financial variables, inclusion of stability measures improves management decision making and objective provisioning of bad debts. The recent financial crisis emphasizes the need for developing objective credit scoring methods and instituting prudent risk assessment culture to limit the extent and potential of failure.