Bank Risks

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Bank Risks, Regulatory Interventions and Deconstructing the Focus on Credit Risk

Bank Risks, Regulatory Interventions and Deconstructing the Focus on Credit Risk

The banking system act as the pivot on which other elements that enhance the growth of an economy revolves (Diallo, 2015). Because of the significant roles that banks play in supporting economic growth, the attention of stakeholders has been drawn to the need to continuously assess the risks that could impact the smooth operations of banks especially in discharging their roles to the economy. The risks that banks face have been exacerbated by the globalization and liberalization of the financial markets (Schmukler, 2004). Globalization has led to unprecedented growth in the financial markets and modern banking which has reduced the usually visible distinction between global and domestic markets. The increasing cross-border economic exchanges and the liberalization of the financial markets have increased the speed, size, and scope of capital flow across the world with significant risk implications for the banking system saddled with the onerous task of facilitating international transactions. The nature of banking services has changed from everyday banking such as opening savings and current accounts to becoming involved in complex investments and transactions.
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The Greatest Carry Trade Ever? Understanding Eurozone Bank Risks

The Greatest Carry Trade Ever? Understanding Eurozone Bank Risks

that banks are “short” long-term German bonds. This is consistent with a “carry trade” behavior of European banks: they appear to have invested in long-term government bonds financed in the short-term wholesale market to maximize the carry between both legs of the trade. The negative factor loading on German bunds reflects a “flight to quality” of investors who purchase long-term safe (German) government bonds, at the same time reducing the supply of short-term capital. If long-term bond prices appreciate whenever short-term funding dries up and banks are exposed to short-term funding, then it appears as if banks were short long-term bonds. The positive and significant coefficient of Stock Index suggests that macroeconomic fundamentals are important in explaining bank stock returns. We replace Greek government bonds with Italian, Spanish, Portuguese and Irish bonds in models (2) to (5) and include all GIPSI bond returns together in model (6). All results extend to these models as well. Model (6) in particular suggests that carry trade investments were mostly undertaken in Greek and Italian long-term government bonds. The factor loadings are both economically and statistically significant and the R² of the models show that a substantial proportion of the variation in stock returns is explained by these covariates. In Panel B of Table III, we report a series of tests that supports the notion of “carry trade” behavior of European banks.
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Bank risks, risk preferences and lending

Bank risks, risk preferences and lending

As it was already discussed, increase in credit risk of the current bank cus- tomers may result in bank willingness to adjust bank asset structure and to limit any new activities that might result in additional risk taking. It should be distin- guished from the e¤ect of the balance sheet channel. The balance sheet channel works through changes in credit quality of the new lending opportunities. After a monetary policy shock, that is followed by the real contraction, the value of cash ‡ows from business project decreases. It is emphasised especially by the litera- ture on …nancial accelerator e¤ect (e.g. Bernanke et al., 1999). The mechanism described above is independent of the quality and pro…tability of new lending op- portunities. The issue relevant there is the change in risk in contracts that were started before the monetary policy tightening. Both e¤ects have an impact on new bank lending, though. Therefore, it is important to distinguish between e¤ects of traditional interest rate (money) channel, borrowers’ balance sheet channel and the impact of risks already present in the bank balance sheet.
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The Effects of Mergers and Acquisitions on Bank Risks

The Effects of Mergers and Acquisitions on Bank Risks

merger. This finding is consistent with the notion in literature that large bank mergers pose organisational and procedural hurdles in the post-merger integration process that may prevent merger benefits from materialising (Knapp et al., 2005) or that as banks grow via M&A; they also take on more risk (Hughes et al., 1999). Moreover, Beck et al. (2006) warned that an increasing bank size due to M&A activities might result in lower transparency as consolidation allows banks to expand around various geographic markets and business lines, employing sophisticated financial means to established complex corporations. It is also consistent with banks facing incentives, to use mergers to become ‘too big to fail’ in an attempt to extract benefits from regulators. One can argue that the size of the deal could have a reducing effect on the default risk of bidders because it could enable larger banks to diversify their asset and credit portfolio more efficiently. Additionally, larger deals could facilitate collusion among the remaining competitors, thus increasing profits and ultimately reducing the acquirers' risk. However, the results show that this is not the case. This finding is also in line with Vallascas and Hagendorff (2011) who find the negative impact of deal size on the risk effects of M&A. Overall, the result complies with the univariate test above, in which deal size poses a significant influence on the risk effects of bank mergers.
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Substantiation of tools of management of bank risks in conditions of financial crisis

Substantiation of tools of management of bank risks in conditions of financial crisis

Казначейство – це центр відповідальності банку, основними напрямками діяльності якого є оптимізація та регулювання грошових потоків банку, купівля та продаж валюти для кліє[r]

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The determinants of bank risks: evidence from the recent financial crisis

The determinants of bank risks: evidence from the recent financial crisis

Brunnermeier (2009) suggests that the ‘shadow’ banking system and the process of securitisation both contributed to the severity of the recent crisis. In the ‘shadow’ banking system, banks are incentivised to issue and underwrite excessively complex and opaque structured finance securities using off-balance sheet conduits as a means of transferring risk, raising funds, and regulatory arbitrage (Acharya et al., 2013). The off-balance sheet Structured Investment Vehicles (SIVs) carry the same maturity mismatch feature as in the traditional banking model and usually rely on the issuance of short-term ABCP to finance their purchases of longer term assets, such as ABS and CDOs (Eichengreen, 2008, and Frank et al., 2008). As banks are liable for the credit lines granted to the off-balance sheet conduits, their exposure to funding illiquidity risk was substantial when investors were unwilling to roll over their short-term money market instruments during the crisis. 7 The vulnerability of banks to the funding illiquidity shocks from the structured finance and asset-backed money markets highlights the importance of effective and prudent liquidity risk man- agement. As defined by Cornett et al. (2011), the four main drivers in modern liquidity management are core deposits, liquid assets, equity capital and exposure to loan commitments. They show that it is the core deposits rather than total deposits that stabilise the supply of liquidity and that core deposits and loan origination increase when liquidity is low. In addition, bank capital plays an important role in liquidity management as it serves as a buffer to protect depositors from liquidity
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Bank risks, risk preferences and lending

Bank risks, risk preferences and lending

The problem in hand is closely related to the analysis of the monetary transmis- sion mechanism and might be de…ned as an analysis of the bank lending channel in the …nancial stability context. After a monetary tightening the market price of risk and loan loss distribution change. The credit spreads for the loans already granted might then be not high enough to cover expected losses and the default probability of a bank increases. If the bank intends to maintain the previous level of the probability of default, either additional capital or a change in the asset struc- ture is needed. As raising new capital is usually more costly during an economic downturn, the latter solution might be the only available one for the bank in the short run. In this respect the bank reaction is a¤ected by the present balance sheet structure (being a result of previous decisions) and re‡ects, inter alia, a bank’s risk taking strategy.
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The Role of Joint Audit in Reducing Banking Risks: An Applied Study in the National Islamic Bank

The Role of Joint Audit in Reducing Banking Risks: An Applied Study in the National Islamic Bank

The research aims to develop a proposed model to assess the compliance of auditors with the controls of the joint audit work to help reduce bank risks by studying the following problem "The weakness of the audit programs approved by the auditors' offices regarding the audit of the disclosure of the banking risks contained in the financial statements and the annual report of the management, which adversely affected the necessary professional attention and increase the responsibility of the external auditor as a result.
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The Role of Joint Audit in Reducing Banking Risks: An Applied Study in the National Islamic Bank

The Role of Joint Audit in Reducing Banking Risks: An Applied Study in the National Islamic Bank

The research aims to develop a proposed model to assess the compliance of auditors with the controls of the joint audit work to help reduce bank risks by studying the following problem "The weakness of the audit programs approved by the auditors' offices regarding the audit of the disclosure of the banking risks contained in the financial statements and the annual report of the management, which adversely affected the necessary professional attention and increase the responsibility of the external auditor as a result.
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Credit Card Related Merchant Activities

Credit Card Related Merchant Activities

38 Review reports that show agent bank merchant volume by agent bank. Review agent banks that have significant merchant volume in comparison to the size of their banks. (Small banks with large merchant volume may have difficulty fulfilling their responsibilities regarding chargebacks.) 39 Review a sample of agent bank files, if necessary. Evaluate information and check for compliance with policy (including periodic financial information).

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RESULT PRESENTATION TO INVESTORS & ANALYSTS

RESULT PRESENTATION TO INVESTORS & ANALYSTS

• These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the Bank and are difficult to predict, that may cause actual results to differ materially from any future results or developments expressed or implied from the forward-looking statements. Such risks and uncertainties include, but are not limited to, regulatory developments, competitive conditions, technological developments and general economic conditions. The Bank assumes no responsibility to update any of the forward looking statements contained in this presentation.
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Settlement of cross border transactions through Central Bank Digital Currency (CBDC) : analysis from a risk management perspective

Settlement of cross border transactions through Central Bank Digital Currency (CBDC) : analysis from a risk management perspective

clear that a huge amount of risk is embedded in the concept of cryptocurrencies as they are subject to private issuers, hardly any regulations and prone to sudden value changes, i.e. volatility is high. Also, there are not backed by any tangible asset, which makes them purely speculative. Stablecoins are one-to-one backed to, for instance, fiat currencies or assets and have a stronger risk profile as a result. The risks embedded in commercial bank-issued and central bank-issued digital currencies are comparable, but generally lower due to the moderating effect of central bank issuance. Operational risks largely depend on the entity that issues the digital currency and operates the platform. Public, permissionless digital currencies involve higher operational risks than private, permissioned versions, mainly due to a significant difference in legal risks. Additionally, liquidity risks decrease as the issuing entity has regulatory obligations. Cryptocurrencies are not subject to any regulation, hence the risk that an asset cannot be sold because of a lack of willing investors is high. Since financial institutions are heavily regulated by central banks, liquidity risks tend to be managed adequately. The main advantage of wholesale CBDC introduction would be a stimulus in the op- timisation of liquidity usage due to the unlocking of trapped liquidity on the one hand and increased netting opportunities on the other hand. This is a result of increased availability (round-the-clock) to central bank settlement systems, the elimination of in- termediary correspondent banks and CBDC potentially becoming the centralised and only liquidity pool to settle all financial transactions.
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Successful Implementation of Corporate Governance Mechanisms in Banks

Successful Implementation of Corporate Governance Mechanisms in Banks

The participants believed thatif the banks do not follow the bank polices then it can affect the performance of the banks. For example, not following the bank policy in lending can cause lenders to make risky loans which in turn can affect the shareholders, consumers and the community at large such as the predatory lending in the mortgage industry. The opportunities and constraints in banks differ case by case. Theoretically, strict regulatory environments may promote firm-level governance that is effective in controlling for agency cost so that a complementary relationship exists amidthe governance and the regulation. The presence of regulationscaninfluence the design of internal governance mechanisms and their impact upon the performance of the firms.
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Risks Of Sharia Commercial Bank In Indonesia: Analysis Of Internal And External Factors

Risks Of Sharia Commercial Bank In Indonesia: Analysis Of Internal And External Factors

Provision of financing based on sharia principles according to Law No. 10 of 1998 Article 8 is carried out based on analysis by establishing the precautionary principle so that customers are willing to pay off debts or return financing by the agreement so that the risk of failure or congestion and repayment can be avoided. Nevertheless, the financing provided to customers will not be free from the occurrence of problem financing which can ultimately affect the performance of the Islamic bank. Therefore, in its implementation Islamic banks always apply the precautionary principle (Machmud and Rukmana, 2010).
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Performance And Risk: Empirical Evidence From Rhb Bank

Performance And Risk: Empirical Evidence From Rhb Bank

Manzura and Juanjuan (2009) said that credit risk is the most crucial type of risk for commercial bank. The bank can manage this type of risk by using various type of techniques or ways such as asking for collateral as part of terms to take loan, the borrowers have to have a strong credit standing and guarantees. Brealey and Myers (2003) stated that they are many ways to measure the profitability of the business institutions such as by using the financial ratios return on equity (ROE) and return on assets (ROA). The information needed to calculate the risks of the bank can be taken from their financial statements from their annual reports. Credit risk gives huge impact to the bank’s financial statements where it will determine the amount of loan, the return stated in the annual report.
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Risk management process in banking industry

Risk management process in banking industry

liquid is better for covering the shortage in cash needs. In traditional bank accounts, it is necessary to wait until the end of the maturity in order to receive the corresponding interest income. If the depositors leave their money or their deposits for a more extended period, this increases the risk of withdrawing their savings without interest income. Based on the consideration of needing cash without income, depositors with or without technical knowledge usually opt for shorter periods. Certainly, finance theories indicate that more compounding generates more revenue, because accounts can generate more income on interest. Banks offer higher interest rates for the longer periods to attract depositors to invest over more extended periods. On the other hand, deficit units usually prefer long-term periods to get credits from banks as it provides them with the opportunity to pay back the loan and it is better for them to make the investment and collect the profit in the long-term. According to the concept of maturity transformation, banks transform the short-term deposits into long- term credits and generate profit from the difference between the rates of interest.
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The effects of systematic risks on bank asset quality : evidence from organisation of the petroleum exporting countries (OPEC)

The effects of systematic risks on bank asset quality : evidence from organisation of the petroleum exporting countries (OPEC)

Kambhu, J., Weidman, S., & Krishnan, N. (2007). New directions for understanding systemic risk: a report on a conference cosponsored by the Federal Reserve Bank of New York and the National Academy of Sciences. National Research Council. Washington, D.C.: The National Academic Press. Retrieved from http:// scholar .google.com/scholar?hl=en&btnG=Search&q=intitle:New+Directions+for+Underst anding+Systemic+Risk#4

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UNINSURED DEPOSITOR RIGHTS PROTECTION IN BANK INSOLVENCY  

UNINSURED DEPOSITOR RIGHTS PROTECTION IN BANK INSOLVENCY  

The objective of the article is legal instruments protecting uninsured depositor in bank insolvency. The paper is focused and reviews issues relating to the unprofessional depositor with typology of insolvent Lithuanian bank “Snoras”. According to this view, the paper analyses legal aspects of the bank’s specific obligations to the depositor under Lithuania’s bank insolvency rules and regulations. The purpose is, by means of different methods, to investigate depositor’s rights protection concept covering uninsured bank’s product - deposit certificates. This paper reveals the content of legal norms regulating uninsured depositors in bank insolvency (laws, secondary legislation, especially court decisions of Lithuania), analyzes what problems arise in an attempt to ensure depositor rights and discusses the impact for uninsured depositor ex ante and ex post bank insolvency. The main issue of the paper: what are the legal techniques protecting uninsured depositor rights under bank insolvency frameworks? The issue based on the typology of insolvent bank “Snoras” which actively disseminated deposit certificates to the customers in order to improve the bank's financial stability, without increasing the share capital of the bank, for that reason, bank misinformed the owners of deposit certificates that such a product is treated as insurance object. The paper is written from the Lithuanian law perspective.
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Banking integration and co movements in EU banks’ fragility

Banking integration and co movements in EU banks’ fragility

We decided to use the DD as fragility indicator since it represents a measure of bank risk with some desirable properties. In particular, Gropp et al. (2006 and 2006) show that this indicator encompasses most elements of bank risk (asset returns, volatility - i.e. asset risk - and leverage) and constitutes a measure not affected by the presence of explicit or implicit safety nets. Further, this indicator, being based on stock market information, is inherently forward-looking and available more frequently than traditional balance-sheet indicators (in principle, it can be calculated on a real-time basis). More importantly, the authors show that this measure is more capable than other market indicators of bank fragility (e.g. subordinated bond spread, or stock returns) to predict a material deterioration in bank’s condition (up to 18 months in advance). Hence, the DD may represent a useful indicator to monitor bank fragility that may complement the information provided by other sources (e.g. balance sheets). However the same authors also highlight some limitations of the DD indicator. In particular, the distance to default can be sensitive to trading irregularities which could be particularly high for banks with low trading volumes (typically small banks or banks in a troubled situation). In the context of this paper this could mean biasing our results towards not finding evidence of co-movements in the fragility of EU banks. It follows from the formula that the basic ingredients for the calculation of the DD are
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Assessment of water supply system and water quality of Lighvan village using water safety plan

Assessment of water supply system and water quality of Lighvan village using water safety plan

Although bank filtration imposes fewer expenses on gov- ernments, it provides suitable water for drinking and other uses. However, it should be noted that application of these systems should be done after a thorough study of water pollution level, types of water pollutants, soil properties of the area, soil percolation and system distance from pol- lutant sources.

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