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This paper investigates how well regulator examinations predict bank failures and how best to incorporate examination information into an econometric model of time‐to‐failure. We estimate proportional hazard models with time‐varying covariates and find that examiner ratings help explain the failure hazard. Both the overall rating of a bank's condition and management, i.e., the composite CAMELS rating, and ratings of specific components contain information. In addition, we find that the marginal “effect” of ratings is non‐linear, in that the impact of a rating downgrade on the hazard is larger, the weaker a bank's initial rating.

The economic development of Bangladesh is heavily reliant on the banking industry, yet it faces numerous hurdles, including liquidity issues, capital shortages, non-performing loans, inefficiencies and so on. Therefore, this study investigated the performance and efficiency of scheduled banks (state-owned, private commercial, foreign commercial and specialized banks) operating in Bangladesh.

The research was conducted using secondary data from annual reports of banks. The CAMELS rating system and Data Envelopment Analysis (DEA) methods were employed to measure the performance and efficiency of banks, respectively.

In the overall bank rankings, results revealed that foreign commercial Standard Chartered Bank and state-owned Sonali Bank Limited came in first and last position, respectively. Among the four categories of banks, foreign commercial banks were the best performer, while state-owned banks were the worst. Only two banks, i.e. Citibank NA and HSBC Bank, were scale efficient while the remaining banks were inefficient. In terms of performance and efficiency, state-owned and specialized banks were deemed wanting.

This study proposes recommendations to the policymakers that could lead to more effective tactics for improving the banking industry's performance and efficiency.

As far as the authors are concerned, this study presents empirical evidence on the performance and efficiency of different types of banks and explores comparisons among them, which has never been done to this extent in the country before.

The purpose of this study is to identify the effectiveness of risk management and corporate governance (CG) practices followed in Islamic banks (IBs) of Gulf Cooperation Council (GCC) countries. Hence, they are considered as critical performance indicators for financial institutions and IBs. Though the IBs are growing, there are still challenges associated with their operations because of Shariah noncompliance risks, governance, capital adequacy ratio and other risks.

This study uses a mixed-method approach, gathering qualitative data from senior risk managers of chosen IBs via semi-structured interviews and quantitative data from selected IBs financial reports using capital IQ resources. The information was gathered for a considerable time (2013–2019), and the CAMELS rating system was used to analyze it.

The results showed that GCC IBs manage their business risks well through effective CG except in certain areas like asset quality management and liquidity.

The result of this study can provide support to the banks’ top management, chief executives, regulators and government, in all practices related to risk assessment, management and mitigation.

This study contributes to the existing knowledge in risk management and CG practices. Furthermore, this study is a new attempt in knowing the risk management and CG practices followed in IBs in GCC countries using the mixed-method approach.

Certificates of deposit (CDs) are uninsured deposits that have not been protected by the Japan Deposit Insurance Corporation (DIC) since the beginning of the issuance in May 1979. Thus, CDs should reflect exceedingly well banks’ failure probabilities and the risk perception of market participants among many types of depositors in Japan. Because of this, CDs issued by Japanese banks may enhance the market discipline of banking organizations. This is the first chapter to test the depositor discipline hypothesis using Japanese bank data from the financial year 1998 to the financial year 2003 . The chapter develops reduced-form models that describe how interest rates and the quantity of CDs may be related to banks’ financial measures. Among the Japanese CAMEL ratings, the chapter finds that CD interest rates are sensitive to the capital adequacy ratio (CAR) and that CD quantities are sensitive to ROA. The chapter also insists that CD holders in Japan are sensitive to bank risks and exercise disciplinary power to impose market discipline that compliments regulatory discipline.

This study aims to develop a Sharīʿah-compliance rating mechanism for the Islamic financial services industry (IFSI), with a special focus on banking. The banking sector is taken as the area of focus due to its leadership role in the volume of global Sharīʿah-compliant assets.

The objectives of the Islamic financial system (IFS) are selected as the basis for ratings. A range of performance indicators (leading to achievement of the objectives) is grouped into four broader categories and used in the study to allocate scores with a sum total of 100. Special considerations – including the amount of resources required in performing an activity, suitability of prevailing business conditions, the degree of compulsion/discretion in performing a task and linkage with the essence of the IFS – were taken into account in the allocation of scores.

This study groups multiple performance measures into four categories, including portfolio construction (deposits mechanism, participatory and asset-based modes of financing), access to finance (service to the less-privileged and sector screening), reputation (disclosures and stakeholders’ survey) and Sharīʿah governance (Sharīʿah supervision and controls, charitable operations, human resources, product development and organization). The Portfolio, Audit, Reputation and System (PARS) rating system is then developed.

A Sharīʿah-compliance rating system is helpful in measuring the progress towards goal achievement of the IFS and in gaining stakeholders’ trust. It is also important for Sharīʿah boards and regulators in policy formulation, for management in addressing weaknesses and taking corrective measures and potentially for standard-setting bodies.

This study presents a comprehensive quantitative Sharīʿah-compliance rating mechanism, taking into consideration the objectives of the IFS – equitable distribution of wealth and financial stability, in addition to Sharīʿah-compliance in operations. Development of Sharīʿah-compliance quality ratings for Islamic banking is essential to gain customers’ trust; the suggested methodology is thus a contribution to the literature on Islamic finance.

The purpose of this paper is to analyze the off‐balance sheet (OBS) behavior of a sample of small commercial banks in the USA in 2006. In particular, it aims to study the impact that monitoring intensity has on bank OBS usage.

The paper uses a two‐stage least squares regression methodology and splits the sample by supervisory bank ratings to ascertain the impact that monitoring intensity has on OBS activity.

Certain board characteristics and executive compensation schemes do influence the extent of OBS usage in banks only when the bank is poorly rated. When the bank is strong and monitoring is less extreme, these variables have limited relationship with OBS usage.

Findings are consistent with the idea that monitoring intensity increases when ratings decline and this leads to more risk‐averse behavior on the part of bank managers.

These results lend support to the argument of stronger regulation in the banking industry since monitoring does impact on bank management behavior and decision making.

Because of the current financial crisis, research on OBS usage is extremely relevant and important. Here, the paper looks at small private commercial banks that engage in OBS activity. This phenomenon is not as well studied or understood.

This paper aims to examine the efficiency of Islamic vs conventional banks in Malaysia by unveiling the traditional efficiency concept – black box – with a three-stage network structure of bank operations.

This paper applies data envelopment analysis (DEA) for examining bank efficiency. An adaptive three-step network DEA (NDEA) model is demonstrated for redefining the traditional black box of banking operations. Slack-based variable returns to scale approach is used. Data from all 43 commercial banks in Malaysia are examined over a six-year study period (2010-2015). Inputs and outputs of the model are selected based on CAMELS rating. Undesired output is also considered in time of examining bank efficiency in Malaysia.

The empirical results of this study signify that only a few banks in Malaysia have been performing well in converting deposits and equities into profit as well as minimizing loan loss provisions. Islamic banks in Malaysia have performed better both in production (converting deposits and equities into earning assets) and profitability (converting loans into net income). Conventional banks, however, have over scored in intermediation (converting earning assets into loans).

An adaptive NDEA approach proposed in this paper defines the core banking process instead of traditional approaches in examining bank efficiency based on individual functions (nodes in the network model). This approach has proven to provide better benchmark capacity.

The purpose of this research is to examine the growth rates of commercial banks and credit unions around the financial crisis and recovery. Credit unions are analyzed as a group and by field of membership. Specifically, this research analyzes the growth rates of assets, deposits, and loans.

This research employs univariate tests of differences to examine the median growth rates for commercial banks and credit unions. Unbalanced pool regressions analyze growth rates during the pre-crisis, crisis, and recovery periods, controlling for size, net charge-offs, and unemployment.

Univariate test results that control for size show that banks grow at faster rates than credit unions for most of the pre-crisis years. However, medium sized credit unions grow at faster rates for most of the crisis and recovery years. Results of unbalanced pool regressions suggest that, overall, credit unions grow at slower rates than do banks. However, during the crisis and recovery, credit union growth is significantly greater than that of banks, after controlling for net charge-offs, size, and unemployment. Credit union growth varies by field of membership type.

Although a large volume of research examines commercial bank performance around the financial crisis, only a few papers assess the performance of credit unions. And very few papers compare commercial banks and credit unions. This paper explores how the recent financial crisis influenced the growth of commercial banks and credit unions from 2005 to 2013.

Financial institutions, including banks, have their responsibilities to contribute towards the preservation of the environment. Green banking is an emerging concept that involves eco-friendly initiatives by banks and although Mauritius lacks a comprehensive regulatory framework for green banking, there exists a few green regulations and guidelines. Accordingly, the purpose of this study is to critically analyse the existing legal and regulatory framework on green banking in Mauritius. It is expected that this study will showcase the need for some more robust and proper green banking legal and regulatory framework in Mauritius.

To achieve the research objective, a black-letter analysis is used to analyse the existing regulatory framework in Mauritius. Moreover, a comparative analysis of the current legal frameworks on green banking in countries like Bangladesh, Indonesia, Pakistan and the UK is carried out.

This study recommends the establishment of a guideline or legal framework for green banking, a Sustainable Finance Policy, a legal binding framework for issuance of bonds, adoption of a Task Force on Climate-related Financial Disclosure guideline, compulsory environmental reporting and disclosures and a green standard rating.

To the best of the authors’ knowledge, this research is among the first literature on green banking laws, especially in the context of a developing country being Mauritius, and it is anticipated that the findings are of use not only to academics but also to the wider community in general.

Purpose – This chapter investigates the influence of bank loan underwriting practices on loan losses and identifies potential determinants of lending practices for five categories of loans: business, consumer, commercial real estate, home equity, and construction and land development loans.

Methodology/approach – Using data on the riskiness of lending practices obtained from the U.S. Federal Deposit Insurance Corporation (FDIC) bank examiner surveys from January 1996 to March 2009, I fit a two-step treatment effects model to measure the effects of underwriting practices on loan losses, controlling for the potential endogeneity of lending practices.

Findings – In the selection step, I find that for business loans, the likelihood that bank management will adopt low-risk lending practices increases with bank financial performance and management quality hierarchical complexity and decreases with market competition. Results for the selection of lending practices for consumer loans and three categories of real estate loans are similar to those found for business loans but show weaker statistical relationships to all explanatory variables. In the loss determination step, I find that lower (higher) risk underwriting practices are generally associated with lower (higher) gross loan charge-offs (as percentage of gross loans and leases) for five categories of loans: business, consumer, commercial real estate, home equity, and construction and land development loans.

Originality/value of chapter – This is the first study to model the determinants of loan underwriting practices with the practices being characterized in terms of their risk to the bank. In addition, this is the first study to consider the effects of the riskiness of lending practices on loan losses, controlling for the endogeneity of practices.