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1 – 10 of over 46000Jiajia Jin, Ziwen Yu and Chuanmin Mi
This paper attempts to analysis the credit risk at the angle of industrial and macroeconomic factor using grey incidence analysis method.
Abstract
Purpose
This paper attempts to analysis the credit risk at the angle of industrial and macroeconomic factor using grey incidence analysis method.
Design/methodology/approach
Credit asset quality problem is one of the obstacles limiting the further development of commercial banks; the research on credit risk becomes an important part of the implementation of a commercial bank's risk management. Different industries may have different effects on the credit risk of commercial bank. This paper proposes finding out the different incidences between industries and credit risk, as well as macroeconomics. Incidence identification method is established to investigate whether the industry and macroeconomic factor could affect an impaired loan ratio of a bank using the grey incidence analysis method.
Findings
The results indicate that the impaired loan ratio differs with diverse industry's influence and the macroeconomics also affect it. From the angle of the industry, the result can also determine the risk deviation scope in the grey risk control process which offers new content and ideas within the grey risk control.
Practical implications
Under the guidance of the principle of “differential treatment, differential control”, this research will help to strengthen the implementation of differentiated credit policy, focus on guiding and promoting the optimization of credit structure, so as to maintain a reasonable size of credit facilities and build a steady currency credit system.
Originality/value
The paper succeeds in finding the top five influent industries compared with others by using one of the newest developed theories: grey systems theory.
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Omar Masood, Hasan Al Suwaidi and Priya Darshini Pun Thapa
The purpose of this paper is to identify any differences between the Islamic and non‐Islamic banks in the UAE on credit risk management.
Abstract
Purpose
The purpose of this paper is to identify any differences between the Islamic and non‐Islamic banks in the UAE on credit risk management.
Design/methodology/approach
The study uses survey based methodology for data collection. The sample for the study consists of six commercial banks from UAE with three non‐Islamic and three Islamic banks and with 148 credit risk managers as respondents for the survey. The study aims to investigate factors which distinguish between Islamic and non‐Islamic banks in UAE. This is achieved by fitting a binary logistic regression model.
Findings
The study shows that the managers in Islamic banks now do not rely only on personal experiences and simple credit risk analysis. The Islamic banks appear also to be developing and practising the newer and robust techniques, in addition to traditional methods, to manage their credit risk in UAE compared to non‐Islamic banks, which indicates a possibility of further improvement in their credit risk management.
Originality/value
The paper uses questionnaire‐based methodology, which has not been used previously in the UAE financial sector, as well as in studies of credit risk management. Therefore, this research could become the cornerstone of further academic research in other developing countries using this methodology.
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The authors provide the reader with a simple introduction to credit derivatives. The article includes a broad overview of the market, estimates of the global market size, and a…
Abstract
The authors provide the reader with a simple introduction to credit derivatives. The article includes a broad overview of the market, estimates of the global market size, and a description of the most widely used products.
Proposes to investigate the current practices of credit risk management by the largest US‐based financial institutions. Owing to the increasing variety in the types of…
Abstract
Purpose
Proposes to investigate the current practices of credit risk management by the largest US‐based financial institutions. Owing to the increasing variety in the types of counterparties and the ever‐expanding variety in the forms of obligations, credit risk management has jumped to the forefront of risk management activities carried out by firms in the financial services industry. This study is designed to shed light on the current practices of these firms.
Design/methodology/approach
A short questionnaire, containing seven questions, was mailed to each of the top 100 banking firms headquartered in the USA.
Findings
It was found that identifying counterparty default risk is the single most‐important purpose served by the credit risk models utilized. Close to half of the responding institutions utilize models that are also capable of dealing with counterparty migration risk. Surprisingly, only a minority of banks currently utilize either a proprietary or a vendor‐marketed model for the management of their credit risk. Interestingly, those that utilize their own in‐house model also utilize a vendor‐marketed model. Not surprisingly, such models are more widely used for the management of non‐traded credit loan portfolios than they are for the management of traded bonds.
Originality/value
The results help one to understand the current practices of these firms. As such, they enable us to make inferences about the perceived importance of the risks. The paper is of particular value to the treasurers intending to better understand the current trends in credit risk management, and to academics intending to carry out research in the field.
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João Jungo, Mara Madaleno and Anabela Botelho
This study aims to examine the role of financial inclusion and institutional factors such as corruption and the rule of law (RL) on the credit risk and stability of banks.
Abstract
Purpose
This study aims to examine the role of financial inclusion and institutional factors such as corruption and the rule of law (RL) on the credit risk and stability of banks.
Design/methodology/approach
The study considers a sample of 61 developing countries and uses very robust estimation techniques that allow controlling for endogeneity, heteroskedasticity and serial correlation, such as instrumental variables method in two-stage least squares (IV-2SLS), instrumental variables generalized method of moments (IV-GMM), as well as system of generalized methods of moments in two stages (Sys-2GMM).
Findings
The results confirm that financial inclusion and strengthening the RL can significantly contribute to reducing credit risk and improving the financial stability of banks; in contrast, the authors find that weak control of corruption aggravates credit risk. In addition, they found that greater competitiveness in the banking sector increases credit risk.
Social implications
This study supports the need to promote financial inclusion and strengthen institutional factors to improve the stability of the banking sector, as well as promote general well-being in the economy.
Originality/value
This study contributes to the scarce literature by simultaneously using institutional factors such as corruption and the RL and macroeconomic variables such as economic growth and inflation in the relationship between financial inclusion and the banking sector, as well as considering competitiveness as an explanatory factor for banks’ credit risk and stability.
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With the help of financial engineering – and equipped with the modern technique of risk management – securitisation was supposed to identify and evaluate risks and parcel them out…
Abstract
With the help of financial engineering – and equipped with the modern technique of risk management – securitisation was supposed to identify and evaluate risks and parcel them out to informed parties who could bear them. In hindsight, we can see that this somewhat simplistic thesis – espoused by market participants as well as the academic promoters of modern techniques of risk management – seemed to promise a great deal more than it could ultimately deliver. At this juncture, however, the danger of regulatory over-reaction – which might be throwing the baby (financial innovation) out with the bath-water (overlooking/under-pricing of risk) – is very real and (in my view) calls for policy measures of this sort should be resisted firmly not only by market participants but also by regulators. This is not to say that regulation should be seen as immune from responsibility in the unfolding of the current credit crisis (quite the opposite would more likely be closer to the truth). As we shall see below (Section “Financial Crisis and Credit Ratings Debacle in SF”), the best risk-management practices – and related tools available before the crisis – provided enough ammunition to caution against the uncertainty surrounding risk assessment for some categories of SF products. However, the increasing complexity embedded in an increasing number of deals did provide genuine new challenges even to best risk-management practices.
Vikas Sharma, Munish Gupta and Kshitiz Jangir
Introduction: Commercial banks play a vital role in the global economy, facilitating economic growth and providing essential financial services. As key intermediaries between…
Abstract
Introduction: Commercial banks play a vital role in the global economy, facilitating economic growth and providing essential financial services. As key intermediaries between savers and borrowers, these institutions operate in a dynamic and complex environment characterised by various risk factors that can significantly impact their profitability and overall stability. Understanding the interconnected relationships between credit risk, interest rate risk, liquidity risk, and profitability is crucial for effective risk management strategies and the development of appropriate regulatory frameworks.
Purpose: Commercial banks play a critical role in the global economy by facilitating economic growth and providing financial services. This study examines the interconnected relationships between credit risk, interest rate risk, liquidity risk, and profitability in commercial banking.
Methodology: The sample consists of licenced scheduled commercial banks on the Bombay Stock Exchange (BSE) from 2015 to 2022. Using the Smart PLS-SEM 3.0 path analysis technique, the study evaluates the combined influence of these risk factors on profitability and provides evidence-based recommendations for risk management strategies.
Findings: The findings can assist banks in enhancing their risk management practices, and regulators in developing appropriate regulatory frameworks. By understanding the key risk factors and their impact on profitability, banks and regulators can mitigate risks, enhance transparency, and promote stability within the banking sector.
Significance/value: The value of this study lies in its focus on the interconnectedness of risk factors, profitability, and the potential implications for decision-making, risk management strategies, regulatory frameworks, and the overall stability of the commercial banking sector.
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