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Article
Publication date: 26 October 2012

Jiajia 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.

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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.

Details

Grey Systems: Theory and Application, vol. 2 no. 3
Type: Research Article
ISSN: 2043-9377

Keywords

Article
Publication date: 3 August 2012

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.

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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.

Article
Publication date: 1 February 2002

GUNTER DUFEY and FLORIAN REHM

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…

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.

Details

The Journal of Risk Finance, vol. 3 no. 3
Type: Research Article
ISSN: 1526-5943

Article
Publication date: 1 March 2006

Ali Fatemi and Iraj Fooladi

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…

12882

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.

Details

Managerial Finance, vol. 32 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 18 October 2022

Son Tran, Dat Nguyen, Khuong Nguyen and Liem Nguyen

This study investigates the relationship between credit booms and bank risk in Association of Southeast Asian Nations (ASEAN) countries, with credit information sharing…

Abstract

Purpose

This study investigates the relationship between credit booms and bank risk in Association of Southeast Asian Nations (ASEAN) countries, with credit information sharing acting as a moderator.

Design/methodology/approach

The authors use a two-step System Generalized Method of Moments (SGMM) estimator on a sample of 79 listed banks in 5 developing ASEAN countries: Indonesia, Philippines, Malaysia, Thailand and Vietnam in the period 2006–2019. In addition, the authors perform robustness tests with different proxies for credit booms and bank risk. The data are collected on an annual basis.

Findings

Bank risk is positively related to credit booms and is negatively associated with credit information sharing. Further, credit information sharing reduces the detrimental effect of credit booms on bank stability. The authors find that both public credit registries and private credit bureaus are effective in enhancing bank stability in ASEAN countries. These results are robust to regression models with alternative proxies for credit booms and bank risk.

Research limitations/implications

Banks in ASEAN countries tend to have strong lending growth to support the economy, but this could be detrimental to stability of the sector. Credit information sharing schemes should be encouraged because these schemes might enable growth of credit without compromising bank stability. Therefore, policymakers could promote private credit bureaus (PCB) and public credit registries (PCR) to realize their benefits. The authors' research focuses on developing ASEAN countries, but future research could provide more evidence by expanding this study to other emerging economies. In-depth interviews and surveys with bankers and regulatory bodies about these concerns could provide additional insights in the future.

Originality/value

The study is the first to examine the role of PCB and PCR in alleviating the negative impact of credit booms on bank risk. Furthermore, the authors use both accounting-based and market-based risk measures to provide a fuller view of the impact. Finally, there is little evidence on the link between credit booms, credit information sharing and bank risk in ASEAN, so the authors aim to fill this gap.

Details

Asia-Pacific Journal of Business Administration, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1757-4323

Keywords

Open Access
Article
Publication date: 13 October 2022

Cristian Barra and Nazzareno Ruggiero

Using bank-level data over the 1994–2015 period, the authors aim to investigate the role of bank-specific factors on credit risk in Italy by considering two different…

Abstract

Purpose

Using bank-level data over the 1994–2015 period, the authors aim to investigate the role of bank-specific factors on credit risk in Italy by considering two different groups of banks, namely, cooperative and non-cooperative (commercial and popular), in different local markets.

Design/methodology/approach

Relying on highly territorially disaggregated data at labour market areas’ level, the authors estimate the impact of the role of bank-specific factors on credit risk in Italy from the estimation of a fixed-effect estimator. Non-performing loans to total loans has been used as a proxy of credit risk; the bank-specific factors are as follows: growth of loans, reflecting credit policy; log of total assets, controlling for banks’ size; loans to total assets, reflecting the volume of credit market; equity to total assets, capturing the solvency of banks and reflecting their capital strength; return on assets, reflecting the profitability of banks; deposits to loans, reflecting the intermediation cost; cost of total assets, reflecting the banks’ efficiency or volume of intermediation cost.

Findings

The empirical findings suggest that regulatory credit policy, capitalisation, volume of credit and volume of intermediation costs are the main bank-specific factors affecting non-performing loans. Nevertheless, the present analysis suggests that the behaviour of cooperative banks’ behaviour seems to be in line with that of commercial rather than popular banks, casting doubts about the feasibility of their credit policies. It turns out that recent reforms involving popular and cooperative banks represent the first step toward the enhancement of the stability and efficiency of the Italian banking system. While the present study’s benchmark results are not particularly affected by the degree of competition in the banking sector and by banks’ size, it shows that both cooperative and non-cooperative banks have undertaken more prudent credit policies after the advent of the financial crisis and the introduction of the Basel regulation.

Originality/value

The relationship between bank-specific factors and credit risk has been analysed using a rich sample of cooperative, commercial and popular banks in Italy over the 1994–2015 period. The authors rely on labour market areas being sub-regional geographical areas where the bulk of the labour force lives and works. The contribution is motivated by the financial distress experienced after the 2008 financial crisis, which has significantly hit the Italian banking system and cooperative banks in particular.

Details

Journal of Financial Regulation and Compliance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1358-1988

Keywords

Abstract

Details

Understanding Financial Risk Management, Second Edition
Type: Book
ISBN: 978-1-78973-794-3

Book part
Publication date: 7 October 2011

Roberto Violi

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…

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.

Details

Finance and Sustainability: Towards a New Paradigm? A Post-Crisis Agenda
Type: Book
ISBN: 978-1-78052-092-6

Abstract

Details

The Banking Sector Under Financial Stability
Type: Book
ISBN: 978-1-78769-681-5

Abstract

Details

The Corporate, Real Estate, Household, Government and Non-Bank Financial Sectors Under Financial Stability
Type: Book
ISBN: 978-1-78756-837-2

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