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This paper finds that the disclosure of supervisory actions is associated with changes in regulators' enforcement behavior. Using a novel sample of enforcement decisions and orders (EDOs) and the setting of the 1989 Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), which required the public disclosure of EDOs, we find that U.S. bank regulators issue more EDOs, intervene sooner, and rely more on publicly observable signals after the disclosure regime change. The content of EDOs also changes, with documents becoming more complex and boilerplate. Our results are stronger in counties with higher news circulation, indicating that disclosure plays an incremental role in regulators' changing behavior. We evaluate the main potentially confounding changes around FIRREA, including the S&L crisis and competition from thrifts, and find robust results. We also study changes in bank outcomes following the regime change and find that uninsured deposits decline at EDO banks, especially for banks with EDOs covered in the news. Finally, we observe that bank failure accelerates despite improvements in capital ratios and asset quality.

The study reviews the effect of capital adequacy on the performance of Nigerian deposit money banks for the period of 2000 – 2020. The objective of this study is to examine how capital adequacy has helped deposit money banks achieve an efficient performance. This study adopts an ex-post facto research design, and the sample size is all deposit money banks with international and national authorization in Nigeria. The data used are mainly secondary data collected from the audited annual publications financial statements of all the deposit money banks listed on the Nigerian Stock Exchange. The study employed ordinary least square multiple regression (OLS), descriptive statistical analysis, in addition to E-view electronic packages. According to empirical results at 5% level of significance, findings show that total capital to risk weighted assets, banks capitalization to total credits, and debt to equity ratio (the independent variables to capital adequacy) had direct and inverse linear significant effect on return on assets (dependent variable to performance) of deposit money banks in Nigeria. The study concludes that capital adequacy, one of the key factors affecting the performance of the Nigeria deposit money banks in measuring efficient performance of financial institutions in Nigeria has both direct and inverse linear relationship with efficient performance of banks, therefore, recommends that the Central Bank of Nigeria should effectively regulate the capital and the resources owned by the deposit money banks (DMBs) in Nigeria to globally acceptable standard since the current ₦25 billion and ₦50 billion minimum capital-base requirements cannot justify the banking reality of nowadays. This will help to enhance investment planning, decision making within the financial system and early prevention of systemic bank distress. Keywords: Asset Quality, Capital Adequacy, corporate governance, Distress, Liquidity, Profitability. Title: EFFECT OF CAPITAL ADEQUACY ON THE PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA Author: Ezu, Gideon Kasie, Nwanna Ifeanyi Onyenwe, Eke-Jeff, Oluchi Mirian International Journal of Novel Research in Marketing Management and Economics ISSN 2394-7322 Vol. 10, Issue 1, January 2023 - April 2023 Page No: 53-63 Novelty Journals Website: www.noveltyjournals.com Published Date: 27-March-2023 DOI: https://doi.org/10.5281/zenodo.7774547 Paper Download Link (Source) https://www.noveltyjournals.com/upload/paper/EFFECT%20OF%20CAPITAL%20ADEQUACY-27032023-7.pdf, International Journal of Novel Research in Marketing Management and Economics, ISSN 2394-7322, Novelty Journals, Website: www.noveltyjournals.com

Purpose: The aim of this study is to examine which factors give impact on BPD performance as Regional Development Bank that still relies on Local Government Fund. Theoretical framework: Research on BPD performance so far without looking at special conditions where the bank's performance is experiencing very good performance and without mentioning the dependence of BPD on local government funds, so this research was conducted Design/methodology/approach: The study collects data from 25 Indonesian Regional Development Banks (BPD) in period 2013-2017. Data analysis technique in this research uses multilinear regression. Findings: The results of this research show that Growth of Third Party Fund (GTPF) has no effect on ROA. CAR and LDR have a positive and significant effect on ROA. Meanwhile, NPL and QAP have a negative and significant effect on ROA. Research, Practical & Social implications: The implication of this study indicates that management of bank needs to conduct a better strategy to maximize the profit from third party funds. Also, local government should consider other private bank as an alternative to deposit their fund. So that, Regional Government-owned bank may compete to other banks and it becomes independent. Originality/value: This study highlights the performance of BPD banks specifically in periods where the bank's performance is still very dependent on local government funds.

Banks are financial intermediaries who transform deposits into loans. Banks in the MENA (Middle East and North Africa) region use large deposits from oil companies and big businesses to finance trade, and fund government and private sector infrastructure projects. The role of banks in financing trade and development is significant as undeveloped capital markets are unable to perform this function. During the COVID-19 crisis, banks sustained liquidity shocks, as deposits were withdrawn to meet personal and business needs. Essentially, banks could not make loans, as the funds to make loans were depleted. The purpose of this study is to evaluate the effectiveness of liquidity creation as a main force, in conjunction with other performance predictors such as efficient asset management, asset quality, and bank size, on bank financial performance, either individually or in conjunction with liquidity creation during the COVID-19 financial crisis. We used bank financial data from a sample of 298 banks from 11 countries in the MENA region, including Egypt, Tunisia, Morocco, Qatar, Bahrain, Oman, Kuwait, Saudi Arabia, United Arab Emirates, Jordan, and Israel, from 2020 to2021. Liquidity creation, efficient asset management, asset quality, and bank size increased bank return on assets and return on equity. Bank size and asset quality acted jointly with liquidity creation to increase return on assets and increase return on equity. We conclude that as liquidity creation acts individually, and in conjunction with asset quality and bank size to increase bank profits, both its main effect and its moderated effect, can maintain bank profitability, during periods of extreme liquidity supply shocks, such as the COVID-19 crisis.

PurposeThis study analyzed the moderating effect of bank size on the relationship between financial soundness and financial performance of commercial banks in Kenya.Design/methodology/approachThe study employed data from 39 commercial banks for ten years from 2009 to 2018. Panel data regression model was used to analyze data.FindingsThe study results established a negative moderating effect of bank size on the relationship between commercial banks' financial soundness and net interest margin (NIM) and return on assets (ROA) with the results indicating a correlation coefficient of −0.1699 and −0.218, respectively. However, an absence of moderating effect was established when return on equity (ROE) was used as a measure of financial performance.Practical implicationsThe paper finding recommends that banks' management and other policy makers should consider the effect of bank size while devising financial soundness policies to ensure optimal level of banks' financial soundness aimed at improving banks' financial performance. In addition, bankers associations should come up with policies to standardize asset quality management practices to ensure continuous positive performance of the banking sector.Originality/valueThe study shows the contribution and applicability of the theory of production in the banking sector.

This paper aims at testing the significance of each of Covid-19 pandemic and social distancing on banks’ asset quality, using a sample of 30 banks representing 10 countries according to GMM technique. Data have been collected from the World Health Organization during 2020. The research covers 10 countries (Egypt; Saudi Arabia; Indonesia; Germany; France; Russia; India; Mexico; South Korea and Nigeria) where 3 banks have been investigated from each country. Results indicate that banks’ asset quality measured by Average change of nonperforming loans ratio seems to be sensitive to Covid-19 spread, measured by Average cases of COVID-19. Besides, findings support the effect of social distancing, measured by each of average staying at residential and average social distancing for retail-recreation. It’s important to pinpoint that results do not support the effect of each of average deaths of Covid-19 and average social distancing for workplaces, residential, grocery pharmacy, parks and transit stations.

Using Bank for International Settlements (BIS) data on cross-border bank flows across 128 countries and over two decades, we find that heightened bank flows are associated with improved financial stability in a recipient country’s bank system. The reductions in marginal expected shortfall (MES) are concentrated among network-central banks and especially those in less concentrated banking sectors. Higher bank flows are also associated with improvements in bank asset quality, efficiency, and profitability in recipient markets. We interpret these new findings as consistent with predictions from recent models of bank globalization that emphasize a competition channel for bank risk-taking.

Based on a sample of 63 listed European banks, this paper investigates the relationship of capital and asset quality, in terms of provisioning and coverage policies, with bank risk and performance during the period 2005Q1-2018Q4. Our results point out different relationships between risk-based and non-risk-based measures of capital with bank risk and performance profiles. In particular, the information content of the leverage ratio appears to be merely related to the bank dimensional feature, whereas the total capital ratio shows a positive and statistically significant relationship with bank stability and is also negatively related to insolvency risk, thereby suggesting a crucial role for capital for the overall bank resilience. In addition, more capitalized banks are associated with higher bank performance. Regarding asset quality, hefty coverage and provisioning policies are generally associated with both lower bank resilience and performance. These results are relevant for disentangling the implications that the regulatory overhaul set out to address the NPLs issue is having on banking activity.

This research is an endeavor to assess the soundness of financial health of banking sector through IMF prescribed Core Financial Soundness Indicators Model (FSI) for the selected banks in Bangladesh based on a panel data of 155 Bank-year observations during the time horizon of 2015-2019. This study also assessed how FSIs vary across different groups of banks (State-owned, Conventional Private Commercial Banks (PCBs), Islamic Banks, Foreign Banks, 4th Generation Banks) and impact the stability of banks in Bangladesh. Two separate analysis have been conducted: Core FSI with ANOVA and bank stability with Panel Regression Model. Bank Z Score value was used as a measure of Stability. Variables like Capital Adequacy (CRAR), Asset Quality (NPL), Profitability (ROA & ROE) and Liquidity (LCR & NSFR) were considered as measures of banking soundness. The results show that soundness varies significantly among different groups of banks. The condition of State-owned commercial banks is really perilous as they are burdened with significantly high amount of NPL and lower amount of profit. Only Foreign banks showed better financial soundness in terms of all the chosen FSIs. The results of Panel Fixed Effect Model depict that profitability has strong positive impact on banking stability in Bangladesh. Non-performing loans and liquidity have negative impact on stability. The regression findings also reveal that capital adequacy impacts stability negatively. This negative relation demands a thorough review of the existing capital adequacy requirements of the country’s banking sector. These research findings will provide the policy-makers as well as the regulatory authorities with significant policy implications and also help them conduct an in-depth macro-prudential analysis towards a stable financial system. However, these findings require to be interpreted cautiously keeping in mind that these selected FSIs are only some of many other tools such as early warning systems, stress testing and so on.

This study aims to determine whether the Quality of Earning Assets Has an Effect on Return On Assets at BRI Syariah Banks (Persero). Data obtained from the results of bank financial reports, especially regarding KAP and ROA for 5 consecutive years. The data analysis of this research was carried out using statistical analysis. The results of this study indicate that KAP (Earning Asset Quality) has an influence on ROA (Return On Asset) at PT Bank BRI Syariah. This is in accordance with the theory which states that the ability of bank management to manage problematic productive assets on total productive assets the higher the higher the quality of the productive assets which will affect the bank's ability to generate profits.

The federal mortgage policy, the conforming loan limit (CLL), was spatially uniform before the 2008 crisis, despite remarkable heterogeneity across geography. I show that in areas that experienced a larger decline in the jumbo loan share following an increase in the CLL, lenders raised jumbo loan approval rates, lowered mortgage rates to defend short-term market share, extended credit to riskier borrowers, and incurred deteriorated asset quality in the long run. This result is not explained away by credit supply or demand changes, the bunching effect, or reverse causality. Instead, my evidence is consistent with a competition channel: the effect of CLL increases on jumbo loan credit expansion is significantly exaggerated in a more competitive jumbo-lending market. Overall, my findings suggest that the securitization policies of the government-sponsored enterprises can induce spillovers on the jumbo market segment and influence credit allocation.

Despite the various control measures put in place especially the CBK’s prudential laws to ensure that the performance of commercial banks in Kenya is ensured, most commercial banks have been collapsing in the recent past. It is in this light that the current study sought to ascertain the impact of bank liquidity, capital adequacy, asset quality and earnings on the firm value of listed Commercial banks in Kenya. Descriptive research design was employed on a population sample of eleven publicly listed retail banks. Secondary data was collected from CBK and other public financial reports over the 12-year period from 2009 to 2020. The collected data was analysed using1a multivariate panel regression1model to generate the relevant regression tests. The1study established that the capital adequacy has a marginal positive impact on the firm value while earning ability was found to have a statically insignificant positive effect on firm value among Kenyan commercial bank. The study findings indicated that liquidity was insignificantly and negatively correlated with firm value as asset quality had insignificant positive effect on firm value among Kenyan commercial bank. The study recommends that, managers of listed banks should embrace utilization of internally generated equity capital to ultimately promotes credit risk assessments as they maintain optimal levels of liquidity to maximize firm value and maintain high quality of assets as they sustained levels of earnings that boost output. This paper explained a credit risk rating concept that had not been examined in Kenya before.

I compare the efficiency of different equilibria reached in a credit rating game that allows for communication between the issuer and two credit rating agencies (CRAs) prior to disclosing ratings. CRAs observe private signals that correlate with asset quality and can learn about each other’s signals by exchanging messages with the issuer. Conflicts of interest lead CRAs to provide biased ratings. When issuer messages are informative about signals, CRAs find it optimal to selectively offer biased ratings based on issuer messages. Messages are informative when the issuer discloses high ratings from both CRAs and profits more from increasing issuance than from selling its worst assets. The equilibrium in which only one CRA provides ratings leads to the highest efficiency when average asset quality is low, agency signals frequently disagree and asset payoffs are skewed.

Notwithstanding the increasing importance of technology investment for the banking sector, evidence regarding its impact has been limited, especially from the standpoint of an emerging economy. To address this shortcoming, using an extended dataset on technology spending for India, we analyze its impact on bank performance and stability for the period 1992–2018. The findings indicate that technology exerts a negative impact on profitability and relatedly, it lowers stability as well. These findings resonate primarily for state-owned banks, although for other bank groups, the overall impact is generally observed to be positive. We also examine the impact of key phases in the technological journey of banks and the channels through which it affects bank behavior. The evidence supports the fact that demonetization exerted a significant adverse impact on state-owned banks. As well, weaknesses in asset quality and cost efficiencies are two key drivers that affect bank behavior.

Purpose: Analysing financial performance is one of the popular methods for measuring operational efficiency of a firm. Ratio analysis is an important tool of financial analysis. The analysis of key performance parameters enables diverse group of stakeholders to obtain information about profitability and growth prospects. Mergers and acquisitions are popular means of inorganic growth. The Indian Banking Industry has used this effective tool to consolidate and grow in size. Through M&A, acquired banks get a new name, structure, products and services. However, the risk of NPAs continues to be a major problem for banks. In order to study the effectiveness of a merger, analysing financial performance prior to and after merger becomes important. The State Bank of India merger has been taken up for the study, since following the merger there is a substantial increase in both the market share as well as asset base of the bank. Design/Methodology/Approach: This paper studies the result of mergers on financial indicators, market performance, asset quality, liquidity position and employee productivity of SBI after it merged with its 5 associate banks and BMB through ratio analysis. The ratios indicating the performance parameters have been taken from secondary sources such as moneycontrol.com, stock-financials.valuestocks.in. etc. A comparison of various financial ratios is made to determine the change in the performance parameters of the bank. Findings/Result: The study highlightsreduction in profitability, increase in cost to income ratio, slight improvement in liquidity, decline in asset quality and market performance and a slight decrease in employee productivity after the merger. Originality/Value: This paper studies the effectiveness of mergers in terms of change in key financial performance parameters. Paper Type: Research Case Study based on company financial analysis.

This study explores bank screening incentives under credit market competition between traditional banks and a Fintech startup. The bank screening incentives increase with the cost of the Fintech startup’s screening technology, decrease with the performance of that technology, and increase with the cost of entrepreneurs’ conveying information to the Fintech startup. However, when the preparation cost of entrepreneurs applying to the banks for loans falls with Fintech, the bank screening incentives are eroded; while when the bank screening cost decreases with Fintech, those incentives are enhanced. We also discuss the role of capital regulation and several extensions for robustness.

We investigate the impact of banks’ ability to minimise costs on asset quality, by assessing the temporal relationship between these variables in a sample of Italian banks over the period 2006–2015. We offer new insights into the channels through which bank efficiency affects non-performing loans by disentangling the short-term component of cost efficiency from its long-term component. We show that non-performing loans afflicting Italian banks can be explained by both efficiency components. A decrease in short-term cost efficiency precedes a worsening in banks’ asset quality, implying that regulators should consider adopting short-term efficiency as an early warning indicator of a deterioration in asset quality. We also present evidence of a trade-off between long-term efficiency and bank non-performing loans, which suggests that the removal of exogenous hindrances that prevent banks from allocating optimal levels of resources to the management of their loan portfolio should be a main policymakers’ objective.

In this study, I examine the impact of diversity (ethnic & religious fractionalization and polarization) on banking stability in Sub-Saharan Africa (SSA). Using data from 1996 to 2014, I employ the system Generalized Method of Moments (sys-GMM) approach to examine this relationship. I find that countries in SSA are more polarized religiously than they are ethnically implying that, the continent is more likely to experience conflicts and other associated adverse effects of polarization through religion rather than ethnicity. The region is, however, more ethnically fractionalized than they are religiously. Further, I conjecture that banks in more heterogeneous societies will experience poor asset quality and lower stability. I however postulate that banks offset the risks from diversity at certain levels of net interest margin (NIM). I provide empirical evidence to support these conjectures. I find varying threshold NIM values for each diversity indicator depending on the stability measure used. I also find that opening up the banking system to foreign entry can help offset the negative impact of ethnic and religious fractionalization and polarization on banking stability. Policy implications are discussed.

PurposeThis study aims to capture the “persistence effect” of credit risk in Indian banking industry using the bank-level data spanning over the period of 19 years from 1998/1999 to 2016/17. Alongside, the study explored how the bank-specific, industry-specific, macroeconomic variables alongside regulatory reforms, ownership changes and financial crisis affect the bank's asset quality in India.Design/methodology/approachUsing two-step system generalized method of moment (GMM) approach, the study derives key factors that affect the bank's asset quality in India.FindingsThe empirical results confirm the time persistence of credit risk among Indian banks during study period. This reflects that bank defaults are expected to increase in the current year, if it had increased past year due to time lag involved in the process of recovery of past dues. Further, higher profitability, better managerial efficiency, more diversified income from nontraditional activities, optimal size of banks, proper credit screening and monitoring and adherence regulatory norms would help in improving the credit quality of Indian banks.Practical implicationsThe practical implication drawn from the study is that nonaccumulation of nonperforming loans (NPLs), higher profitability, better managerial efficiency, more diversified income from nontraditional activities, optimal size of banks, proper credit screening and monitoring and adherence regulatory norms would help in improving the credit quality of Indian banks.Originality/valueThis study is probably the first one that identifies in addition to the current year, whether lag of bank industry-macroeconomic affects the level of NPLs of Indian banks. So far, such an analysis has received less attention with respect to Indian banking industry, especially immediate aftermath of the global financial crisis.

Islamic banks are recognised as entities which support social objectives as well as economic development of the country. Financial performance of the global Islamic banking and finance has shown promising growth as equal to well-established conventional banks. The study aims to investigate the effect of asset quality and operational efficiency on the financial performance of Islamic banks in Malaysia. The study uses panel data analysis, whereby the annual reports of 16 Islamic banks in Malaysia are analysed over a ten-year period from 2010 to 2019. The independent variables of the study are asset quality and operational efficiency. The dependent variable of the study is financial performance proxied by Return on Asset (ROA) and Return on Equity (ROE). Multiple regression models consisting of random-effect model and fixed-effect model are employed to analyse the data of the study. The findings of the study show that both asset quality and operational efficiency of Islamic banks have a significant influence on the financial performance proxied by ROA and ROE. Hence, the findings of the study evince the importance of proper management practices in protecting the wealth, as well as the financial performance of the Islamic banks.

Credit remains one of the main sources of income for any banks globally. However, this exposes the banks and other financial institutions to credit risk as there is a possibility of non-payment of the loan by the borrowers as per the contractual obligations. Assessing and managing this risk is becoming a crucial factor for every commercial bank across the world. This study therefore, sought to determine the effect of credit risk determinants on the financial performance of commercial banks in Kenya. The data set comprised the 41 commercial banks in Kenya as of the year 2021. The determinants of credit risk for this study were Capital Adequacy (CA), Loan Loss Provision (LLP), Liquidity Risk (LR), and Asset Quality (AQ). The financial performance of the banks under study was measured by the Return on Assets (ROA) and Return on Equity (ROE). These ratios indicated the financial performance in terms of the profitability of the banks under study as far as the efficient utilization of assets of these banks, and the ability of the banks to utilize money invested by investors to create profit. The study used secondary data from the annual financial statements of the 41 commercial banks in Kenya for five years from the year 2017-to 2021 (panel data). Both correlation and inferential statistics designs were used to complete the resulted analysis from the Statistical Package for Social Sciences. Correlation and regression analyses were conducted to explain the effect of credit risk determinants on financial performance of commercial banks in Kenya. The study found that capital adequacy had a direct significant effect on financial performance of commercial banks in Kenya (p= 0.001, β= 0.164). Loan loss provision registered an indirect significant effect on the financial performance of commercial banks in Kenya (p= 0.000, β= -0.325). The study further found that liquidity risk had an indirect significant effect on financial performance of commercial banks in Kenya (p= 0.000, β= -0.568). The study also found that asset quality had a positive insignificant effect on financial performance of commercial banks in Kenya (p= 0.114, β= 0.089). Generally, the study concluded that credit risk determinants had a statistically significant effect on the financial performance of commercial banks in Kenya (R-square= 0.875, p-value= 0.000). The study recommends that the regulatory authority for the commercial banks, Central Bank of Kenya should enhance its oversight on the compliance of developed policies guiding the operation of commercial banks to enable them to continue with adequate financial performance. Keywords: Capital Adequacy, Loan Loss Provision, Liquidity Risk, Asset Quality, financial performance. Title: Effect of Credit Risk Determinants on Financial Performance of Commercial Banks in Kenya Author: Justus Okumbo Manyala, Dr. Jane Queen Omwenga, Dr. Charles Weda International Journal of Social Science and Humanities Research ISSN 2348-3156 (Print), ISSN 2348-3164 (online) Vol. 10, Issue 4, October 2022 - December 2022 Page No: 292-316 Research Publish Journals Website: www.researchpublish.com Published Date: 19-October-2022 DOI: https://doi.org/10.5281/zenodo.7226135 Paper Download Link (Source) https://www.researchpublish.com/papers/effect-of-credit-risk-determinants-on-financial-performance-of-commercial-banks-in-kenya, International Journal of Social Science and Humanities Research, ISSN 2348-3156 (Print), ISSN 2348-3164 (online), Research Publish Journals, Website: www.researchpublish.com

Bank survival is essential to economic growth and development because banks mediate the financing of the economy. A bank’s overall condition is often assessed by a supervisory rating system called CAMELS, an acronym for the components Capital adequacy, Asset quality, Management quality, Earnings, Liquidity, and Sensitivity to market risk. Estimates of the impact of CAMELS components on bank survival vary widely. We perform a meta-synthesis and meta-regression analysis (MRA) using 2120 estimates collected from 50 studies. In the MRA, we account for uncertainty in moderator selection by employing Bayesian model averaging. The results of the synthesis indicate an economically negligible impact of CAMELS variables on bank survival; in addition, the effect of bank-specific, (macro)economic, and market factors is virtually absent. The results of the heterogeneity analysis and publication bias analysis are consistent in terms that they do not find an economically significant impact of the CAMELS variables. Moreover, best practice estimates show a small economic impact of CAMELS components and no impact of other factors. The study concludes that caution should be exercised when using CAMELS rating to predict bank survival or failure.

PurposeThe purpose of this study is to examine whether the relationship between asset quality and profitability is linear or nonlinear, using a global dataset containing 2,943 banks from advanced and emerging economies.Design/methodology/approachThe authors use the U-shape test to investigate the existence of a nonlinear relationship between asset quality and profitability. In addition, the dynamic panel generalised method of moments (GMM) and quantile regression are used to examine the nonlinear effect of profitability on nonperforming loans (NPLs).FindingsAfter controlling for macroeconomic and bank internal factors, the authors find empirical evidence supporting the existence of a nonlinear relationship in the form of a U-shape. This is also confirmed through the three-stage U test procedure. After distinguishing between advanced and emerging economies, the authors also find that, in advanced markets, the credit policy responds more rapidly to changes in credit market conditions than in emerging markets, providing insights into credit market dynamics.Research limitations/implicationsFurther research can check the robustness of this study’s findings in different markets and investigate the existence of nonlinearity in other bank variables.Practical implicationsIn a nutshell, the results demonstrate potential implications for policymakers who need to carefully monitor banks' lending behaviour to ensure that banks do not lower lending standards. In addition, banking regulators and supervisors should consider the possible nonlinear relationship in their risk assessments and macrostress tests. Further, these results are important for bank managers, who should monitor the performance of their loan portfolios to ensure that their credit officers do not lower credit standards. Likewise, for banks located in an emerging economy, investing in human capital and advanced technologies can enable them to respond more effectively to changes in the credit market.Originality/valueTo the best of the authors' knowledge, this study is considered the first to provide empirical evidence for the nonlinear relationship between asset quality and profitability.

Purpose The purpose of the study is to examine the relationship between the board of directors (BODs) and the Shariah board (SB) and assess its impact on the financial soundness of Islamic banks (IBs). Design/methodology/approach The authors use a regression model to test the effects of the relationship between the BOD and the SB on the financial soundness of IBs by applying a panel data set of 61 IBs, covering 18 countries from 2008 to 2014. The dependent variable is the Z-score indicator. To test the robustness of the results, the authors use dependent variables other than the Z-score [A rating of Capital adequacy (C), Asset quality (A), Management (M), Earnings (E), Liquidity (L), and Sensitivity (S) (CAMELS)] for 2018. Findings The results show that meetings between directors and SB members significantly reduce the financial soundness of IBs. The relationship between the BOD and the SB increases conflicts of interest and agency costs. However, a representation of the SB at the BOD meetings and vice versa does not affect financial soundness. The Accounting and Auditing Organization for Islamic Financial Institutions and the Islamic Financial Services Board corporate governance standards do not require the presence of the SB representative at the BOD meetings or vice versa, which justifies the results. Practical implications This study attempts to fill gaps in the literature by investigating the impact of meetings between the SB and the BOD on the financial soundness of IBs across the world. The results suggest that the BOD’s frequent interference in the affairs of the SB can have adverse effects on IBs and should be avoided. Originality/value The authors depart from the previous literature by using three new characteristics that link the BOD to the SB. Methodologically, the authors use three new measures to evaluate this relationship and its effect on the financial soundness of IBs. This study is unique because it explores the comparative impacts of the presence of a SB representative at the BOD meetings and a director at the SB meetings and meetings between the two governing boards of IBs.

This research was conducted to analyze whether there are differences in financial performance in conventional banking BUKU IV before and after the COVID-19 pandemic based on capital ratio (Capital Adequency Ratio), earning asset quality ratio (Net Performing Loan), profitability ratio (Return on Asset & Return on Equity), efficiency ratio (BOPO: operational costs / operating income), and liquidity ratio (Loan / Deposit Ratio). Because of using saturated sampling technique, the objects that make up the population of this research are all used as research samples, that is seven banks that meet the criteria for BUKU IV including BCA, BNI, BRI, CIMB Niaga, Danamon, Mandiri, Panin. The results of this research shows that: ( 1) there is no difference in performance in conventional BUKU IV banking before and after the COVID-19 pandemic based on the CAR ratio; (2) there is a difference in performance in BUKU IV conventional banking before and after the COVID-19 pandemic based on the NPL ratio; (3) there is a difference in performance in conventional banking BUKU IV before and after the COVID-19 pandemic based on the ROA ratio; (4) there is a difference in performance in BUKU IV conventional banking before and after the COVID-19 pandemic based on the ROE ratio; (5) there is a difference in performance in BUKU IV conventional banking before and after the COVID-19 pandemic based on the BOPO ratio; and (6) there is a difference in performance in BUKU IV conventional banking before and after the COVID-19 pandemic based on the LDR ratio.

The objective of research is to understand and to examine how good is the performance of BPR Dinar Pusaka at Sidoarjo based on the use of balanced scorecard approach, especially concerning with the measurement of performance with financial perspective, customer perspective, internal business process perspective, and learning and growth perspective. Method used in this research is quantitative data analysis. Result of calculation and analysis is then used as the base for decision-making or also as the reference in making conclusion whether the performance of bank management is good or not if measured using balanced scorecard approach. This position is supported by Dahlan and Siamat, Tawaf and Tjukria, P, Kaplan and Norton, Yuwono, Sukarno, and Ichsan, Ratnawati, Mulia, Sutrisno Hadi, Husien Umar, Mulyadi, and Suharsimi Arikunto. Pursuant to the result of research, the conclusion is made as following: (1) Financial perspective at BPR Dinar Pusaka is described by the increase of the ratios of asset quality and efficiency and the decline of the ratios of capitalization, rentability and liquidity. (2) Customer perspective at BPR Dinar Pusaka is explained by the increase of customer retention and customer profitability rates and the satisfaction of saving customers and credit customers, but with the decline of customer acquisition. (3) Internal business process perspective at BPR Dinar Pusaka is indicated by the increase of receivable circulation rate, the improved timings for credit service process and saving service process, and the reduced level of uncollected receivable risk. (4) Learning and growth perspective at BPR Dinar Pusaka is reflected by the increase of employee training rate and employee satisfaction rate but with the decline of employee productivity rate.

This study provides one of the first evidence of the market discipline in the interbank market of the Vietnamese banking system after the global financial crisis. Based on the data of 19 commercial banks listed in Vietnam from 2010 to 2019, our empirical results suggest a weak interbank discipline in the Vietnamese banking system. Banks seem to be interested in the liquidity ratio of their fellows, especially for smaller banks, whereas they pay more attention to asset quality in the case of larger banks. We believe our study is of interest to regulators and policymakers in Vietnam

Purpose The purpose of this paper is to apply various data mining techniques for predicting the financial performance of Islamic banking in Indonesia through the main exogenous determinants of profitability by choosing the best data mining technique based on the criteria of the highest accuracy score of testing and training. Design/methodology/approach This paper used data mining techniques to predict the financial performance of Islamic banking by applying all of LASSO regression, random forest (RF), artificial neural networks and k-nearest neighbor (KNN) over monthly data sets of all the full-fledged Islamic banks working in Indonesia from January 2011 until March 2020. This study used return on assets as a real measurement of financial performance, whereas the capital adequacy ratio, asset quality and liquidity management were used as exogenous determinants of financial performance. Findings The experimental results showed that the optimal task for predicting the financial performance of Islamic banking in Indonesia is the KNN technique, which affords the best-predicting accuracy, and gives the optimal knowledge from the financial performance of Islamic banking determinants in Indonesia. As well, the RF provides closer values to the optimal accuracy of the KNN, which makes it another robust technique in predicting the financial performance of Islamic banking. Research limitations/implications This paper restricted modeling the financial performance of Islamic banking to profitability through the main determinants of return of assets in Indonesia. Future research could consider enlarging the modeling of financial performance using other models such as CAMELS and Z-Score to predict the financial performance of Islamic banking under data mining techniques. Practical implications Owing to the lack of using data mining techniques in the Islamic banking sector, this paper would fill the literature gap by providing new effective techniques for predicting financial performance in the Islamic banking sector using data mining approaches, which can be efficient tools in business and management modeling for financial researchers and decision-makers in the Islamic banking sector. Originality/value According to the author’s knowledge, this paper is the first that provides data mining techniques for predicting the financial performance of the Islamic banking sector in Indonesia.

The leverage ratio is an important ratio, especially in the banking sector. In this study, it is researched whether the leverage ratio in Turkish banking sector is influenced from the procyclicality in the Turkish economy or how it is influenced. For this purpose, it is focused on leverage ratio and asset rate. As leverage ratio, it is used the external assets / total shareholder’s equity rate and also the total assets / total shareholder’s equity. As indicator for asset quality and change is used the total loans / total assets in Turkish banking sector. The relationship between the leverage ratios and the total loans / total asset rate in the condition of the all else being equal is analysed empirically as a whole with the quarterly banking cumulative sectorial data between 2007 - 2019 by ARDL ( Auto-Regresive Distributed Lag ) method for first time. According to the analysis results, there is a positive and statistically significant relationship between each of the leverage ratios and the total loans / total assets rate in the long run. It indicates that the leverage ratio is procyclical. It means that the leverage ratio increase and also the total loans / total assets rate in banking sector increase. To conclude, as the credit policy, it is recommended to determine countercyclical policy during financial expansion periods for the financial stability.

This study investigates the impact of corporate governance on asset quality of Islamic banks by employing data on 129 Islamic banks from 29 countries spanning the period from 2008 to 2017. The study shows that asset quality of Islamic banks is positively and significantly sensitive to an increase in board independence, Shariah board, and audit committee effectiveness. The study finds that female participation in management as CEOs seems to detract from good performance and that more board meetings can be harnessed to improve banks’ asset quality. These empirical findings have practical policy implications regarding asset quality management and board construction within the Islamic banking sector.

The competition among corporates to become market leader is not only with in economy but also it is global and it effects the organizations in a positive or in a negative way as well in such a challenging and rapid environment Merger & Acquisition (M&A) is one of the best ways to enhance the capital, customers, and profitability. This paper is based on the CAMEL (Capital Adequacy, Asset Quality, Management Soundness, Efficiency and Liquidity Ratios) framework. Overall, twenty-five ratios before and after merger included on nine year pre and nine-year post were collected/ calculated and analyzed with SPSS and E-Views. Paired Sample T test were calculated and analyzed with the use of SPSS and structural break down test with the use of E-Views. The research after testing and analysis with software conclude that banks in long run shows significant difference in Capital adequacy ratios and Asset Quality and shows better Capital Adequacy and Asset Quality Ratios after merger among the five ratios tested.

Lending is the primary business of retail banking and non-performing loans (NPLs) have been the focus of attention in recent years. In the wake of the 2008–2010 financial crisis, non-performing loans (NPLs) had increased everywhere, but in some countries they had reached unprecedented heights. Several banks have experienced a particularly challenging period over recent years and the Great Financial Crisis has highlighted the weakness of the banking system and the need to further investigate banks’ asset quality and transparency from both a regulatory and an accounting perspective, which pressure by different institutions for a more accurate assessment of loan portfolios led to the general need for higher provisioning in a period characterised by extremely low interest rates and low bank profitability. The objective of this research is to determine the factors associated with non-performing loans. We presented a literature study using systematic literature review of relevant publications and as a result of this process, we included 21 articles and then examined the bibliographical references to check the validity of the inquiry and to avoid any potential omissions. We identified several variables that affect NPLs and those that are influenced by NPLs. We found no variables that associate with policies, and strongly suggest research for variables that associate with policies.

Este estudio examina el impacto de los indicadores financieros en la rentabilidad de los bancos privados ecuatorianos, entregando una metodología útil para la identificación de los factores internos relevantes que influyen en el rendimiento de la entidad y permiten así, que la toma de decisiones del corto y largo plazo sea más eficiente. La investigación realizada utilizó un modelo de regresión lineal múltiple basado en mínimos cuadrados ordinarios, analizando indicadores de liquidez, morosidad, calidad de activos, y apalancamiento como variables independientes, mientras que el rendimiento sobre activos (ROA) y el rendimiento sobre patrimonio (ROE) constituyeron las variables dependientes. El estudio utilizó 192 observaciones provenientes de las entidades bancarias: Banco de Guayaquil, Produbanco, Banco Internacional, y Banco Bolivariano durante el periodo 2016-2019. Los resultados de este estudio demuestran (1) una relación negativa significativa entre los indicadores de liquidez y morosidad con el rendimiento y (2) una relación positiva significativa entre la calidad de activos y apalancamiento con el ROA y ROE. Con estos resultados, se concluye que las variables independientes son relevantes en el rendimiento bancario, por lo que se las debe monitorear continuamente para su control efectivo. Este manuscrito, complementa a la literatura financiera al introducir un análisis estadístico del periodo 2016-2019, entregando una investigación previa a la ocurrencia de la pandemia Covid19, de manera que, se recomienda que estudios futuros realicen un análisis posterior a la emergencia sanitaria y se comparen dichos resultados para determinar los efectos en la rentabilidad de los bancos provocados por la pandemia.

I present a model in which sellers can signal the quality of an asset both by retaining a fraction of the asset and by choosing the liquidity of the market in which they search for buyers. Although these signals may seem interchangeable, I present two settings which show they are not. In the rst setting, sellers have private information regarding only asset quality, and I show that liquidity dominates retention as a signal in equilibrium. In the second setting, both asset quality and seller impatience are privately known, and I show that both retention and liquidity operate simultaneously to fully separate the two dimensions of private information. Contrary to received theory, the fully separating equilibrium of the second setting may contain regions where market liquidity is increasing in asset quality. Finally, I show that if sellers design an assetbacked security before receiving private information regarding its quality, then the optimality of standard debt is robust to the paper’s various settings.

Life insurance, as well as bank deposits, is a form of household savings, so contributions under life insurance contracts must be properly guaranteed by creating compensation mechanism. The paper deals with a number of issues in relation to the solutions for Ukrainian life insurance guarantee scheme (IGS). The main purpose of this study is to introduce decision on scheme design and appropriate fund-raising mechanism for Ukrainian IGS providing the last resort protection to customers who make their savings via life assurance contracts. Highlighting positive and negative effects of IGS implementation, analysing sources of funding for guarantee schemes, the research substantiates economic effects of risk-based approach to assessing contribution and proposes general scheme of estimating the insurer’s contribution to the IGS fund, in particular indicators for risk-based adjustment of IGS levies and adjustment procedures. Based on methods for calculating contributions to European deposit guarantee schemes, the article specifies technically sound methods for calculating contributions to IGS fund which capture various aspects of the insurers’ risk profile including capital adequacy, asset quality, liquidity and funding, profitability profile, business management, as well as the potential loss for the IGS and market circumstances. The methodology, proposed in the paper, is relevant not only for Ukraine, where the introduction of the IGS scheme for life assurance is only in perspective, but also for all other countries with existing IGS to implement risk-weighted approach to scheme setting that prompts insurers to control their risks, provides more effective and healthy competition. Keywords: life assurance, insurance guarantee scheme, policyholder protection, funding mechanism, risk-weighted contribution. JEL Classification G22, G33 Formulas: 5; fig.: 4; tabl.: 1; bibl.: 13.

The aim of this study is to see the health level of BRI (Bank Rakyat Indonesia) of 2018 and 2019 by CAMEL and RGEC ratio. This study is quantitative study. Collection data technique of this study are interview and documentation while analyzing data technique is through descriptive method where CAMEL is consisted of capital, asset quality, management quality, feasibility and liquidity factor while RGEC is consisted of risk profile, good corporate governance, and earning factor. Based on the result of this study, CAMEL of 2018 and 2019 are 99,41 and 99,23 categorized as “health”. RGEC of 2018 and 2019 are 96,67 percent categorized as “health”. Keywords: Health level, CAMEL, RGEC

This study aims to partially analyze and examine the effect of the quality of earning assets and non-performing loans on bank profitability. This study uses secondary data obtained from the financial statements of PT Bank Negara Indonesia Tbk. Makassar Regional Office for the period 2011 - 2019 using the cross-sectional technique. This study used 36 samples. Furthermore, it will be tested with several testing stages, such as the classic assumption test in normality, multicollinearity, and autocorrelation—methods of data analysis using multiple linear regression analysis techniques. This study indicates that partially the quality of earning assets has a positive and significant effect on profitability. In contrast, non-performing loans have no positive and significant effect on profitability. Simultaneously, productive asset quality and non-performing loans affect profitability.

Bank's business activities cannot be separated from public trust, so the health level of the bank needs to be maintained and the application of prudential principles in running its business. Banks are required to maintain the soundness level of the bank by paying attention to asset quality, capital adequacy, liquidity, management quality, and profitability, as well as solvency. This research has formulated several problems, namely: the relationship between the amount of credit, the level of liquidity, and profitability and to find out how much influence the amount of credit, the level of liquidity to profitability through Return on Assets (ROA). The purpose of the authors in conducting research is: to determine the relationship between the amount of credit, the level of liquidity, and profitability and to determine the influence of the amount of credit, the level of liquidity on profitability using ROA. The results of this study are recommended as input and information about the application of the amount of credit and the level of liquidity that can be used as the basis for the profitability as measured by ROA.

This paper investigates the variation in nonperforming loans over the economic cycle and the effect of past returns based on a nonparametric quantile analysis of the largest Islamic banks in the United Kingdom and Turkey from 2010 to 2019. The findings show a weak variation in nonperforming loans that increases with an increasing return on assets and a decreasing return on equity and decreases in an inverse scenario. As a result, the credit risk of Islamic banks is countercyclical. We suggest that the inverse relationships evidence the existence of trade-offs within bank returns and credit risk. Thus, banks’ past profitability and risk mitigation are determinants of asset quality. These findings provide support for risk-taking and risk-sharing principles in which flight-to-safety mirrors the calibration of risk factors in a disruptive economy. Our estimates indicate that nonparametric quantile regression captures considerably more variation in a risk-return analysis.

Purpose This paper aims to examine the effect of bank-specific, financial structure and macroeconomic factors on the risk-taking behavior, stability and profitability of banks in Gulf Cooperation Council (GCC) economies during 1998–2017. Design/methodology/approach The authors use a two-step system generalized method of moments dynamic model to analyze the data. Findings The results show that non-traditional activities increase the risk and decrease the stability and profitability of banks that are highly capitalized, highly liquid and large. Banks in this group are less engaged in securities investments and their higher degree of loan exposure leads to a decrease in risk and an increase in their stability and profitability. Higher concentration increases the risk and decreases the stability and profitability of banks that are less capitalized, less liquid and small. Banks with a higher share of non-traditional activities are riskier and less stable and less profitable before the financial crisis. The study finds that banks with relatively higher capitalization and high lending growth rates are riskier, profitable and less stable during the crisis. Larger commercial banks are less risky and more stable and profitable than smaller banks before the global financial crisis. Islamic banks performed better in terms of fee income, capitalization, liquidity, asset quality and have higher market concentration than conventional banks. Originality/value The study provides the first comprehensive empirical evidence on the drivers of risk-taking behavior, stability and profitability of the GCC banks. It also investigates the differences across these variables based on the characteristics of financial strength such as capitalization, liquidity and size; before, during and after the financial crisis; and differences between Islamic and conventional banks.

Our goal is to elucidate the interaction of banks’ screening effort and strategic information production in loan-backed asset markets using a general equilibrium framework. Asset quality is unobserved by investors, but banks may purchase error-prone ratings. The premium paid on highly rated assets emerges as the main determinant of banks’ screening effort. The fact that rating strategies reflect banks’ private information about asset quality helps keep this premium high. Conventional regulatory policies interfere with this decision margin, thereby reducing signaling value of high ratings and exacerbating the credit misallocation problem. We propose a tax/subsidy scheme that induces efficiency.

Business users (suppliers) of information technology (IT) equipment often contract with third party remanufacturers (3PRs) for the end‐of‐use disposition of their used electronic equipment. Our goal in this research is to develop a model to analyze contracts consisting of an upfront payment (t) and a revenue share (r) between a supplier and 3PR, study their impact on disposition decisions, and explore the impact of 3PR risk‐aversion and quality uncertainty on optimum contracts. We model a Stackelberg game where the supplier offers risk protection from quality uncertainty to a 3PR. The 3PR faces a convex increasing remanufacturing cost and a sales revenue that is increasing and concave in the volume resold. We show general conditions under which a unique contract exists and can be expressed in closed form. We calibrate our model using a dataset on supplier contracts and equipment conditions provided by a 3PR. Our managerial insights are derived from the data and summarized as follows. First, there is a benefit to suppliers from characterizing the quality of used assets. Therefore, they should consider adjusting contracts to reflect asset quality. Second, suppliers can increase profit by contracting based on quality grade and using a portfolio of contracts. Third, we show that the asset age impacts contract terms, with suppliers with assets at a lower age keeping a higher revenue share and observing a greater fraction of equipment remanufactured. This suggests that suppliers should consider the benefits of disposition contracts when making equipment replacement decisions.

Credit management capability is seen as a crucial aspect for banks sustainability. The variable that is directly related to bank credit risk is a non-performing loan (NPL) which is commonly used to assess the asset quality of a bank. The purpose of this research is to analyze main effects and interaction effects of bank ownership types and bank core capital category (BUKU) to the bank NPL performance. The study was conducted using secondary data obtained from bank quarterly reports from the Financial Services Authority (OJK) through the website ojk.go.id, bank financial reports, and infobank magazine. Bank’s performance in the classification of bank ownership types and bank core capital category were evaluated with respect to bank’s NPL which in this case is used as indicator of the bank’s performance. Tests were performed using TWO WAY ANOVA and Post Hoc Test. The findings of this study found that the main effect type of bank ownership had a significant effect on the performance of NPL management, the main effect of banks’ BUKU had no significant effect on the performance of NPL management and the interaction effect of bank type and banks’ BUKU had a significant effect on the performance of NPL management.

Bu çalışmada amaç COVİD-19 öncesi dönem ile pandeminin devam ettiği 2020 ve 2021 verileri aracılığıyla katılım bankaları ile mevduat bankalarının bu durumdan etkilenme düzeyinin farklı olup olmadığının ortaya konmasıdır. Bu kapsamda örneklem olarak seçilmiş beş özel mevduat bankası ile beş katılım bankası karlılık, risk ve borç ödeme gücü, likidite, aktif kalitesi ve sermaye yeterliliği bakımından oran analizi yöntemi ile değerlendirilmiştir. Katılım bankaları ile mevduat bankaları arasındaki oransal farklılıkların istatistiksel olarak anlamlı olup olmadığı ise t-testi ile sınanmıştır. Elde edilen sonuçlara göre pandemi sürecinde aktif kalitesi bakımından katılım bankalarının daha verimli olduğu, bunun haricindeki değişkenlerde anlamlı bir farklılık olmadığı sonucuna ulaşılmıştır. This study aims to reveal whether the level of exposure of participation banks and deposit banks is different from the period before COVID-19 and 2020 and 2021 when the pandemic continues. In this context, five private deposit banks and five participating banks selected as samples were evaluated with the ratio analysis method of profitability, risk and solvency, liquidity, asset quality, and capital adequacy. Whether the proportional differences between participation banks and deposit banks are statistically significant was tested with the t-test. According to the results obtained, it was concluded that participation banks were more efficient in terms of asset quality during the pandemic process, and there was no significant difference in other variables.

Commercial banks are banks that play an important role in advancing the nation through the products provided, and banks are a source of income for the state. For this reason, it is very important to know the management performance of Indonesian commercial banks listed on the Indonesia Stock Exchange through their profitability growth, this underlies the researcher using conventional commercial banks listed on the Indonesia Stock Exchange (IDX) as the object of research. Based on this description, this study aims to determine the effect of capital, asset quality, profitability and liquidity on profitability at conventional commercial banks listed on the Indonesia Stock Exchange. The population in this study are Conventional Commercial Banks listed on the Indonesia Stock Exchange (IDX). Banks that meet the requirements as a sample in this study are 40 banks. Then multiplied by 3 years period, starting from 2017–2019. So, the total number of observations (40 x 3) is 120 data units in this study. Regression analysis is basically a study of the dependence of the dependent variable with one or more independent variables. Based on the results of multiple linear regression, it can be seen that leverage has no effect on tax avoidance. This shows that companies that have high or low leverage ratio values ??during the first, second, and third quarters of 2020 do not affect the company's decision to take tax avoidance actions. Based on the results of multiple linear regression, it can be seen that company size has no effect on tax avoidance. The results show that both companies that have large and small asset values ??during the first, second, and third quarters of 2020 do not influence the company's decision to take tax avoidance actions.

Managing the bank risk well are very needed so that the bank can operate smoothly. One of the important bank risk to managed well is bank asset quality risk. The banks are required to be careful and wiser in manage these asset quality risk. The object of this study is to obtain evidence of the effect of productive asset quality management on bank profit. The empirical studies conducted on rural banks in Indonesia. As the independent variable is productive asset quality consist of classified productive asset, productive asset quality and non-performing loan, while as the dependent variable is bank profit measured by return on asset. Return on asset of 89,6% explained by classified productive asset, productive asset quality and non-performing loan. While the rest return on asset of 10,4% effect by other variables that not examined in this study. Keywords: Classified Productive Asset, Productive Asset Quality, Non-performing Loan, Return on Asset.

PurposeThe purpose of this paper is to investigate how much liquidity banks create and how liquidity creation changed over time in the MENA countries and to examine the soundness of banks in these countries based on the CAME rating system, in addition to investigating the relationship between CAME ratios and liquidity creation of these banks.Design/methodology/approachThe study regresses the CAME ratios together with other control variables to model liquidity creation. The robustness of the results is evaluated by using a different measure of liquidity creation and by excluding the observations of the Islamic banks.FindingsThe results show that the CAME rating system, as an indicator of bank soundness, is negatively related to bank liquidity creation. Specifically, capital adequacy, management efficiency and earning ability ratios affect the on-balance sheet components of liquidity creation, while asset quality ratio affects its off-balance sheet component.Practical implicationsThe paper offers insights to regulators and banks managers in terms of better understanding of the negative relationship between CAME rating system and bank liquidity creation.Originality/valueThis paper sheds more light on the relationship between bank soundness and liquidity creation by using the ratios of the CAMEL rating system as an indicator of bank strength and soundness.