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Bank stability in South Africa: what matters?
- Source :
- Banks and Bank Systems, Vol 14, Iss 1, Pp 122-136 (2019)
- Publication Year :
- 2019
- Publisher :
- LLC CPC Business Perspectives, 2019.
-
Abstract
- The study examined the determinants of bank stability within the South African banking sector. By controlling for individual bank characteristics and market characteristics, the study determined possible determinants of solvency, a proxy for bank stability, measured by z-score within the South African financial sector. The South African financial sector is highly concentrated but with a significantly large number of banks, the greater portion being foreign owned banks. The business models of some of the financial intermediaries differ from the big four and therefore the influence of the type of business model is of great interest in this study, as it highlights a unique feature of the South African financial sector. The study’s investigation used panel data estimation techniques and found that among the specific bank characteristics, lending activity and capitalization do significantly affect solvency of banks and at sector level concentration was significant. The crisis dummy also revealed that the presence of a financial crisis heightened insolvency. The results have implications for financial institutions and therefore are of interest to regulators, bank management and researchers. Policy prescription in the form of Prompt Corrective Action framework is made to ensure proactive reaction to trends likely to cause instability.
- Subjects :
- Marketing
bank concentration
Organizational Behavior and Human Resource Management
diversification
050208 finance
Index (economics)
05 social sciences
Financial system
bank funding
Stability (probability)
bank solvency
lcsh:HG1501-3550
Management of Technology and Innovation
0502 economics and business
lcsh:Banking
bank lending
Business
050207 economics
Law
Finance
bank regulation
Subjects
Details
- ISSN :
- 19917074 and 18167403
- Volume :
- 14
- Database :
- OpenAIRE
- Journal :
- Banks and Bank Systems
- Accession number :
- edsair.doi.dedup.....93aa1c79f13b93ad3919a66db3b08f3b
- Full Text :
- https://doi.org/10.21511/bbs.14(1).2019.11