Non-performing assets remained a paramount problem in the Indian banking sector despite several regulatory, policy, and supervisory responses and treatment enforced by the regulatory bodies and the government. The present paper seeks to analyse the trend of NPA ratio in India between GFC and COVID-19, along with the trend of some important microeconomic and macroeconomic...
Crowdfunding is considered an efficient alternative to traditional sources of finance that can enhance financial inclusion and reduce financing gaps faced by entrepreneurial firms and small and medium enterprises (SMEs). The growth of crowdfunding platforms (CFPs), however, depends on an enabling regulatory regime that can promote the objectives of innovation and financial...
The advent of macroprudential policy alongside monetary policy raises the issue whether macroprudential policy has an additional effect on bank interest rate margins to that of monetary policy, and if so, whether it accentuates or offsets the interest rate effect. In light of this, we estimate combined effects of macroprudential policies and monetary policies on bank interest...
This paper presents a framework to operationalize the multidimensional construct of a bank’s business model (BBM). We conceptualize the construct from a structural perspective, defining it as its balance sheet’s strategic composition and structure, encompassing asset allocation and funding sources. In contrast to prior research, our study describes the strategic decisions made by...
The Credit Suisse default in 2023 sparked considerable discourse about the absence of bank resolution procedures. Instead of resolution, public guarantees and unconventional emergency liquidity assistance (ELA) were provided. Of course, this occurred nearly two decades after the global financial crisis of 2007–2009, and evidently, there are still lessons to be learned. This study...
Public anger following the 2007/9 financial crisis was exacerbated by the failure to hold people accountable. A Parliamentary Commission recommended new legislation which resulted in the Senior Managers and Certification Regime (SMCR). A few other jurisdictions (e.g. Ireland and Australia) adopted similar requirements. In this article we document interviews with individuals who...
We empirically study the environmental impact of banks, i.e., the negative externality on the environment and society deriving from the use of a natural resource or the emission of a pollutant. We find that environmental “impact ratios”, that is, environmental damage costs in proportion to total revenues are negatively correlated with bank profitability. Furthermore, banks with a...
Based on bank-level data from 29 Sub-Saharan African countries between 2005 and 2019, we apply panel fixed effects (FE) and two-step system GMM estimators to investigate whether increased cross-border banking affects domestic banking sector stability. We find significant evidence that the stability of banks in host countries declines with an increased presence of foreign banks...
The article analyzes the dichotomy between banks
Net zero transition plans are a promising additional instrument for prudential supervisors to assess, address and bring distant financial risks into the present. To date, transition plans have primarily emerged as non-financial disclosure requirement and as such, their prudential application has been limited. In this article, we discuss the role that transition plans can play as...
Silvergate Bank began to “wind down operations and voluntarily liquidate” its bank in March 2023. Whereas Silicon Valley Bank and Signature Bank would be shut down by the Federal Deposit Insurance Corporation in the following days, this “crypto-sector bank” was able to satisfy depositor withdrawals and enter into voluntary liquidation. This paper examines how Silvergate Bank...
This study aims to identify, by year and over the entire period under study (2005–2022), the countries with the most restrictive bank sanctioning policies in terms of amounts and numbers of penalties to point out the most active institutions in terms of imposing penalties, and to determine the regularities governing the process of imposing these burdens. Using linear ordering...
When a widespread funding shock hits the banking system, banks may engage in strategic behaviour to deal with funding shortages by a pre-emptive disposal of assets. Alternatively, they may adopt a more cautious strategy to mitigate price reactions, thereby distributing the assets sales into smaller portions over time. We model banks’ optimal behaviour using standard optimisation...
In an increasingly digitised world, and within the new reality of digital finance, a fully digitised public currency seems to be a natural step. To this end, central banks have been testing the possibility to issue a digital form of the traditional fiat currency (so-called Central Bank Digital Currency-CBDC). As these projects steadily progress, and in some cases, reach the...
The belief that bank capital helps improve stability takes for granted the idea that increases in capital are an incentive to reduce risk-taking because bank owners would have more to lose (skin-in-the-game) if their banks fail. Nevertheless, given the higher cost of capital as compared to debt, it is also possible that increases in capital would lead to higher risk-taking due to...
The most recent financial crisis exposed to the auditors the risk associated with the audit engagement of their banking clients. Because many banking clients failed and investors suffered trillions of dollars in losses, auditors are now defendants in numerous shareholder and regulatory lawsuits. There is consensus that the financial crisis was created by an abundance of credit...
The fast-paced advances of technology, including artificial intelligence (AI) and machine learning (ML), continue to create new opportunities for banks and other financial institutions. This study reveals the barriers to trust in AI by prudential banking supervisors (compliance with regulations). We conducted a qualitative study on the drivers for adoption of explainability...
We assess the relation of macroprudential policy and competition to bank risk for a sample of 1373 banks from 13 East Asian countries, using the IMF iMaPP dataset of macroprudential policy from 1990 to 2018. To our knowledge, this is the first paper to include both macroprudential policy and individual bank market power, as well as their interaction, as determinants of bank risk...
This article analyses the optimal punishment structure set by a regulator in banking markets under asymmetric information. Relying on a theoretical model, we analyse whether a decreasing, constant, or increasing sanction scheme deters potentially repeated offences in banking. We find that an increasing punishment structure is efficient in reducing gambling bank behaviour. This...
Among the largest economies of the world, the EU not only has set the most ambitious and legally binding objectives for the reduction of the GHG emissions but also it has accompanied these objectives with a “state of the art” regulatory framework in the realms of investor protection and safety and soundness. Our paper focuses on the bank financing channel and highlights...
The article analyses regulatory reforms in the EU to the capital buffers for mitigating risks associated with institutions
The religious principles that characterize the Islamic bank have direct consequences on the models of Corporate Governance which, at the same time, must be in accordance with national and international regulations and best practices. The aim of this paper is to analyze the role of the participatory depositor in the Corporate Governance Models of the Islamic Bank, a special...
We investigate the effectiveness of the euro area’s single supervisory mechanism’s capital relief measures in response to the outbreak of the coronavirus pandemic, in terms of large non-financial corporations’ lending outcomes. Using a granular borrower level dataset and controlling for the policies of other euro area authorities, bank characteristics and demand effects, we find...
Despite widespread recognition among financial regulators and central banks that climate change may threaten financial stability, the causes and consequences of climate-related systemic financial risk remain underexplored. Stress testing has emerged as one of the most prevalent regulatory tools for addressing climate-related financial risks, and this article analyzes the role of...
This paper examines the intersections of fundamental rights and European banking supervision. It contributes to a more nuanced and refined understanding of the importance of European Union (EU) fundamental rights for supervised banks in the absence of an EU-wide administrative code. Since 2014, the European Central Bank (ECB) has assumed prudential supervisory tasks for...