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Banking Regulation and Capital Framework
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Banking Regulation and Capital Framework

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Banking and Finance".

Deadline for manuscript submissions: closed (30 April 2022) | Viewed by 9586

Special Issue Editor

Dr. Cristina Gutiérrez López

E-Mail Website
Guest Editor
Faculty of Economics and Business, Business Management Department, University of León, 24071 León, Spain
Interests: capital regulation; risk management; stress-testing

Special Issue Information

Dear Colleagues,

The banking sector is constantly facing new challenges derived from increased competition and tightened regulations aimed at improving risk management, enhancing capital rules and strengthening banking supervision. The ultimate aim is not to avoid individual bailouts but to achieve a resilient financial system. An international regulatory framework and special national/regional rules determine banks’ behavior and impose limits on financial performance, since these companies have to meet requirements in terms of minimum capital, short- and long-term liquidity ratios, or countercyclical buffers, among others, even more so in response to the last financial crisis. These topics justify the interest in deepening such new regulations and their consequences.

We invite papers that explore the impact of recent regulations on banking systems in any aspect, including, but not limited to, how these rules have been implemented, the outstanding differences among regions or even countries, and the impact on financial performance.

Dr. Cristina Gutiérrez López
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • Financial stability
  • Banking solvency
  • Capital requirements
  • Solvency ratio
  • Liquidity ratio
  • Market discipline
  • Countercyclical buffers

Published Papers (4 papers)

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Research

20 pages, 700 KiB  
Article
Time to Simplify Banking Supervision—An Evidence-Based Study on PCA Framework in India
by Soumik Bhusan, Angshuman Hazarika and Naresh Gopal
J. Risk Financial Manag. 2022, 15(6), 271; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15060271 - 17 Jun 2022
Cited by 2 | Viewed by 2377
Abstract
The financial stability of the commercial banking sector remains one of the critical responsibilities of the Reserve Bank of India (RBI). Weak banks cause instability in the financial system, triggering depositor runs. While several studies covered the prompt corrective action framework (PCA) for [...] Read more.
The financial stability of the commercial banking sector remains one of the critical responsibilities of the Reserve Bank of India (RBI). Weak banks cause instability in the financial system, triggering depositor runs. While several studies covered the prompt corrective action framework (PCA) for identifying weak banks, very few delve into the simplification of the same. This paper debates the opportunities to simplify using new parameters that reflect signs of weakness in a commercial bank. The PCA framework introduced in December 2002 marked a paradigm shift in the RBI’s supervision mechanism. At its inception, the RBI used three parameters (capital to risk-weighted assets, net non-performing assets, and return on assets) to identify weak banks. In 2017, the RBI added two more parameters (tier-1 leverage, common tier-1 equity) to build rigour in the framework. Banks that breach the threshold in any of these financial parameters could come under the RBI’s lenses. Under such a situation, the bank has to operate under constraints imposed on expansion, managerial compensation, raising deposits, and dividends distribution. This article explores new ratios and establishes their application in PCA using “linear discriminant analysis”. We debate reducing the number of parameters from five to two, and conclude that only coverage ratio (new) and credit-to-deposit ratio (new) could simplify PCA without diluting its effectiveness. Full article
(This article belongs to the Special Issue Banking Regulation and Capital Framework)
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32 pages, 3202 KiB  
Article
What’s Different about Bank Holding Companies?
by Ralph Chami, Thomas F. Cosimano, Jun Ma and Celine Rochon
J. Risk Financial Manag. 2022, 15(5), 206; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15050206 - 29 Apr 2022
Cited by 2 | Viewed by 1929
Abstract
We develop a dynamic model of a BHC that encompasses both a trading desk and a loan desk, and explore the role of risk attitude and overleveraging by the trading desk. We trace the impact of monetary policy and market innovations on bank [...] Read more.
We develop a dynamic model of a BHC that encompasses both a trading desk and a loan desk, and explore the role of risk attitude and overleveraging by the trading desk. We trace the impact of monetary policy and market innovations on bank behavior in the presence of Basel III type regulations. We show that the value of the BHC is enhanced by operating both desks. We explore alternative regulatory remedies to ongoing efforts to ring-fence the proprietary trading business, and show that regulations that target bank governance can mitigate possible rogue trading and the overleveraging problem. Full article
(This article belongs to the Special Issue Banking Regulation and Capital Framework)
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24 pages, 514 KiB  
Article
An Equilibrium-Based Measure of Systemic Risk
by Katerina Ivanov, James Schulte, Weidong Tian and Kevin Tseng
J. Risk Financial Manag. 2021, 14(9), 414; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm14090414 - 02 Sep 2021
Viewed by 1914
Abstract
This paper develops and implements an equilibrium model of systemic risk. The model derives a systemic risk measure, loss beta, in characterizing all too-big-to-fail banks using a capital insurance equilibrium. By constructing each bank’s loss portfolio with a recent accounting approach, we perform [...] Read more.
This paper develops and implements an equilibrium model of systemic risk. The model derives a systemic risk measure, loss beta, in characterizing all too-big-to-fail banks using a capital insurance equilibrium. By constructing each bank’s loss portfolio with a recent accounting approach, we perform a comprehensive empirical study of this loss beta measure and document all TBTF banks from 2002 to 2019. Our empirical findings suggest a significant number of too-big-to-fail banks in 2018–2019. Full article
(This article belongs to the Special Issue Banking Regulation and Capital Framework)
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26 pages, 361 KiB  
Article
The Effect of Bank Levy Introduction on Commercial Banks in Europe
by Karolina Puławska
J. Risk Financial Manag. 2021, 14(6), 279; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm14060279 - 21 Jun 2021
Cited by 4 | Viewed by 2445
Abstract
We evaluated the effects of the bank levy (BL) on the profitability of commercial banks and the balance sheet reconstruction, and the shifting of banks’ activities into countries with lower BL rates after BL introduction. Moreover, we investigated the effects of the Basel [...] Read more.
We evaluated the effects of the bank levy (BL) on the profitability of commercial banks and the balance sheet reconstruction, and the shifting of banks’ activities into countries with lower BL rates after BL introduction. Moreover, we investigated the effects of the Basel III and Single Resolution Fund (SRF) introduction on the amount of BL payment. We compared two different BL designs: the Hungarian and the German versions. The results clearly pointed to the negative effect of BL introduction on the ROA of larger Hungarian commercial banks and of smaller commercial banks in Germany. Moreover, the results showed that the introduction of the BL did not influence loan activity in Hungary. However, it decreased the value of the loans from German commercial banks. The results showed that commercial banks in Hungary prefer to restructure their balance or shift assets among different locations or entities to decrease the bank levy. The research findings also showed that Hungarian commercial banks decreased the value of paid BL after the Basel III introduction. On the other hand, the results also showed that the value of paid BL in German commercial banks increased after the Basel III and SRF introduction, especially in larger banks. Full article
(This article belongs to the Special Issue Banking Regulation and Capital Framework)
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