Journal articles: 'Liquidity and credit risks'

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Ahamed, Faruque. "Determinants of Liquidity Risk in the Commercial Banks in Bangladesh." European Journal of Business and Management Research 6, no. 1 (February 19, 2021): 164–69. http://dx.doi.org/10.24018/ejbmr.2021.6.1.729.

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The study examines the bank-specific and external factors that affect the liquidity risk in commercial banks in Bangladesh. The study has been conducted using 23 banks data from 2005-2018, and panel data is used to conduct the regression analysis. Among the bank-specific factors, asset size has a negative relationship with liquidity risk. The larger the bank size, the better the liquidity position and the lower the liquidity risk. Return on equity and capital adequacy ratio has a positive but insignificant relationship with the liquidity risks. In the case of macroeconomic factors, inflation negatively affects the liquidity risks, whereas GDP and domestic credit positively affect. Private and public sector credits increase the investments, which in turn fuel GDP growth. Growth in domestic credit reduces liquidity and may create insolvency. The loan outstanding to asset ratio is positively related to the liquidity risk of the banks. Banks usually increase the loan/advance disbursement to increase profitability, which dries out liquidity and enhances liquidity risk. The study concludes that although several factors are found insignificant yet have positive/negative relation, the banks must carefully evaluate the factors to avoid a future liquidity crisis.

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Kouam, Henri. "Financial stability and liquidity risks in the banking sector across the CEMAC region." Business & Management Studies: An International Journal 9, no. 1 (March 25, 2021): 343–54. http://dx.doi.org/10.15295/bmij.v9i1.1788.

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How does credit from the financial sector and claims on the central government affect banking sector liquidity and financial stability risks? This paper constructs an algorithm, which investigates the impact of domestic credit from the financial sector, bank to capital assets ratio, claims on the central government on banking sector liquidity – a proxy for financial stability. The results show a positive and statistically significant impact of the capital assets ratio on the bank's liquidity of 3.1%. It equally finds that domestic credit and claims on central government hurt bank liquidity, notably of -0.15% and -2.5%, respectively. The study recommends that commercial banks invest in higher-value domestic projects to improve their profitability over the long-run, thereby boosting financial stability. Furthermore, the central bank should make additional liquidity for banks contingent on the amount of credit they provide to the real economy.

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Hammami, Haifa, and Younes Boujelbene. "FINANCIAL RISKS AND STOCK MARKET CRASHES: AN EMPIRICAL ANALYSIS OF THE TUNISIAN STOCK MARKET." Applied Finance Letters 10 (June 16, 2021): 10–23. http://dx.doi.org/10.24135/afl.v10i.379.

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This study aims to investigate the effect of financial risks on the stock market crashes occurrence from 1999 to 2020. Using the windows method, we detect two stock market crises in the Tunisian stock market. Based on the probit model, we find evidence that low stock return risk, low EUR/TND exchange rate risk, high interest rate risk, high credit risk and high liquidity risk increase the occurrence probability of stock market crashes. Our results suggest that the decrease in volatility, particularly in equity and exchange market, the increase in volatility in interest rate, the credit rating downgrades issued by Moody’s and the low liquidity market contribute to crashes in the Tunisian stock market. In summary, financial risks, which are the market risks, the credit risk and the liquidity risk could be leading indicators of crashes in the Tunisian stock market. Keywords: Stock market crashes; Liquidity risk; Credit risk; Market risks.

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Cai, Ruoyu, and Mao Zhang. "How Does Credit Risk Influence Liquidity Risk? Evidence from Ukrainian Banks." Visnyk of the National Bank of Ukraine, no. 241 (September 29, 2017): 21–32. http://dx.doi.org/10.26531/vnbu2017.241.021.

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This study investigates the link between two major risks in the banking sector: liquidity risk and credit risk. Utilizing a novel sample of Ukrainian banks for the period from Q1 2009 to Q4 2015, we document credit risk as having a positive relationship with liquidity risk. Our findings suggest banks with a high level of non-performing loans might not meet depositors’ withdrawal demands, which could lower cash flow and trigger depreciation in loan assets and consequently increase liquidity risk. Furthermore, we find this positive relationship between credit risk and liquidity risk is more pronounced in foreign banks and large banks. Our results are robust with respect to alternative measures of bank risks.

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Dewi, Eneng Trisnawati, and Wimpi Srihandoko. "Pengaruh Risiko Kredit dan Risiko Likuiditas Terhadap Profitabilitas Bank." Jurnal Ilmiah Manajemen Kesatuan 6, no. 3 (December 28, 2018): 131–38. http://dx.doi.org/10.37641/jimkes.v6i3.294.

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Banks in it’s operations are certainly unfree from various risks. The Bank's business risk is uncertainty about a predictable or unpredictable outcome. Non-Performing Loans (NPL) Are financial ratios related to credit risk. Loan to Deposit Ratio (LDR) is a financial ratio related to liquidity risk. This study aims to examine the relationship between credit risk and liquidity risk to profitability at 3 government banks. The data in this study are secondary data. The results of this study indicate that partially credit risk has a significant effect on profitability, and liquidity risk has no significant effect on profitability. Credit risk and liquidity risk simultaneously have an influence on profitability. Keywords: non performing loan, liquidity risk, profitability

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Farooq, Sheikh Muhammad Umer, and Muhammad Zubair Mumtaz. "Examining the Relationship Between Banking Competition and Solvency, Liquidity and Credit Risks in Pakistan." Journl of Applied Economics and Business Studies 4, no. 1 (March 30, 2020): 29–52. http://dx.doi.org/10.34260/jaebs.412.

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This study empirically examines the relationship between the banking competition and the risks faced by the financial sector (i.e. solvency, liquidity, and credit risks) considering 31 banks for the period 2001 to 2018. Banks are further sub-divided into three categories i.e. state-owned banks, foreign banks, and private/commercial banks. The results reveal that Pakistan’s banking industry is relatively elastic and an increase in competition is directly associated with solvency risk, liquidity risk and credit risk of financial institutions and these findings corroborate the competition fragility theory. Besides, state-owned banks have a lesser probability to cope with solvency risk, however, foreign banks appear to face the least liquidity risk whereas private banks appear to face the least credit risk among the entire cluster.

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Monfort, Alain, and Jean-Paul Renne. "Decomposing Euro-Area Sovereign Spreads: Credit and Liquidity Risks*." Review of Finance 18, no. 6 (November 16, 2013): 2103–51. http://dx.doi.org/10.1093/rof/rft049.

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Zheng, Harry. "Interaction of credit and liquidity risks: Modelling and valuation." Journal of Banking & Finance 30, no. 2 (February 2006): 391–407. http://dx.doi.org/10.1016/j.jbankfin.2005.04.026.

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Gefang, Deborah, Gary Koop, and Simon M. Potter. "Understanding liquidity and credit risks in the financial crisis." Journal of Empirical Finance 18, no. 5 (December 2011): 903–14. http://dx.doi.org/10.1016/j.jempfin.2011.07.006.

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10

Kiernan, Kevin F., Vladimir Yankov, and Filip Zikes. "Liquidity Provision and Co-insurance in Bank Syndicates." Finance and Economics Discussion Series 2021, no. 060 (September 24, 2021): 1–59. http://dx.doi.org/10.17016/feds.2021.060.

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We study the capacity of the banking system to provide liquidity to the corporate sector in times of stress and how changes in this capacity affect corporate liquidity management. We show that the contractual arrangements among banks in loan syndicates co-insure liquidity risks of credit line drawdowns and generate a network of interbank exposures. We develop a simple model and simulate the liquidity and insurance capacity of the banking network. We find that the liquidity capacity of large banks has significantly increased following the introduction of liquidity regulation, and that the liquidity co-insurance function in loan syndicates is economically important. We also find that borrowers with higher reliance on credit lines in their liquidity management have become more likely to obtain credit lines from syndicates with higher liquidity. The assortative matching on liquidity characteristics has strengthened the role of banks as liquidity providers to the corporate sector.

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11

Mennawi, Ahmed Nourrein Ahmed. "The The Impact of Liquidity, Credit, and Financial Leverage Risks on Financial Performance of Islamic Banks: A Case of Sudanese Banking Sector." Risk and Financial Management 2, no. 2 (December 26, 2020): p59. http://dx.doi.org/10.30560/rfm.v2n2p59.

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This study aims to investigate the impact of liquidity, credit, and financial leverage risks on the financial performance of Islam banks in Sudan during the period of 2008 - 2018. Panel dataset of 143 observations from (13) banks has been used in this study. Two models of ROA and NPM have been constructed using robust random effects estimates for testing the study hypotheses. The independent variables consist of liquidity and credit risks plus the financial Leverage ratio. Credit risk that measured by nonperformance of loan (financing) and provision of loan (financing) loss ratios; while the liquidity risk measured by cash to deposits ratio, liquid assets to total assets ratio and total loan (financing) to total deposits ratio. The financial performance of Islamic banks in Sudan measured by the ratios of return on assets and net profit margin. The results reveal that the credit risk and financial leverage have significant and negative impact on the financial performance of Islamic banks in Sudan, whereas the liquidity risk generally found to be insignificant. Despite that, the liquidity risk in term of liquid assets to total assets ratio provides a significant and positive influence on the financial performance of Sudanese banks. Finally, the importance of this study is that it touches the most significant types of risks that Sudanese Islamic banks face during their operational cycles.

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Gubareva, Mariya, and Maria Rosa Borges. "Interest rate, liquidity, and sovereign risk: derivative-based VaR." Journal of Risk Finance 18, no. 4 (August 21, 2017): 443–65. http://dx.doi.org/10.1108/jrf-01-2017-0018.

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Purpose The purpose of this paper is to study connections between interest rate risk and credit risk and investigate the inter-risk diversification benefit due to the joint consideration of these risks in the banking book containing sovereign debt. Design/methodology/approach The paper develops the historical derivative-based value at risk (VaR) for assessing the downside risk of a sovereign debt portfolio through the integrated treatment of interest rate and credit risks. The credit default swaps spreads and the fixed-leg rates of interest rate swap are used as proxies for credit risk and interest rate risk, respectively. Findings The proposed methodology is applied to the decade-long history of emerging markets sovereign debt. The empirical analysis demonstrates that the diversified VaR benefits from imperfect correlation between the risk factors. Sovereign risks of non-core emu states and oil producing countries are discussed through the prism of VaR metrics. Practical implications The proposed approach offers a clue for improving risk management in regards to banking books containing government bonds. It could be applied to access the riskiness of investment portfolios containing the wider spectrum of assets beyond the sovereign debt. The approach represents a useful tool for investigating interest rate and credit risk interrelation. Originality/value The proposed enhancement of the traditional historical VaR is twofold: usage of derivative instruments’ quotes and simultaneous consideration of the interest rate and credit risk factors to construct the hypothetical liquidity-free bond yield, which allows to distil liquidity premium.

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Battaglia, Francesca, and Maria Mazzuca. "Securitization and Italian banks’ risk during the crisis." Journal of Risk Finance 15, no. 4 (August 18, 2014): 458–78. http://dx.doi.org/10.1108/jrf-07-2014-0097.

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Purpose – The purpose of this study was to examine the 2007-2009 financial crisis to analyze how securitization relates to the Italian bank risk profile, both in terms of credit and liquidity risks. Design/methodology/approach – To test our research hypotheses, we adopt ordered probit models, in which we regress the changes in credit risk and liquidity on a set of regressors, including two securitization dummy variables plus a vector of control variables. Findings – Our results show that the impact of securitization on the originators risk-taking is not uniform. When credit risk is considered, the securitization effects seem to be statistically significant only during the crisis period. However, when we turn to analyze the bank’s liquidity position, our results show that securitization improves it both during the pre-crisis and the crisis years. Our results support the Basel III initiatives aimed to realize a better integration between the different types of risks (i.e. credit and liquidity risks). Research limitations/implications – The major limitation of our study is related to the analyzed geographic area. Practical implications – First, our results support the Basel III initiatives aimed to realize a better integration between the different types of risks (i.e. credit and liquidity risks). In general, the broad policy implication of the paper is that in some contexts, such as the Italian market, securitization does not necessarily produce negative effects in terms of bank’s risk. Originality/value – This study contributes to the empirical literature on the effects of securitization for banks in several ways. First, we consider the complexity of the bank’s risk profile; second, despite the importance of the Italian securitization market, there is a research void on it. Furthermore, unlike previous studies, our analysis covers the period 2000-2009, including the financial crisis years. Finally, to our knowledge, our methodology (ordered probit models) has not been used in the past in this context.

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Toufaili, Bilal. "THE IMPACT OF RISK MANAGEMENT ON FINANCIAL PERFORMANCE." EUrASEANs: journal on global socio-economic dynamics, no. 3(28) (May 31, 2021): 7–23. http://dx.doi.org/10.35678/2539-5645.3(28).2021.7-23.

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Commercial banks that control a large proportion of overall assets of the financial sector primarily rely on extending credits, and banks may raise their earnings through this function which constitutes one of the major functions of commercial banks. Consequently, and due to the wide multiple risk exposures of commercial banks, the issue of capital structure has become a vital element in determining the viability of banks and their ability to withstand various risks involved. Hence, risk management as such has become an essential part of evaluating various risks, including credit risks, liquidity risks, solvency risks and so forth. It is necessary to remember that banks differ from one to another in many respects, namely, their goals, services and strategies. Thus, banks are facing various risks in their day-to-day operations. The research here has implemented a quantitative methodology throughout distributing a survey over a defined number of respondents, and the results were viewed through the prism of regression analysis and Pearson correlations. The obtained results prove there is a direct relationship between market risk, liquidity risk, credit risk, and solvency risk. The results also prove that the higher the risk management ratios are managed, the higher the net income will be.

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Gurendrawati, Etty, Hera Khairunnisa, I. Gusti Ketut Agung Ulupui, Trisni Suryarini, and Adam Zakaria. "Bank Risk Profile and Credit Growth in Indonesia." Jurnal Ilmiah Akuntansi dan Bisnis 16, no. 1 (January 5, 2021): 84. http://dx.doi.org/10.24843/jiab.2021.v16.i01.p06.

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Banks are one of the important industries in a country, whose importance is evidenced by the management of bank risks. The purpose of this research is to investigate the effect or impact of the risk profile disclosure on banking credit growth in Indonesia for the years 2016, 2017, and 2018. Commercial banks in Indonesia, which provide information related to a complete risk profile in the annual report from 2016 to 2018, were selected as the sample. The risk profile variable is an independent variable consisting of credit risk, market risk, and liquidity risk. Panel data regression with E-Views 8 was used for data processing. The results of the study prove that disclosure of credit risk, market risk, and liquidity have significant influences to the banking credit growth in Indonesia. Keywords: risk profile, credit growth, credit risk, market risk, liquidity risk

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16

Chavaz, Matthieu, and Marc Flandreau. "“High & Dry”: The Liquidity and Credit of Colonial and Foreign Government Debt and the London Stock Exchange (1880–1910)." Journal of Economic History 77, no. 3 (August 21, 2017): 653–91. http://dx.doi.org/10.1017/s0022050717000730.

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We gather a new database to conduct the first historically informed study of the importance of liquidity and credit for government bonds between 1880 and 1910. We argue that colonial and sovereign debt markets were segmented owing to differences in underlying information asymmetries. The result was heterogeneous pricing of colonial and sovereign debt, and different market microstructures and clienteles, themselves influenced by political, institutional, and financial arrangements. We find that sovereign spreads mainly reflected credit risks, while colonial spreads mainly reflected liquidity risks. Liquidity premia were economically large and significant, contributing between 10 percent and 39 percent of colonial spreads. These findings help understanding why the seemingly dry subject of colonial illiquidity inspired passionate disputes and ground-breaking reforms of financial imperial institutions.

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Ivanenko, O. "Statistical evaluation of operational risks influence of credit unions on the structure on their assets." Bulletin of Taras Shevchenko National University of Kyiv. Economics, no. 134 (2013): 23–26. http://dx.doi.org/10.17721/1728-2667.2013/134-1/6.

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According to the results of the statistical analysis of the estimated impact of assets of credit unions and the riskiness of individual transactions to ensure the solvency of credit unions and match quality requirements of liquidity.

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18

Li, Haitao, Chunchi Wu, and Jian Shi. "Estimating liquidity premium of corporate bonds using the spread information in on- and off-the-run Treasury securities." China Finance Review International 7, no. 2 (May 15, 2017): 134–62. http://dx.doi.org/10.1108/cfri-11-2016-0125.

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Purpose The purpose of this paper is to estimate the effects of liquidity on corporate bond spreads. Design/methodology/approach Using a systematic liquidity factor extracted from the yield spreads between on- and off-the-run Treasury issues as a state variable, the authors jointly estimate the default and liquidity spreads from corporate bond prices. Findings The authors find that the liquidity factor is strongly related to conventional liquidity measures such as bid-ask spread, volume, order imbalance, and depth. Empirical evidence shows that the liquidity component of corporate bond yield spreads is sizable and increases with maturity and credit risk. On average the liquidity spread accounts for about 25 percent of the spread for investment-grade bonds and one-third of the spread for speculative-grade bonds. Research limitations/implications The results show that a significant part of corporate bond spreads are due to liquidity, which implies that it is not necessary for credit risk to explain the entire corporate bond spread. Practical implications The results show that returns from investments in corporate bonds represent compensations for bearing both credit and liquidity risks. Originality/value It is a novel approach to extract a liquidity factor from on- and off-the-run Treasury issues and use it to disentangle liquidity and credit spreads for corporate bonds.

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Aluko, Olufemi Adewale, Funso Tajudeen Kolapo, Patrick Olufemi Adeyeye, and Patrick Olajide Oladele. "Impact of Financial Risks on the Profitability of Systematically Important Banks in Nigeria." Paradigm 23, no. 2 (August 12, 2019): 117–29. http://dx.doi.org/10.1177/0971890719859150.

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This study examines the impact of financial risks in form of credit, interest rate and liquidity risk on the profitability of systematically important banks in Nigeria over the period from 2010 to 2016. The fixed effects regression model is estimated with Driscoll–Kraay standard errors in order to produce results that are robust to heteroscedaticity, autocorrelation, cross-sectional dependence and temporal dependence. After controlling for some bank-specific, industry-specific, macroeconomic and institutional factors, the empirical results show that credit and liquidity risks have a positive impact on bank profitability while interest rate does not have an impact. The results are robust to alternative measures of profitability.

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Gregory, Paul R., and Aleksei Tikhonov. "Central Planning and Unintended Consequences: Creating the Soviet Financial System, 1930–1939." Journal of Economic History 60, no. 4 (December 2000): 1017–40. http://dx.doi.org/10.1017/s0022050700026358.

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We use the Soviet state and party archives to study the creation of the Soviet financial system. Although its framers intended to centralize all emission and monitoring of money and credit, in practice the system was characterized by informal mechanisms involving multiple players, soft budget constraints, and massive moral hazards. Enterprises issued “illegal” commercial credits and surrogate monies, causing liquidity growth to far outpace real economic activity. When confronted with the choice of solvency versus plan fulfillment, firms always chose the latter: credit risks were passed on to solvent enterprises, the state bank, and the state budget.

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Diallo, Ousmane, Tettet Fitrijanti, and Nanny Dewi Tanzil. "Analysis of The Influence of Liquidity, Credit and Operational Risk, in Indonesian Islamic Bank’s Financing for The Period 2007-2013." Gadjah Mada International Journal of Business 17, no. 3 (December 18, 2015): 279. http://dx.doi.org/10.22146/gamaijb.8402.

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The purpose of this paper is to analyze the influence of credit, liquidity and operational risks in six Indonesian’s islamic banking financing products namely mudharabah, musyarakah, murabahah, istishna, ijarah and qardh, in order to try to discover whether or not Indonesian islamic banking is based on the “risk-sharing” system. This paper relies on a fixed effect model test based on the panel data analysis method, focusing on the period from 2007 to 2013. The research is an exploratory and descriptive study of all the Indonesian islamic banks that were operating in 2013. The results of this study show that the Islamic banking system in Indonesia truly has banking products based on “risk-sharing.” We found out that credit, operational and liquidity risks as a whole, have significant influence on mudarabah, musyarakah, murabahah, istishna, ijarah and qardh based financing. There is a correlation between the credit risk and mudarabah based financing, and no causal relationship between the credit risk and musharaka, murabahah, ijarah, istishna and qardh based financing. There is also correlation between the operational risk and mudarabah and murabahah based financing, and no causal relationship between the operational risk and musharaka, istishna, ijarah and qardh based financing. There is correlation between the liquidity risk and istishna based financing, and no causal relationship between the liquidity risk and musharaka, mudarabah, murabahah, ijarah and qardh based financing. A major implication of this study is the fact that there is no causal relationship between the credit risk and musharakah based financing, which is the mode of financing where the islamic bank shares the risk with its clients, but there is an influence of credit risk toward mudarabah mode financing, a financing mode where the Islamic bank bears all the risk. These findings can lead us to conclude that the Indonesian Islamic banking sector is based on the “risk sharing” system.

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Diallo, Ousmane, Tettet Fitrijanti, and Nanny Nanny Tanzil. "Analysis of The Influence of Liquidity, Credit and Operational Risk, in Indonesian Islamic Bank’s Financing for The Period 2007-2013." Gadjah Mada International Journal of Business 17, no. 3 (December 18, 2015): 279. http://dx.doi.org/10.22146/gamaijb.8507.

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The purpose of this paper is to analyze the influence of credit, liquidity and operational risks in six Indonesian’s islamic banking financing products namely mudharabah, musyarakah, murabahah, istishna, ijarah and qardh, in order to try to discover whether or not Indonesian islamic banking is based on the “risk-sharing” system. This paper relies on a fixed effect model test based on the panel data analysis method, focusing on the period from 2007 to 2013. The research is an exploratory and descriptive study of all the Indonesian islamic banks that were operating in 2013. The results of this study show that the Islamic banking system in Indonesia truly has banking products based on “risk-sharing.” We found out that credit, operational and liquidity risks as a whole, have significant influence on mudarabah, musyarakah, murabahah, istishna, ijarah and qardh based financing. There is a correlation between the credit risk and mudarabah based financing, and no causal relationship between the credit risk and musharaka, murabahah, ijarah, istishna and qardh based financing. There is also correlation between the operational risk and mudarabah and murabahah based financing, and no causal relationship between the operational risk and musharaka, istishna, ijarah and qardh based financing. There is correlation between the liquidity risk and istishna based financing, and no causal relationship between the liquidity risk and musharaka, mudarabah, murabahah, ijarah and qardh based financing. A major implication of this study is the fact that there is no causal relationship between the credit risk and musharakah based financing, which is the mode of financing where the islamic bank shares the risk with its clients, but there is an influence of credit risk toward mudarabah mode financing, a financing mode where the Islamic bank bears all the risk. These findings can lead us to conclude that the Indonesian Islamic banking sector is based on the “risk sharing” system.

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Al-Afeef, Mohammad Abdel Mohsen, and Atallah Hassan Al-Ta'ani. "The Effect of Risks on Banking Safety: Applied Study on Jordanian Traditional Banks (2005-2016)." International Journal of Economics and Finance 9, no. 9 (August 10, 2017): 102. http://dx.doi.org/10.5539/ijef.v9n9p102.

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Banking sector is one of the most important sectors that support the sustainable economic development in Jordan, therefore this study aimed to test the impact of risks; (Liquidity risk, bank credit risk and interest rate risk) on the safety in the banking sector in the Jordanian commercial banks during the period 2005-2016.The results of the study showed that there is a statistically significant impact for each of liquidity risk and interest rate risk on the safety in the banking sector, and there isn't statistically significant impact for credit risk on the safety in the banking sector during the period of this study, and also find that the explanatory of model was 60.5%, which means that 39.5% due to other factors.

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Tchernykh, S. "Risk Management in Banks." Voprosy Ekonomiki, no. 8 (August 20, 2004): 120–27. http://dx.doi.org/10.32609/0042-8736-2004-8-120-127.

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Problems of managing risks of partnership in banks taking into account the new Central Bank of Russia document "On Organization of Internal Control in Credit Organizations and Bank Groups" are considered in the article. It is pointed out that effective bank risk management including risks of partnership сan be realized only under condition of bona fide competition. Functioning of banks in competitive environment is impossible without risks, their monitoring allows to become competitive on the banking services market if various "black lists" and other unsound negative information leading to lowering the level of liquidity of a credit organization are absent. Methods of managing risks of partnership that become all the more complex under the influence of technological innovations (in particular, the development of operations with credit derivatives) are also analyzed.

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Sutrisno, Sutrisno. "Risiko dan kinerja Bank Perkreditan Rakyat: Studi perbandingan antara BPR Syariah dengan Konvensional di Indonesia." INFERENSI: Jurnal Penelitian Sosial Keagamaan 11, no. 2 (March 26, 2018): 309–28. http://dx.doi.org/10.18326/infsl3.v11i2.309-328.

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The aims of this study were to examine the effect of risks consisting of credit risk (NPL/NPF), capital risk (CAR), liquidity risk (LDR/FDR), and operating risk (OEOI) on rural banking performance as measured by return on assets ROA), the differences in risk and performance of Islamic Rural Banking (IRB) and Conventions Rural Banking (CRB). The population is all banking in Indonesia whether operating in Islamic or conventionally with purposive sampling method. The results showed that NPL in CRB had not significant effect, while NPF IRB had negative significant effect on performance. In contrast, CAR on Islamic Rural Banks had not significant effect, while CAR of conventional rural banking has positive significant effect on performance. Liquidity risks (LDR/FDR), both IRB and CRB have positive significant impact on performance. While the operational risk (OEOI) has a negative significant effect on the performance of CRB as well as IRB. Differential test results indicate that there are significant differences between CRB and IRB in terms of profitability (ROA), credit risk (NPL / NPF), liquidity risk (LDR / FDR) risk, and operating risk (BOPO).

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Permatasari, Ika. "Does corporate governance affect bank risk management? Case study of Indonesian banks." International Trade, Politics and Development 4, no. 2 (October 23, 2020): 127–39. http://dx.doi.org/10.1108/itpd-05-2020-0063.

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PurposeThe purpose of this study is to examine the relationship between corporate governance and risk management of Indonesian banks.Design/methodology/approachImplementation of good corporate governance is measured by good corporate governance composite rating, which is the result of bank's self-assessment. Bank risk managements are measured by market risk, credit risk, liquidity risk and operational risk.FindingsThe study results showed that good corporate governance implementation in Indonesia was able to influence bank risk. There were differences in credit risk, liquidity risk and operational risk in banks with different governance ratings, but not at market risk.Originality/valueThe effectiveness of risk management and good corporate governance implementation is needed to enable banks to identify problems early, to follow up on rapid improvements and to be more resilient to crises. This study is an analysis of the relationship between corporate governance and banks' risk management in Indonesia. In particular, risk management is measured by four risks: market risk, credit risk, liquidity risk and operation risk.

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Ilyas, Rahmat. "Analisis Risiko Pembiayaan Bank Syariah." BISNIS : Jurnal Bisnis dan Manajemen Islam 7, no. 2 (October 23, 2019): 189. http://dx.doi.org/10.21043/bisnis.v7i2.6019.

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Financing or financing is funding provided by one party to another party to support the planned investment, whether done alone or in an institution. Risk in the banking context is a potential event, both predictable and unpredictable that has a negative impact on bank income and capital. The main reason for the occurrence of credit risk is that banks are too easy to lend or invest because they are too required to take advantage of excess liquidity, so that credit assessments are less careful in anticipating various possible business risks that they finance. Risk management is needed to identify, measure and control various types of risk, because it becomes a very basic tool to support the sustainability of the bank's business. The type of risk management that is closely related to the role of DPS is reputation risk, which in turn has an impact on displaced commercial risk, such as liquidity risk and other risks. The function and role of DPS in Islamic banks has strong relevance to the risk management of Islamic banking, namely reputation risk, which in turn impacts other risks such as liquidity risk.

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Inegbedion, Henry, Bello Deva Vincent, and Eseosa Obadiaru. "Risk Management and the Financial Performance of Banks in Nigeria." International Journal of Financial Research 11, no. 5 (September 22, 2020): 115. http://dx.doi.org/10.5430/ijfr.v11n5p115.

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The study examined “risk management and financial performance of banks in Nigeria” with focus on commercial banks. The broad objective of the study was to ascertain the effect of risk asset management on the optimal financial performance of commercial banks in Nigeria. The study is a longitudinal survey, so the ex-post facto research design was applied. Research data were analysed using generalized method of moments (GMM) and vector Error Correction Model, after testing and adjusting the data for stationarity and Cointegration.The research findings were: Banks’ profitability is significantly influenced in the short run by liquidity risk and in the long-run by credit risk, capital adequacy risk, leverage risk and liquidity risk. Furthermore, profitability measured by ROaA was found to be positively related to liquidity risk but negatively related credit risk. Arising from the findings, there is the need for effective risk management, especially credit, capital adequacy, leverage and liquidity risks, to enhance the profitability of banks. By helping to enhance the going concern of banks, risk management will help to reduce retrenchment and unemployment and hence help to forestall the attendant social vices.

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Nguyen, Phuong Anh, and Thi Thuy Trang Dinh. "Factors Affecting Bank Risks in Vietnam." International Journal of Economics and Finance 13, no. 10 (September 5, 2021): 42. http://dx.doi.org/10.5539/ijef.v13n10p42.

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The research identifies the determinants of credit risk and insolvency risk in the Vietnamese banking sector. Using the data sample of 25 commercial banks over ten years (2008-2017), we examine the relationship between internal variables, external variables, and bank risks. In this study, the independent variables are bank size, bank capitalization, return on asset, return on equity, loan loss provision, capital adequacy ratio, inflation rate, and GDP growth rate. In contrast, non-performing loans and Z-score are the dependent variables. The empirical results show that all factors have an effect on bank risks except liquidity ratio.

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Qabrati, Isuf. "Risk Management in Banking Sector: Empirical Data from Commercial Banks in Kosovo." PRIZREN SOCIAL SCIENCE JOURNAL 3, no. 1 (March 24, 2019): 6. http://dx.doi.org/10.32936/pssj.v3i1.71.

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Financial institutions are an important source of financial system functioning of a country and include banks, pension funds, insurance companies, microfinance institutions, and so on. While the risk of financial institutions presents their ability to lose, consequently the change of the actual cash flow from the planned one. Among the major risks facing financial institutions are credit risk, market risk, operational risk and liquidity risk.The purpose of this paper is to investigate the risk management in financial institutions by making a survey with the banking sector, which accounts for most of the financial activities. For this reason, eight financial indicators are used to calculate the financial performance of the eight commercial banks involved in the research, which operate in Kosovo, taking into account the last two years of their operation. From the data derived from these indicators, using the One-Way ANOVA analysis, differences between banks were investigated according to their performance. As a result, it has been found that there are significant differences between banks according to liquidity risk, credit risk, equity risk and profitability risk. In addition, a linear regression model was also performed, which shows that the change in the return on equity (ROE) depends almost entirely on the change in the other seven indicators included. Key words: Commercial Banks,Risks, Liquidity, Credit, Equity, Profitability.

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Safitri, Ririn, and Perminas Pangeran. "Balanced Scorecard and ISO 31000, Risk Management Integration to Improve Performance: Case Study at Indonesian Credit Union." International Journal of Multicultural and Multireligious Understanding 7, no. 6 (August 3, 2020): 527. http://dx.doi.org/10.18415/ijmmu.v7i6.1802.

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This study aimed to integrate the Balanced Scorecard and risk management processes with the Cindelaras Tumangkar Credit Union (CTCU), Condong Catur 01 Branch office. CTCU has four Branch Offices (BO), meanwhile this study was conducted on one of the CTCU at Condong Catur 01 Branch Office. The risk assessment was based on the framework model of ISO 31000 and Balanced Scorecard. The result of the risk identification showed that the risks faced by CTCU were financial risk (credit risk, market risk, liquidity risk), operational risk, and business risk. In the risk analysis process, the result stated that the credit risk was the highest risk, meanwhile the market risk was the medium risk. Based on the evaluation results, the financial risks needed urgent priority to be handled because the risks had the highest impact on the performance degradation. Those risks were managed by doing risk mitigation.

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DJEBALI, Nesrine, and Khemais ZAGHDOUDI. "Corporate Governance in Banks and its Impact on Credit and Liquidity Risks: Case of Tunisian Banks." Asian Journal of Finance & Accounting 11, no. 2 (December 2, 2019): 148. http://dx.doi.org/10.5296/ajfa.v11i2.13929.

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Given the crucial role played by banks in a developing country like Tunisia, it is important to maintain their stability. The purpose of this article is twofold. First, it studies the effect of banking governance on credit risk. Second, it tests the relationship between bank governance mechanisms and liquidity risk. In this article, we have combined literature regarding two areas of governance, first, ownership structure and board characteristics, and second, their impact on banking risks. To achieve this goal, we used a sample of 10 Tunisian banks observed during the period 1998-2015. The econometric approach used in this study is based on both the fixed and random effects models of panel data analysis. Our results show that credit risk and liquidity risk are directly related to bank governance mechanisms. These findings enable bank managers to better understand the factors influencing bank risk and serve as a basis for regulations to strengthen bank governance.

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Hafez, Hassan M. "Risk management practices in Egypt: A comparison study between Islamic and Conventional banks." Risk Governance and Control: Financial Markets and Institutions 5, no. 4 (2015): 257–70. http://dx.doi.org/10.22495/rgcv5i4c2art1.

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The purpose of this research is to examine the degree to which the Egyptian banks use risk management practices and techniques to eliminate associated risks to their business. Not only has that but also to compare between Islamic and conventional banked in terms of risk management practices. A standardized questionnaire was used to cover the main aspects of risk management: understanding risk, risk management, risk identification, risk assessment and analysis; risk monitoring and risk management practices and finally the types of risks faced by the two set of banks. The study found that the most challenging types of risks facing Islamic and conventional banks in Egypt are credit and liquidity risks. Conventional banks are more efficient in risk management and use more sophisticated techniques and practices. Liquidity risk is the most prominent and vital risk for Islamic Banks.

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Chun, Albert Lee, Ethan Namvar, Xiaoxia Ye, and Fan Yu. "Modeling Municipal Yields With (and Without) Bond Insurance." Management Science 65, no. 8 (August 2019): 3694–713. http://dx.doi.org/10.1287/mnsc.2017.3007.

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We develop an intensity-based model of municipal yields, making simultaneous use of the credit default swap premiums of the insurers and both insured and uninsured municipal bond transactions. We estimate the model individually for 61 municipal issuers by exploiting the dramatic decline in credit quality of the bond insurers from July 2007 to June 2008, and decompose the municipal yield spread based on the estimated parameters. The decomposition reveals a dominant role of the liquidity component as well as interactions between liquidity and default similar to those modeled by Chen et al. [Chen H, Cui R, He Z, Milbradt K (2018) Quantifying liquidity and default risks of corporate bonds over the business cycle. Rev. Financial Stud. 31(3):852–897.] for corporate bonds. Toward the end of the sample period, our model also reproduces the “yield inversion” phenomenon documented in the literature. This paper was accepted by Neng Wang, finance.

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Sahani, Kalpana, Soni Sahani, Sundip Bansal, Deepak Shakya, and Binay Shrestha. "Credit Risk Management of Kumari Bank Ltd. Nepal." International Journal of Emerging Research in Management and Technology 7, no. 4 (April 20, 2018): 14. http://dx.doi.org/10.23956/ijermt.v7i4.2.

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Banks are always faced with different types of risks that may have a potentially negative effect on their business. Risk-taking is an inherent element of banking and, indeed, profits are in part the reward for successful risk taking in business. On the other hand, excessive and poorly managed risk can lead to losses and thus endanger the safety of a bank's depositors. Risks are considered warranted when they are understandable, measurable, controllable and within a bank’s capacity to readily withstand adverse results. Sound risk management systems enable managers of banks to take risks knowingly, reduce risks where appropriate and strive to prepare for a future, which by its nature cannot be predicted.Financial institutions are subject to a number of risks such as Credit risk, Market risk management, Foreign exchange risk, Operational risk, and Liquidity risk. Although credit risk has always been of primary concern to these institutions, its importance became paramount during the recent financial crisis. The crisis exposed the shortcomings of existing risk management systems, and several firms saw significant losses resulting from failure of their counterparties to deliver on contracts. Firms may also be worried about a second recession, which makes credit risk a top priority.

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Castellani, Davide, and Peter Cincinelli. "Dealing with Drought-Related Credit and Liquidity Risks in MFIs: Evidence from Africa." Strategic Change 24, no. 1 (January 2015): 67–84. http://dx.doi.org/10.1002/jsc.1998.

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SALIM, AL-SAADI MOHANAD RAHIM. "THE ROLE OF FINANCIAL ANALYSIS INDICATORS IN THE PROCESS OF RISK REDUCTION IN COMMERCIAL BANKS." EKONOMIKA I UPRAVLENIE: PROBLEMY, RESHENIYA 2, no. 2 (2021): 73–77. http://dx.doi.org/10.36871/ek.up.p.r.2021.02.02.013.

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The article is devoted to the use of financial analysis for the purposes of risk management of a commer-cial bank. The paper defines the bank risk, provides a classification of banking risks, and also uses the exam-ple of the largest Russian bank, Sberbank PJSC, to calculate the main indicators used in assessing the finan-cial risks of a credit institution. In particular, the dynamics of indicators of liquidity and financial stability, indi-cators of credit risk assessment, indicators of market risk assessment are analyzed. Based on the results of the calculations, the relevant conclusions were drawn and basic recommendations for the bank’s financial risk management were developed.

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Agrawal, Tarunika Jain, and Sanjay Sehgal. "Dynamic Interaction of Bank Risk Exposures: An Empirical Study for the Indian Banking Industry." IIM Kozhikode Society & Management Review 7, no. 2 (May 21, 2018): 132–53. http://dx.doi.org/10.1177/2277975218767543.

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Banks are exposed to different types of risks in the process of financial intermediation and maturity transformation. The experience of the extant global financial crisis provided ample evidence of interaction among bank risks and perils of ignoring interactions in the changing economic, technological and regulatory environment. In this study, we assess the dynamic interaction among bank risks for the entire banking sector and bank groups based on various bank-specific characteristics in a vector autoregression framework, including variance decomposition and impulse response function analysis. We estimate the market measures of different risks using a multivariate GARCH (1, 1) in mean model. The study uses weekly bank level data from 23 October 2004 to 1 August 2014 for 40 listed Indian banks. The findings suggest that there is a positive interaction between equity risk and all other risks. Credit risk and exchange rate risk have a reciprocal relationship. It has also been observed that equity risk impacts credit risk positively. Interest rate risk seems to be affected by its lagged values and does not appear to be affected by other risks. The study highlights the role of liquidity in reducing bank risk exposures and supports new liquidity standards introduced in Basel III. The results improve the understanding of the interaction among risk exposures, which may enhance the supervisory process in the Basel framework. The risk interactions must be kept in mind for making capital provisioning, and an integrated approach to risk management by banks is more desirable.

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Nesvetailova, A. "The Lingering Puzzles of the Global Credit Crunch, or an Essay on the Liquidity Illusion." Voprosy Ekonomiki, no. 12 (December 20, 2010): 33–58. http://dx.doi.org/10.32609/0042-8736-2010-12-33-58.

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As lessons from the global financial crisis of 2007-2009 are being drawn, some rather uncomfortable questions about the political economy of the global credit crunch continue to linger. The most worrying of these include the presence of fraud and illicit practices at many levels of the financial practice during the credit boom, and the fact that a series of whistleblowers and warning signs of the coming crisis had been ignored on a systematic basis. Analyzing the evidence, the paper suggests that it is a pervasive illusion of wealth-creating capacity of the financial markets that explains the key causes of the credit crisis. This phenomenon can be understood as illusion of liquidity. Developing a theoretical framework for understanding this phenomenon, the author argues that it was the illusion of liquidity that helped conceal not only the true magnitude of risks in the system, but most controversially, the mounting signs of the coming meltdown.

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F. O., Ifeanyieze, Nwachukwu C. U., Onah F. C., Mgbenka` R. N., Ekenta L. U., Nwankwo C. U., Onah Ogechukwu, et al. "Effect of Bank Holding Company Structure on Farmers’ Financial Welfare in Nigeria." Journal of Social Sciences Research, no. 512 (December 5, 2019): 1723–33. http://dx.doi.org/10.32861/jssr.512.1723.1733.

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This study examines the impact of bank holding structure on the financial welfare of farmers. We used an expost facto research design and studied all the 18 deposit money banks in Nigeria. We used dummy variable to measure bank conglomerate structure for the period between 2001 and 2018. We also identified the features of financial holding companies based on firms’ specific variables including portfolio condition, competitive standing, equity characteristics and sizes. Based on our analysis, bank holding structures significantly and positively affect banks’ propensity to create risk assets to farmers (coefficient=0.34; p-value less 5%). This implies that ring fencing banks leads to increase in credit availability to farmers and consequently their welfare advancement in Nigeria. Banks with holding structure have competitive advantage and this competiveness benefits farmers significantly (coefficient=0.05; p-value < 0.05). Our analysis also shows that banks with holding structures diversify into non-interest source of revenue, which yields positive and significant effect on farmers’ financial welfare (coefficient= 2.05). Thus, diversifying conglomerating banks can outperform their peers in terms of risk asset making for farmers to extent that relative to non conglomerate banks, up to 2.05% of credit is allocated to farmers for every unit change in bank market due to holding structures. Variation in deposit demands, and gross assets were found to advance loans to farmers. However, default risks and liquidity risk of conglomerate banks limits their credit availability to farmers, which implies that conglomerate banks are highly sensitive to liquidity and default risks. We also found that conglomerate banks allocates risks asset to farmers based on the national economic growth level. Thus, as the economy improves conglomerate banks’ desire to make risk assets to farmers also increases. We recommend that regulators should improve economic growth in order to draw banks into lending to farmers. Conglomerate banks should be protected from default shocks and liquidity risks in order to encourage them to lend more to farmers.

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Jacobs, Johann. "The regulatory treatment of liquidity risk in South Africa." South African Journal of Economic and Management Sciences 15, no. 3 (August 22, 2012): 294–308. http://dx.doi.org/10.4102/sajems.v15i3.209.

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The Basel accord describes the regulatory capital requirements for credit, market and operational risk. The accord aims to provide guidelines to level the playing field for all internationally active banks and to protect consumers against these risks. Despite the growing significance to bank solvency of liquidity risk, it is omitted from the new accord2. Banks are not required to measure and manage this risk yet they are often considerably exposed to the threat of severely diminished liquidity. This omission from the accord could have dire consequences for banks and the economy in which they operate: liquidity crises can occur without warning and spread quickly to other parts of the financial system. This article critically explores current practices in South Africa and proposes guidelines for effective liquidity risk regulation.

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T. T. Tran, Tu, Yen T. Nguyen, Thuy T.H. Nguyen, and Long Tran. "The determinants of liquidity risk of commercial banks in Vietnam." Banks and Bank Systems 14, no. 1 (February 26, 2019): 94–110. http://dx.doi.org/10.21511/bbs.14(1).2019.09.

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This research identifies factors that explain the liquidity of commercial banks in the Vietnam banking system from 2010 to 2015. Using the OLS regression method for analysis, it was found that: the interbank market helps commercial banks improve their liquidity; the larger the loan size, the higher the liquidity risk; good credit risk management has a positive impact on liquidity risk management; and long-term interest rate is negatively related to the liquidity of commercial banks. The research also makes recommendations on liquidity risk management policies to banks and policy-makers from the Government and the State Bank of Vietnam.

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Aydemir, Resul, and Bulent Guloglu. "How do banks determine their spreads under credit and liquidity risks during business cycles?" Journal of International Financial Markets, Institutions and Money 46 (January 2017): 147–57. http://dx.doi.org/10.1016/j.intfin.2016.08.001.

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Al-Eitan, Ghaith N., and Ismail Y. Yamin. "The Threats of Unsystematic Risks in Jordanian Commercial Banking Sector." International Journal of Economics and Finance 9, no. 9 (August 24, 2017): 175. http://dx.doi.org/10.5539/ijef.v9n9p175.

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The objective of this study is to empirically examine the effect of unsystematic risks on the performance of commercial banks in Jordan, using panel data for the period of 10 years (2005-2015). The study uses earning per share and dividends as dependent variables to represent Banks’ performance. The empirical analysis based on the fixed effect model selected on the basis of Hausman test. The results indicate that the impact of Non-performing loans on commercial banks’ dividends is positive and significant while the impact of capital adequacy is negative and statistically significant on dividends. The results indicate that the credit risk, liquidity risk, non-performing loan and capital adequacy have significant effect on earnings per share and the effects are negative as expected. Based on the study it is recommended that the Jordanian commercial banks needs enhance the process of credit risk management to determine loan defaulter and impose the appropriate legal action against them.

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Alkhazali, Ahmad, Ghaith N. Al-Eitan, Hayel Al-serhan, Tareq O. Bani-Khalid, and Ahmad A. Al-Naimi. "The effect of internal risks on the performance of Jordanian commercial banks." Accounting 7, no. 7 (2021): 1819–24. http://dx.doi.org/10.5267/j.ac.2021.6.002.

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This study mainly aimed to examine the effect of internal risks on the financial performance of the Jordanian commercial banks. The study sample comprised the entire commercial banks that are included in the Amman Stock Exchange (ASE) spanning the period from 2009 to 2019. The study formulated four hypotheses, which are related to the effects of liquidity risk and leverage risk on the bank’s performance, proxied by ROA and ROE. Based on the results, liquidity risk did not have a significant effect on both ROA and ROE, while leverage risk did not have a significant effect on ROA, but it did on ROE. It can thus be concluded that the use of financial leverage should be taken into consideration because of its negative influence on the banks’ financial performance, specifically on the shareholders’ returns. It is recommended that future studies examine the effect of additional risk types, like credit risk and operational risk on the performance of banks.

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Serly, Serly. "Analyzing The Effect Of Bank Characteristic On Profitability In Banking Companies Listed In Indonesia Stock Exchange." EKONIKA Jurnal Ekonomi Universitas Kadiri 6, no. 1 (April 30, 2021): 100. http://dx.doi.org/10.30737/ekonika.v6i1.939.

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This research is conducted to analyze the effect of bank characteristics on go public banks’ profitability in Indonesia. Return on asset, return on equity, and net interest margin are dependent variables in this research and involves five types of banking risks (credit, liquidity, security, capital, and insolvency), bank size and diversification, and cost efficiency. Research objects of this research are banking companies listed on Indonesian Stock Exchange (IDX). The research data is financial data issued by IDX from 2014 to 2018. Observation data collected in this research is processed using the regression panel method. The result from this research is that credit risk and insolvency risk has effect on return on asset and return on equity significantly. Liquidity risk, capital risk and bank size don’t have significant effect. Security risk and bank diversification effecting net interst margin significantly. Cost efficiency has effect on profitability significantly.

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MAI, JAN-FREDERIK. "PRICING-HEDGING DUALITY FOR CREDIT DEFAULT SWAPS AND THE NEGATIVE BASIS ARBITRAGE." International Journal of Theoretical and Applied Finance 22, no. 06 (September 2019): 1950032. http://dx.doi.org/10.1142/s0219024919500328.

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Assuming the absence of arbitrage in a single-name credit risk model, it is shown how to replicate the risk-free bank account until a credit event by a static portfolio of a bond and infinitely many credit default swap (CDS) contracts. This static portfolio can be viewed as the solution of a credit risk hedging problem whose dual problem is to price the bond consistently with observed CDSs. This duality is maintained when the risk-free rate is shifted parallel. In practice, there is a unique parallel shift [Formula: see text] that is consistent with observed market prices for bond and CDSs. The resulting, risk-free trading strategy in case of positive [Formula: see text] earns more than the risk-free rate, is referred to as negative basis arbitrage in the market, and [Formula: see text] defined in this way is a scientifically well-justified definition for what the market calls negative basis. In economic terms, [Formula: see text] is a premium for taking the residual risks of a bond investment after interest rate risk and credit risk are hedged away. Chiefly, these are liquidity and legal risks.

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Indrasasmita, Taufan, and Imron Mawardi. "RISIKO PEMBIAYAAN MODAL KERJA DI BANK JATIM SYARIAH." Jurnal Ekonomi Syariah Teori dan Terapan 6, no. 9 (January 17, 2020): 1770. http://dx.doi.org/10.20473/vol6iss20199pp1770-1782.

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The results showed that the risk management process of working capital financing at Bank Jatim Syariah consists of risk identification, risk analysis, risk control and risk evaluation. The main risks in working capital financing are credit risk, reputation risk, and liquidity risk. Bank Jatim Syariah mitigates credit risk by analyzing risk using six methods of Bank Jatim Syariah analysis, which are management analysis, financial analysis, character analysis, facility analysis, business environment condition analysis and collateral analysis or guarantee. After conducting this analysis, Bank Jatim Syariah uses 3R control, which is rescheduling, restructuring and reconditioning.Keywords: Risk, Financing, Bank Jatim Syariah

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Dunne, Peter G. "Positive Liquidity Spillovers from Sovereign Bond-Backed Securities." Journal of Risk and Financial Management 12, no. 2 (April 9, 2019): 58. http://dx.doi.org/10.3390/jrfm12020058.

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This paper contributes to the debate concerning the benefits and disadvantages of introducing a European Sovereign Bond-Backed Securitisation (SBBS) to address the need for a common safe asset that would break destabilising bank-sovereign linkages. The analysis focuses on assessing the effectiveness of hedges incurred while making markets in individual euro area sovereign bonds by taking offsetting positions in one or more of the SBBS tranches. Tranche yields are estimated using a simulation approach. This involves the generation of sovereign defaults and allocation of the combined credit risk premium of all the sovereigns, at the end of each day, to the SBBS tranches according to the seniority of claims under the proposed securitisation. Optimal hedging with SBBS is found to reduce risk exposures substantially in normal market conditions. In volatile conditions, hedging is not very effective but leaves dealers exposed to mostly idiosyncratic risks. These remaining risks largely disappear if dealers are diversified in providing liquidity across country-specific secondary markets and SBBS tranches. Hedging each of the long positions in a portfolio of individual sovereigns results in a risk exposure as low as that borne by holding the safest individual sovereign bond (the Bund).

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Hafez, Hassan M., and Osama A. El-Ansary. "Determinants of capital adequacy ratio: an empirical study on Egyptian banks." Corporate Ownership and Control 13, no. 1 (2015): 1166–76. http://dx.doi.org/10.22495/cocv13i1c10p4.

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Capital adequacy rules are safety valve for regulators and banks’ clients/shareholders to reduce expected risks faced by commercial banks especially for cross border transactions as these rules are applied compulsory by all banks internationally. Applying these rules will achieve rational management and governance. This paper examines explanatory victors that influence capital adequacy ratio (CAR) in the Egyptian commercial banks. The study covers 36 banks during the period from 2003-2013. We examined the relationship between CAR as dependent variable and the following independent variables: earning assets ratio, profitability, and liquidity, Loan loss provision as measure of credit risk, net interest margin growth, size, loans assets ratio and deposits assets ratio. Furthermore, we investigate determinants of CAR before and after the 2007-2008 international financial crises. Results vary according to the period understudy. For the whole period 2003 to 2013 results show that liquidity, size and management quality are the most significant variables. Before the period 2008 results show that asset quality, size and profitability are the most significant variables. After the period 2009 results show that asset quality, size, liquidity, management quality and credit risk are the most significant variable that explain the variance of Egyptian banks’ CAR.

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Journal articles on the topic 'Liquidity and credit risks'

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