International Journal of Banking, Accounting and Finance
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International Journal of Banking, Accounting and Finance (5 papers in press)
An assessment of the Fundamental Review of the Trading Book:
The capital requirement impact on a stylised financial portfolio
by Pederzoli Chiara, Torricelli Costanza Abstract: This paper assesses the impact on capital requirements of the Fundamental Review of the Trading Book (FRTB) based on a stylised financial portfolio sensible to the risk factors affected by the review. Our results show the order of magnitude of the increase across the two regulations and the two possible approaches: the standard approach and the internal model approach. We further disentangle the components of the expected increase implied by the FRTB. The most interesting result emerges for the internal model approach, whereby the increase in the capital charge is attributable not only to the change in the risk measure and the inclusion of longer liquidity horizons, but most importantly to the dampening of the diversification benefit. Keywords: fundamental review of the trading book; capital requirements; trading portfolio; VaR; stressed VaR; expected shortfall; liquidity risk; bank regulation; Basel Committee on Banking Supervision.
Borrower characteristics and loan performance: Evidence from micro and small Greek firms by Vasileios Giannopoulos, Eleftherios Aggelopoulos, Antonios Georgopoulos Abstract: Using a unique dataset of 3,294 micro and small enterprise loans granted before the recession by one of the four systemic banks in Greece, this study identifies diverse borrower-specific characteristics of these loans that transformed into non-performing loans (NPLs) during the recession. Also, we capture how their impact on NPLs changes as recession escalates. More detailed, we find that homeownership, the bank deposit relationship, the existence of own facilities, the business equipment lending purpose, and the cash loan collateral are crucial factors for NPL avoidance in recession years. In contrast, high levels of loan to turnover ratio and the age of the firms owner seem to increase substantially the delinquency risk. The paper provides originality as it explicitly utilizes primary micro-specific information substantially differing from the related literature that utilizes aggregated, macroeconomic data, with important implications for policymakers and bank staff regarding lending and repayment policies. Keywords: Non-Performing Loans; micro and small enterprises; borrower-specific characteristics; Greece.
Assessing competitiveness in MENA banking sector in the context of quality of the institutional variables and political conflict risk by Hatem Elfeituri Abstract: This paper investigates competitive conditions and the role of institutional environments and political risk as revenue drivers for commercial banks in the Middle East and North Africa (MENA) region. We examine an extended period (1999-2015) consisting of political and economic unrest and transformation that includes the 2007 global crisis and the recent Arab uprising 2011. The Panzar-Rosse model and Arrelano-Bond and GMM methodologies have been employed to examine such issues. Our findings indicate that MENA banks are still operating under monopolistic competition conditions. With regards to political instability, bank revenues are negatively affected by such matters and policies that favour deregulation and a more inclusive role for all stakeholders in the banking system to stimulate the growth. The findings are beneficial in terms of valuable policy implications to structure the banking system of these countries optimally. Keywords: Panzar-Rose; Institutional; Monopolistic; Competition; Deregulation; MENA.
Effective Monetary policy, Banks' Pricing Behavior and Human development in Africa. by Abdul Ganiyu Iddrisu, Alhassan Andani, Joshua Abor Abstract: This paper empirically examines the effect of monetary policy effectiveness on human development in Africa. We employ both micro-bank level and macro-country level data. Bank level data are taken from the Bank scope database maintained by Fitch/IBCA/Bureau Van Dijk. Series are yearly, covering a sample of 320 banks across 29 African countries. Panel fixed effects, random effects and IV regressions were estimated for the period 2002 to 2013. For our IV estimation, the paper explores an instrumental variable based on the fact that, effective monetary policy is conditional on the independence of the central bank. The regression results that ensued suggests that; first, effective monetary policy translates to high banks loan and deposit prices. Building on these results and employing various specifications of banks pricing strategy, the second test suggests that, high banks pricing induced by effective monetary policy tends to increase human development. Results of the net effects eventually suggest that effective monetary policy, overall, does not improve human development. Keywords: Effective Monetary Policy; Human Development; Banks’ Pricing Behavior; Central Bank Independence; Africa.
Special Issue on: HFAA 2019 Special Topics in Accounting and Finance
Auditors expertise and the effect of the European banking sector CEO skill on audit quality during the European financial crisis by Panayiotis Tachinakis, Michalis Samarinas Abstract: The paper examines whether Eurozone banks that replace their CEOs with highly skilled ones, also switch to industry-expert auditors, thereby increasing the quality of auditing they receive. Using a sample of Eurozone banks, we develop a logistic regression model that incorporates auditor expertise as an audit quality determinant, audit opinion and directorship skill. Moreover, various proxies are used to control for the effect on the type of auditor opinion. The findings indicate that Eurozone banks alter their approach regarding auditor choice, after replacing their CEO with one with a higher level of directorship skill. Moreover, they seem to switch towards auditors specialising in the sector, thus increasing the quality of auditing, but only if they operate in a country facing fiscal sustainability issues. Robustness checks of the results are assertive of the validity of the conclusions reached. There are important implications arising from the study, highlighting that greater managerial performance is not necessarily reflective of financial health and
stability. In fact, banks operating in a harsh financial environment may seek additional reassurance by establishing a higher quality of audit. Keywords: audit quality; Eurozone; banking; auditor expertise; CEO skills. DOI: 10.1504/IJBAAF.2021.10038399