A profit-to-provisioning approach to setting the countercyclical capital buffer

Pfeifer, Lukáš; Hodula, Martin

doi:10.1016/j.ecosys.2021.100853

Cited by 6 publications

(8 citation statements)

References 27 publications

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“…Grosse and Schumann (2014) found the German bank's procyclicality in giving loans with the sound economy chapter, shown by GDP growth. Pfeifer and Hodula (2021) suggested using the profitto-provisioning approach as the base in setup CCB. They use banking prudence indicators to accommodate the profit and loan loss provision under the financial report standard.…”

Section: Literature Reviewmentioning

confidence: 99%

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Countercyclical Capital Buffer: Building the Resilience or Taming the Rapid Financial Cycle?

Widiantoro

2022

SSRN Journal

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Section: Literature Reviewmentioning

confidence: 99%

“…In the last decades, the research on the countercyclical capital buffer and its ability to improve economic resilience has increased, especially in European countries (Didier et al, 2012;Pfeifer and Hodula, 2021). There has been an exposure from the macroprudential supervisory board in each country to implement them since 2014.…”

Section: Introductionmentioning

confidence: 99%

Countercyclical Capital Buffer: Building the Resilience or Taming the Rapid Financial Cycle?

Widiantoro

2022

SSRN Journal

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“…Several researchers who have tested countercyclical policies on finance were carried out by [15][16][17][18][19][20][21][22][23][24][25][26]. Furthermore, [17][18][19][20][21][22][23] show that countercyclical policies can mitigate and reduce bank liquidity risk.…”

Section: Literatur Reviewmentioning

confidence: 99%

Bank Performance Based on Core Capital Amid the COVID-19 Pandemic in Indonesia

Susilowati

Purnama

2022

KSS

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COVID-19 has had an impact on banking, liquidity and credit. The Financial Services Authority (OJK) has tried to mitigate some of these effects with countercyclical policies as stated in OJK regulation number 11/POJK.03/2020. It is however unclear whether the policy can reduce banking risk in the midst of easing or relaxation policies. This research employed secondary data taken from the Indonesian banking statistics published by OJK. Indicators of bank performance used in the study referred to the policies of the OJK and comprised: capital adequacy ratio, core capital ratio to riskweighted asset, return on assets ratio, operational efficiency ratio, net interest margin ratio, loans to deposits ratio, and liquid assets ratio. The performance index analysis was divided into two periods: January 2017- February 2020 and March 2020 - February 2021. The period was divided to determine the quality of bank performance before and after the stipulation of restructuring policy. The index calculation was carried out by determining the weight based on the dimensions (bank performance indicators). The weight given to each of these indicators was conformed to all indicators. The analysis of the bank performance used the composite index of development calculation. Based on the results, the availability of bank capital affected financial performance. The implementation of countercyclical policies had an impact on bank performance in banks that had greater availability of capital. Banks can evaluate and improve strategies in countercyclical implementation to support national economic recovery. Keywords: core capital, CAR, CCR to RWA, ROA, OER, NIMR, LDR

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“…In this context, the bank must save some of their cyclically overestimated profits (expected losses which not materialize) during the financial boom. This profit-to-provisioning approach is relevant to the CCB decision-making process and can contribute to a more precise assessment of accumulated systemic risk and risk materialization (Pfeifer & Hodula, 2021).…”

Section: Banking and Countercyclical Capital Buffer (Ccb)mentioning

confidence: 99%

“…According to BCBS (2010), the deviation of the ratio and GDP from its long-term trend is an indicator that shows a better signal performance for the need to build capital before the crisis. Most banking crisis were identified with excessive credit growth (Bonfim & Monteiro, 2013;Borio & Drehmann, 2009;Pfeifer & Hodula, 2021;Reigl & Uusküla, 2021;Reinhart & Rogoff, 2011;Schularick & Taylor, 2009;Visser & Vuuren, 2018;Wezel, 2019).…”

Section: Previous Researchmentioning

confidence: 99%

The Effectiveness of Banking Countercyclical Policies in the Development of Priority Economic Sectors in Indonesia

Nugroho

Kurnia

2021

GReviewIEB

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Economic development leads to the evolution and improvement of the financial system. In particular, banks grew relatively larger than national output in line with economic developments. This study aims to analyze how banking policy can cause multiplier effects for the macroeconomic sector and be able to reduce the procyclicality of the banking sector with economic growth that touches the aspect of reverse causality. To answer this concern, many international forums approved the formation of documents one of which includes macroprudential aspects by developing countercyclical capital buffer (CCB) indicators that function to monitor the level of procyclicality of the financial system. The research period used is quarterly data from 2010Q1 to 2019Q4. The analytical tool used is structural vector autoregression (SVAR). Based on the results of the impulse response function, all macroeconomic variables used in this study, namely real GDP, inflation, investment, and the exchange rate respond negatively to CCB policies in conventional banks, Islamic banks, and both. The biggest contribution of the three bank models is to the investment variable. Based on the results of sector mapping, it was found that the direction of the development of Indonesia's priority sectors was in the secondary sector or business fields related to the processing industry, such as both food and beverage, clothing and textiles, and chemicals. Public and foreign public confidence in the products of the processing industry in Indonesia is certainly inseparable from the guarantee of certainty in doing business and investment security that will increase the flow of private capital, especially foreign direct investment. This investment security guarantee is an effect of good financial capital liquidity.

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A profit-to-provisioning approach to setting the countercyclical capital buffer

Cited by 6 publications

References 27 publications

Countercyclical Capital Buffer: Building the Resilience or Taming the Rapid Financial Cycle?

Countercyclical Capital Buffer: Building the Resilience or Taming the Rapid Financial Cycle?

Bank Performance Based on Core Capital Amid the COVID-19 Pandemic in Indonesia

The Effectiveness of Banking Countercyclical Policies in the Development of Priority Economic Sectors in Indonesia

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