Are Larger Banks More Efficient in the Central Eastern European Countries?

Kozak, Sylwester

doi:10.17951/h.2020.54.2.31-40

Cited by 2 publications

(1 citation statement)

References 27 publications

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“…The research covers 108 banks operating in eleven CEE countries and shows that growing bank's size and market share positively affect its efficiency. Additionally, higher concentration of the banking market has a similar effect (Kozak, 2020). Studies on the impact of the ownership structure of the banking sector on the country's economic situation also pointed out that when comparing the share of domestic capital with foreign capital, the type of domestic capital should be taken into account.…”

Section: Literature Reviewmentioning

confidence: 99%

Foreign Capital in Polish Banks – Its Contribution to Systemic Risk and Level of Concentration

Koleśnik

2023

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Theoretical background: An important source of systemic risk in the banking system is the ownership structure, especially the ratio of foreign capital, which affects not only the results of individual banks but also the situation of the entire sector during the financial crisis. The effects of foreign capital engagement in a local banking system not always have to be exclusively positive. In particular, this refers to the systemic risk contribution of foreign capital in the national banking system as well as foreign capital concentration and potential systemic risk transfer through foreign capital. These threats are becoming especially important for the Polish banking sector, where foreign capital to assets ratio – despite its gradual decrease since 2008 – is still higher than 40%. Purpose of the article: The aim of this article is to assess foreign capital systemic risk contribution in the Polish banking system and the scale of threat posed by possible transfer of this risk through foreign capital. Research methods: Two methods were employed in this study, i.e. (1) supervisory measure of individual banks’ systemic risk contribution, including the guidelines of the European Banking Authority, and (2) SRISK% measure, which shows which part of the systemic capital shortfall is generated by which bank. The systemic capital shortfall, on the other hand, is defined as a sum of additional own funds necessary to meet the regulatory minimum should a 40% fall of total capitalisation of the banking system occur within the subsequent 6 months. At the same time, owing to the application of both of the above methods, we could draw on their strengths while eliminating the identified weaknesses. Main findings: Our analyses did not indicate that the level of foreign capital concentration in the Polish systemically important banks may contribute to systemic risk transfer through foreign capital. Although all Polish banks owned by foreign capital, identified as systemically important, are subsidiaries of the banks which – in their home countries – are also considered as systemically important, their contribution to the Polish systemic risk is generally a few times lower than systemic risk contribution of their parent institutions, with the exception of one bank, which should be carefully monitored by the Polish financial safety net. The rising systemic risk contribution of the banks owned by foreign capital and identified as systemically important in the Polish banking system should not be a matter of concern thanks to the diversified share of individual banks in it. The conclusions drawn in the study are important both in terms of the policies adopted by the safety net institutions and from the point of view of further improvement of systemic risk measures, especially those assessing the contribution of individual banks to this risk.

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Section: Literature Reviewmentioning

confidence: 99%

Foreign Capital in Polish Banks – Its Contribution to Systemic Risk and Level of Concentration

Koleśnik

2023

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Bank performance and financial stability during the COVID-19 pandemic: lessons from the MENA region

Mateev,

Sahyouni,

Moudud-Ul-Huq

et al. 2024

EMJB

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PurposeThis study investigates the role of market concentration and efficiency in banking system stability during the COVID-19 pandemic. We empirically test the hypothesis that market concentration and efficiency are significant determinants of bank performance and stability during the time of crises, using a sample of 575 banks in 20 countries in the Middle East and North Africa (MENA).Design/methodology/approachThe main sources of bank data are the BankScope and BankFocus (Bureau van Dijk) databases, World Bank development indicators, and official websites of banks in MENA countries. This study combined descriptive and analytical approaches. We utilize a panel dataset and adopt panel data econometric techniques such as fixed/random effects and the Generalized Method of Moments (GMM) estimator.FindingsThe results reveal that market concentration negatively affects bank profitability, whereas improved efficiency further enhances bank performance and contributes to the banking sector’s overall stability. Furthermore, our analysis indicates that during the COVID-19 pandemic, bank stability strongly depended on the level of market concentration, but not on bank efficiency. However, more efficient banks are more profitable and stable if the banking institutions are Islamic. Similarly, Islamic banks with the same level of efficiency demonstrated better overall financial performance during the pandemic than their conventional peers did.Research limitations/implicationsThe main limitation is related to the period of COVID-19 pandemic that was covered in this paper (2020–2021). Therefore, further investigation of the COVID-19 effects on bank profitability and risk will require an extended period of the pandemic crisis, including 2022.Practical implicationsThis study provides information that will enable bank managers and policymakers in MENA countries to assess the growing impact of market concentration and efficiency on the banking sector stability. It also helps them in formulating suitable strategies to mitigate the adverse consequences of the COVID-19 pandemic. Our recommendations are useful guides for policymakers and regulators in countries where Islamic and conventional banking systems co-exist and compete, based on different business models and risk management practices.Originality/valueThe authors contribute to the banking stability literature by investigating the role of market concentration and efficiency as the main determinants of bank performance and stability during the COVID-19 pandemic. This study is the first to analyze banking sector stability in the MENA region, using both individual and risk-adjusted aggregated performance measures.

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Are Larger Banks More Efficient in the Central Eastern European Countries?

Cited by 2 publications

References 27 publications

Foreign Capital in Polish Banks – Its Contribution to Systemic Risk and Level of Concentration

Foreign Capital in Polish Banks – Its Contribution to Systemic Risk and Level of Concentration

Bank performance and financial stability during the COVID-19 pandemic: lessons from the MENA region

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