Bank risk, competition and bank connectedness with firms: A literature review

Badarau, Cristina; Lapteacru, Ion

doi:10.1016/j.ribaf.2019.03.004

Cited by 24 publications

(25 citation statements)

References 146 publications

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“…They also adopted a defensive strategy, because of the criticism of the indigenous banks by some multinational and foreign banks, to educate the general public and customers on the banks’ current situation. As a regulatory directive, the recapitalisation distorted the banks’ operations and competitiveness (Badarau and Lapteacru, 2020) to raise additional capital from both the domestic and international markets, hence inducing partnership with GAT. Conclusively, despite the negative outcomes of the recapitalisation, the loss of public confidence, and systematic effects (Beccalli et al , 2018; Claessens et al , 2010), the recapitalisation has increased public confidence in the indigenous banks in Ghana and has made banks more robust to undertake large transactions because of the new capital injection.…”

Section: Discussion Theoretical Implication Recommendation and Conclu...mentioning

confidence: 99%

“…the new capital requirement. Such regulatory directives (Badarau and Lapteacru, 2020) distort the business environment, affecting bank competitiveness and risk-taking strategies.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The effects of recapitalisation are discussed in the literature. For instance, Beccalli et al (2018) described the adverse impacts on sources for raising additional capital, bank size, risk-taking behaviour and lending rates (Badarau and Lapteacru, 2020; Beccalli et al , 2018; Coccorese and Ferri, 2020). Coccorese and Ferri (2020) revealed that bank consolidation (merger and acquisition), as a source of raising additional capital, negatively impact on the banks’ ethics and mission, bank identity and credit supply to borrowers who are usually served by smaller banks, rather than by bigger banks.…”

Section: Literature Reviewmentioning

confidence: 99%

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Is recapitalisation regulation a disrupter? Survival and sustainability of indigenous Ghanaian banks

Takyi

Naidoo

2022

QRFM

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Purpose This study aims to explore how the implementation of the recapitalisation by the Bank of Ghana disrupted the indigenous banks’ sources of accessing capital to raise the required amount within the mandatory stipulated time/deadline. Design/methodology/approach This study used purposive sampling techniques to interview key role players and senior members involved in the bank’s recapitalisation process and/or have in-depth information on the 2017–2018 recapitalisation period. Findings This study revealed that government directives significantly shape banks regulations and strategy; accordingly, any state-directed policies must be communicated cautiously, well explained and implemented to reduce any negative consequences. Originality/value This study makes a significant contribution to knowledge by exploring how directives (arbitrary) of regulatory bodies can influence the business as well as its other stakeholders (such as the depositors, public, among others). Secondly, the study highlights how the delays in government support may not derive the benefits expected by the regulator.

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Section: Discussion Theoretical Implication Recommendation and Conclu...mentioning

confidence: 99%

“…the new capital requirement. Such regulatory directives (Badarau and Lapteacru, 2020) distort the business environment, affecting bank competitiveness and risk-taking strategies.…”

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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Is recapitalisation regulation a disrupter? Survival and sustainability of indigenous Ghanaian banks

Takyi

Naidoo

2022

QRFM

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“…The global financial crisis in 2008 raised the concern of scholars about the systemic risk of the financial system [1][2][3]. The growing interconnectedness of the global economy, the rapid expansion of Internet finance, and the impact of COVID-19 on the global economy have all increased financial risks in recent years.…”

Section: Introductionmentioning

confidence: 99%

Systemic risk of multi-layer financial network system under macroeconomic fluctuations

Gao

Jin

2022

Front. Phys.

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As the global economy continues to integrate, COVID-19 is affecting businesses around the world, causing the financial system to become more complicated. The complicated relationship between various agents in the financial system makes potential hazards more easily transmitted. Most studies of systemic risks have focused on single-layer networks, and macroeconomic fluctuations have not been quantified in multi-layer models of financial networks. In this paper, three different macroeconomic shock scenarios (showing upward, downward, and random trends) are constructed to affect the firm’s business activities, and a multi-layer financial network model is developed to simulate systemic risk under macroeconomic fluctuations. Firms with medium and high leverage and small asset sizes, as well as banks with smaller asset sizes and fewer bank-firm credit linkages, are found to be more likely to default. The study also found that average firm leverage exhibits two inflection points, causing banks’ default probabilities to “rise, then fall, and then rise,” with the inflection point value being the lowest under the upward trend of macroeconomics. In addition, the higher the ratio of firm loans to total bank assets, the more likely the bank is to default. Appropriate loan maturity extension has also helped to reduce systemic risk, especially in light of the macroeconomic downward trend. Furthermore, improving the capital adequacy ratio can reduce the bank’s default probability under macroeconomic fluctuations.

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“…Therefore, this study aims to test the non‐linear link between bank stability and bank competition in GCC countries as well as whether competition and concentration co‐exist in GCC countries. In addition, the empirical evidence covering both developed and developing countries in both single and cross country studies, on both conventional and Islamic banks, have yet to reach any consensus on whether competition is a friend or foe for a banking system (Azmi, Ali, Arshad, & Rizvi, 2019; Badarau & Lapteacru, 2019). This study examines the relationship between competition and stability of conventional and Islamic banks for the Gulf Cooperation Council (GCC).…”

Section: Introductionmentioning

confidence: 99%

Does competition lead to financial stability or financial fragility for Islamic and conventional banks? Evidence from the GCC countries

et al. 2020

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This paper investigates the nexus between stability and competition in the banking sector of the Gulf Cooperation Council. We examined a sample of 75 banks over the period 2006–2016. We found a U‐shaped relationship between bank stability and competition suggesting competition‐stability and competition‐fragility nexus. Banking concentration was found to affect instability negatively, which supported the “too important to be bailed out” view. Furthermore, we found that Islamic banks were less stable compared to conventional banks. We also found that bank size, profitability and capital regulation increase bank stability. In addition, the stock market return and the level of debt‐to‐GDP increase instability while the growth in oil price increase stability. Our findings are relevant to regulators to impose or release restrictions that boost financial stability.

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Bank risk, competition and bank connectedness with firms: A literature review

Cited by 24 publications

References 146 publications

Is recapitalisation regulation a disrupter? Survival and sustainability of indigenous Ghanaian banks

Is recapitalisation regulation a disrupter? Survival and sustainability of indigenous Ghanaian banks

Systemic risk of multi-layer financial network system under macroeconomic fluctuations

Does competition lead to financial stability or financial fragility for Islamic and conventional banks? Evidence from the GCC countries

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