Special Issue "The Future of Banking Risk and Regulation"

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Banking and Finance".

Deadline for manuscript submissions: 15 July 2022 | Viewed by 7634

Special Issue Editor

Prof. Dr. Stefano Zedda
E-Mail Website
Guest Editor
Department of Business and Economics, University of Cagliari, 09100 Cagliari, Italy
Interests: banking; Monte Carlo simulation; banking systems stability; risk contributions; banking regulation

Special Issue Information

Dear Colleagues,

The banking sector is characterized by a continuous evolution of regulation and business models, where each of the two is adapted to the other one, and to the evolution of the economic and financial framework. Within this process, the COVID-19 crisis impact on the banks’ assets’ riskiness and NPLs has been, and will be, substantial and diversified among countries, due to the different effects of the pandemic, of the different regulation, and of the different supervisors’ attitudes.

This framework raises important questions on how to deal with the higher riskiness and the higher level of NPLs, on the banks’ attitude to risk, on the evolution of risk management models, on the evolution of banking regulation, and on how to prevent and limit consequences of banking crises.

In this analysis, we’d like to have your contribution on the recent and expected evolution of banking risk and regulation.

The topics covered in this Special Issue will include, but are not limited to: banks’ and banking systems’ performances, banking and financial regulation and supervision, macroprudential policy and regulation, monetary policy and central banking, effects of the COVID-19 pandemic on banks and banking risk.

Prof. Dr. Stefano Zedda
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1200 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • Banks’ business models 
  • Fintech 
  • Risk management 
  • Banking risk 
  • Zombie loans 
  • Banking crisis 
  • Systemic risk 
  • Financial stability 
  • Liquidity risk

Published Papers (6 papers)

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Research

Article
Regulatory Response to the Rise of Fintech Credit in The Netherlands
J. Risk Financial Manag. 2021, 14(8), 368; https://doi.org/10.3390/jrfm14080368 - 11 Aug 2021
Cited by 1 | Viewed by 1065
Abstract
The rise of financial technology (fintech) driven business models in banking poses a challenge for financial regulators. While the positive effects on the banking sector in terms of greater diversity and competition are generally recognized and encouraged by regulators, the nature of fintech [...] Read more.
The rise of financial technology (fintech) driven business models in banking poses a challenge for financial regulators. While the positive effects on the banking sector in terms of greater diversity and competition are generally recognized and encouraged by regulators, the nature of fintech business models may increase the risk of financial instability. Regulators are exploring ways to resolve this dilemma. The paper in hand makes a contribution to the literature by providing a framework for resolving the dilemma that is evaluated in the context of the regulatory response to the rise of fintech credit in the Netherlands. The semi-structured interviews which we conducted with four senior Dutch regulators resulted in three areas that–from their perspective–required urgent action: fintech credit companies need to lower the risk of overlending, increase pricing transparency, and improve lending standards. These findings were confirmed by the results of they survey among fintech credit clients. The current regulatory response to the rise of fintech in banking in the Netherlands provides an interesting case study that delineates the features of the future regulation of fintech in banking. Full article
(This article belongs to the Special Issue The Future of Banking Risk and Regulation)
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Article
Modeling and Simulating Cross Country Banking Contagion Risks
J. Risk Financial Manag. 2021, 14(8), 351; https://doi.org/10.3390/jrfm14080351 - 31 Jul 2021
Cited by 1 | Viewed by 685
Abstract
The recent financial crisis proved that financial contagion could spread among countries resulting in disruptive effects. In this paper, by modeling and simulating banking system behavior and linkages across countries, we assess, based on data from the BIS and IMF, the possible outcome [...] Read more.
The recent financial crisis proved that financial contagion could spread among countries resulting in disruptive effects. In this paper, by modeling and simulating banking system behavior and linkages across countries, we assess, based on data from the BIS and IMF, the possible outcome of domestic crises and how contagion spreads over countries. Results allow detailing the role of a “lighter” or of a “fueler” of financial crises for each country and assessing how each country can affect each other country by contagion, signaling the importance of financial interdependence between some neighboring countries, and detailing which counterpart country would be affected by the ring-fencing of each considered country’s banking system. The method also allows for what-if analyses to optimize the risk exposures, and to plan an emergency strategy in case of alarms coming from specific countries. Full article
(This article belongs to the Special Issue The Future of Banking Risk and Regulation)
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Article
Dynamics of Funding Liquidity and Risk-Taking: Evidence from Commercial Banks
J. Risk Financial Manag. 2021, 14(6), 281; https://doi.org/10.3390/jrfm14060281 - 21 Jun 2021
Cited by 2 | Viewed by 1401
Abstract
The purpose of this study is to investigate the impact of funding liquidity risk on the banks’ risk-taking behavior. To test the hypotheses, we apply the two-step system GMM technique on US commercial banks data from 2002 to 2018. We find that funding [...] Read more.
The purpose of this study is to investigate the impact of funding liquidity risk on the banks’ risk-taking behavior. To test the hypotheses, we apply the two-step system GMM technique on US commercial banks data from 2002 to 2018. We find that funding liquidity increases the banks’ risk-taking of US commercial banks. Furthermore, banks with higher deposits are less likely to face a funding shortage, and bank managers’ aggressive risk-taking activity is less likely to be monitored. Our findings infer that increases in bank funding liquidity increase both risk-weighted assets and liquidity creation, and deposit insurance creates a moral risk issue for banks taking excessive risks in response to deposit rises. The relationship between funding liquidity and the banks’ risk-taking varies with their capitalization and market conditions; the impact of funding liquidity on risk-taking is pronounced for well-capitalized banks and the Global Financial Crisis 2007. Our tests are robust for the usage of alternate proxy of funding liquidity and by controlling economic conditions. The findings of this study have implications for regulators to develop guidelines for the level of liquidity and risk-taking of commercial banks. Full article
(This article belongs to the Special Issue The Future of Banking Risk and Regulation)
Article
A Holistic Perspective on Bank Performance Using Regulation, Profitability, and Risk-Taking with a View on Ownership Concentration
J. Risk Financial Manag. 2021, 14(3), 111; https://doi.org/10.3390/jrfm14030111 - 08 Mar 2021
Cited by 4 | Viewed by 821
Abstract
There is a lack of a holistic perspective on bank performance. This study proposes a multidimensional (three-pronged) approach encompassing regulation, profitability, and nonperforming assets (NPAs) and their interactions as a measure of the performance of a bank. Moreover, the impact of equity holdings [...] Read more.
There is a lack of a holistic perspective on bank performance. This study proposes a multidimensional (three-pronged) approach encompassing regulation, profitability, and nonperforming assets (NPAs) and their interactions as a measure of the performance of a bank. Moreover, the impact of equity holdings of promoters, institutional investors, and retail investors on the proposed three-pronged approach of the bank performance are also explored. Values of the concerned variables were gathered from 2016 to 2019. The dynamic panel data method was applied to empirically test the proposed model. The main findings supported the premises of the proposed approach to bank performance. Furthermore, various ownership classes provided mixed results for their impact on bank performance. Unfavorable roles of promoters and institutional investors and an indifferent role of the retail investors group were startling outcomes of the study. Successful empirical endorsement of the proposed approach for bank performance provides a fresh perspective and has varied policy- and managerial-level implications. The findings regarding various shareholder groups (ownership classes) can be a catalyst to set the policy for ownership distribution in banks, as well as shareholder protection and activism, which are conspicuously absent in India. Full article
(This article belongs to the Special Issue The Future of Banking Risk and Regulation)
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Article
Troubles with the Chf Loans in Croatia: The Story of a Case Still Waiting to Be Closed
J. Risk Financial Manag. 2021, 14(2), 75; https://doi.org/10.3390/jrfm14020075 - 09 Feb 2021
Cited by 1 | Viewed by 1388
Abstract
In numerous Central and Eastern European (CEE) countries, the global financial crisis as well as the unpegging of the foreign exchange rate of the Swiss franc (CHF) against the euro amplified the repayment troubles of households with the outstanding CHF-linked debt. In Croatia, [...] Read more.
In numerous Central and Eastern European (CEE) countries, the global financial crisis as well as the unpegging of the foreign exchange rate of the Swiss franc (CHF) against the euro amplified the repayment troubles of households with the outstanding CHF-linked debt. In Croatia, the CHF loans were approved mainly as mortgages to unprotected and subprime household borrowers without sufficient credit capacity for long-term euro-linked loans, which also contained a possibility of an incremental interest rate change, i.e., the so-called administrative interest rate. This article aims to disclose the reasons behind the credit boom of these loans, the unsustainable CHF debt hardship that the household sector consequently faced, and how it was/could have been resolved, with the Croatian banking sector at the center of the research. Although the CHF case of Croatia has some specificities concerning the prudential regulation and government-sponsored loan conversion, the findings about the supply and demand determinants of the CHF credit boom, as well as a critical assessment of the Croatian government and central bank interventions, might be useful for timely noticing universal threats from the exotic currency-linked loans for the systemic risk and financial stability, and for minimizing the negative externalities from probable debt relief measures. Based on the descriptive and univariate statistics conducted on Bloomberg and the Croatian National Bank (CNB) data, it was found that interest rate differentials and carry trading behavior were the main reasons for the rapid CHF credit growth in Croatia. Nevertheless, according to the financial experts’ opinions obtained via a questionnaire survey, and the court verdicts reached since, the financial consumer protection when contracting these loans was severely violated, which implies that the central bank must enhance its consumer protection role. By adopting a single-country and holistic approach, this is the first paper that deals with the socioeconomic dynamic of the CHF credit default issues in Croatia, which might be interesting as a case study or for making comparison with other CEE countries that have been coping with negative consequences of Swiss francization. Full article
(This article belongs to the Special Issue The Future of Banking Risk and Regulation)
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Communication
Lost in Missions? Employees as a Top Strategic Priority of the World’s Biggest Banks
J. Risk Financial Manag. 2021, 14(2), 46; https://doi.org/10.3390/jrfm14020046 - 21 Jan 2021
Cited by 3 | Viewed by 1195
Abstract
Human resources are vitally important to banking. The mission statements of 50 banks with the biggest market value are analyzed qualitatively and quantitatively for subsequent judgments of consideration of employees among top strategic priorities of these organizations. The staff-related notions are found in [...] Read more.
Human resources are vitally important to banking. The mission statements of 50 banks with the biggest market value are analyzed qualitatively and quantitatively for subsequent judgments of consideration of employees among top strategic priorities of these organizations. The staff-related notions are found in the only 30% statements. Employees are considered in different aspects, and most frequently in regard to their work and duties. The top 10 banks pay attention to personnel development, career, and success. The findings of the present study indicate on the underrepresentation of the staff-related strategic priority in the mission statements of the world’s biggest banks. This seems to be a serious cavity in their strategic communication, dangerous to organization reputation and job satisfaction, and, thus, many actual mission statements need improvement. Full article
(This article belongs to the Special Issue The Future of Banking Risk and Regulation)
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