Journal Banks and Bank Systems

176 articles
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Sarwar Uddin Ahmed, Samiul Parvez Ahmed, Ikramul Hasan
Banks and Bank Systems, Volume 13, pp 71-80; doi:10.21511/bbs.13(3).2018.07

Abstract:Why banks should be concerned about incorporating environmental, social and governance (ESG) criteria in the lending process? What is the motivation? This study aims to find the motives for considering environmental, social and governance (ESG) criteria in bank lending process. A primary survey has been conducted to know the current status and motivation for incorporating ESG factors in investment decisions. Sample comprised 30 private commercial banks (PCBs) operating in Bangladesh. Data collected were analyzed with graphs, descriptive statistics, and regression analysis. Findings of the study indicate that banks are mostly considering basic environmental, social and governance factors set by regulators qualitatively. They are lagging behind in considering the advanced ESG criteria needed for sustainable and efficient credit risk management. Based on motivation for incorporating ESG factors, it was found that banks pioneering in incorporating ESG factors in lending decisions are compensated through better financial performance. Findings of the study are expected to encourage practitioners and policy-makers to take more pragmatic steps to incorporate ESG risk factors quantitatively in lending decision-making process.
Ikhlaas Gurrib
Banks and Bank Systems, Volume 13, pp 58-70; doi:10.21511/bbs.13(3).2018.06

Abstract:The aim of this study is to test a trading system based on the average directional index, which is complemented with the parabolic stop and reverse indicator. The trend-based system is tested onto the most actively traded USD based foreign currency pairs, using both monthly and weekly data set over 2000–2018. Sharpe and Sortino measures are used to track the performance of the currency pairs, based on total risk and downside risk assumptions. Results are robust tested by decomposing the data into pre and post 2008 financial crisis. Using an investment horizon over 18 years, the reliance upon the monthly model produced lower maximum drawdowns and lesser trades than the weekly model. While Swiss Franc had the best (worse) performance in the monthly (weekly) based model, the Chinese Renminbi witnessed the worse (best) performance in the monthly (weekly) based model. Pre and post financial crisis decompositions suggest the weekly-based system is more reliable than the monthly one with relatively more trades and positive performance, where the Chinese Renminbi and Japanese Yen posted the highest Sharpe and Sortino values of 0.996 and 4.452 respectively in the post crisis period. Proportionately high level of negative returns coupled with relatively low positive Sharpe and Sortino values, however, suggest that a trading system relying on the average directional index and parabolic stop and reverse indicator to be further tested and analyzed at higher frequencies.
Eyup Kahveci, Bert Wolfs
Banks and Bank Systems, Volume 13, pp 48-57; doi:10.21511/bbs.13(3).2018.05

Abstract:The technological developments in the banking sector have significant implications for banks and are dramatically changing the way retail banks conduct their business. Banks can invest in digital banking (DB) services either to acquire a strategic advantage or because doing so has become a strategic necessity. This study is organized to examine if DB service channels have any positive or negative impact on Turkish deposit banks’ performance. With this aim in mind, in the first stage of the proposed DEA model, physical assets are used. Then, in the second stage, DB service channels are added to see if they have any impact on banks’ performance. The results show that the banks are investing in DB services just to keep the competition as it is. In other words, they invest in DB services as a strategic necessity. DB services do not provide any strategic advantage to any banks in terms of financial performance or efficiency since the banks are already efficient. Investing in DB only helped to preserve their strategic positions. The Turkish deposit banking industry is very competitive and very profitable, and it is necessary to invest in DB services just to keep the competition as it is.
Umanto, Chandra Wijaya, Andreo Wahyudi Atmoko
Banks and Bank Systems, Volume 13, pp 36-47; doi:10.21511/bbs.13(3).2018.04

Abstract:Studies related to intellectual capital, particularly in banking sector, are basically focused on the relationship between intellectual capital performance and bank performance. In con¬trast to previous studies, this study analyzes the intellectual capital performance of regional development banks throughout Indonesia to develop performance through management of efficiency and productivity. The population and sample in this study consist of 26 regional development banks in Indonesia for the period 2007–2013. The management of efficiency is measured using the ratio of operating expense to operating income (BOPO), while the management of labor productivity is measured using the ratio of labor expenses to total operating expense and income level. At the theoretical level, this study is expected to fill the gap for the assessment of intellectual capital performance of banking institutions with unique characteristics such as regional development banks. To analyze intellectual capital performance, VAICTM method developed by Pulic (1998, 2000, 2004, 2008) is applied. The findings show that the intellectual capital performance of regional development banks is in the category of common performers. Finally, regional development banks need to focus on the importance of strengthening intangible resources directly affecting banking management in terms of strengthening information technology, positioning, and management competence, as well as organizational culture and working climate.
Adel K. Almasarwah, Ahmad M. Omoush, Nizar AlSharari
Banks and Bank Systems, Volume 13, pp 24-35; doi:10.21511/bbs.13(3).2018.03

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Uwalomwa Uwuigbe, Eluyela Damilola Felix, Olubukola Ranti Uwuigbe, Obarakpo Teddy, Falola Irene
Banks and Bank Systems, Volume 13, pp 12-23; doi:10.21511/bbs.13(3).2018.02

Abstract:This study investigated the influence of Corporate governance on the timeliness of financial reports of listed banks in Nigeria. In order to provide answers to the research questions raised in this study, data were generated from the annual report of the listed banks on the Nigerian Stock Exchange considering the period 2008–2015. The study used Board size, Board Independence and Foreign Executives on the board as proxies for corporate governance. The data were analyzed using descriptive statistics, correlation matrix and panel data regression analysis. It was observed that board size had a non-significant negative relationship with the timeliness of financial reports. Also, the study observed that board independence also had a non-significant negative relationship with the timeliness of financial reports. Finally, it was observed that foreign executives on the board had a significant positive relationship with the timeliness of financial reports. The study thus recommends that the existing legal framework in Nigeria should be developed that clearly specifies the rights and obligations of a bank, its management and, of course, other stakeholders.
Nelli Heorhiadi, Oleksiy Druhov, Roksolana Vilhutska, Mariana Bets, Andrii Stoianovskyi, Mateusz Folwarski
Banks and Bank Systems, Volume 13, pp 1-11; doi:10.21511/bbs.13(3).2018.01

Abstract:Organizational development in banks management systems (ODBMS) is a complex phenomenon of a sustainable and multifunctional nature. The goal of ODBMS is to generate creative ideas and implement changes in order to provide an appropriate level of rational interaction between the ODBMS subjects. It leads to an achievement of the expected economic and managerial results.Organizational changes that are accompanied by organizational development in the BMS can be controlled and spontaneous, positive and negative. The idea of the article is to reveal the methodical aspects of the managed organizational development of the BMS, with expected positive effects. It would be shown that the offered ideas can be used for achieving organizational goals, avoiding the organizational entropy, increasing the creative activity of bank employees, in particular, in developing new banking products, expanding the opportunities of Internet banking, etc.Achieving certain positive effects from the implementation of organizational changes in the BMS requires a high level of managers awareness about the state of implementation of the goals of the bank’s organizational development, the methods of their implementation, factors that affect the achievement of these goals. In this context, fundamental information about the structure and links in the BMS is important as well as operational information that characterizes the level of completeness and implementation quality of the specific banking officers’ duties.In the article the features of ODBMS are solved, based on the application of the provisions of morphological analysis and set theory. The proposed provisions are considered through the prism of two criteria – the level of managerial awareness and predictability of the results of the organizational changes implementation.
Udo Braendle
Banks and Bank Systems, Volume 13, pp 164-177; doi:10.21511/bbs.13(2).2018.14

Abstract:Weak corporate governance in financial institutions has been a contributing factor of the financial crisis. The topic has, therefore, become the key priorities of banking supervision, because one of the takeaways was that. The article gives an overview about the newly established European Banking Union and about its structure focusing on the first pillar, the Single Supervisory Mechanism (SSM). In a second step, the focus is laid on the recent regulatory changes regarding corporate governance, the related supervisory practice and implications for European banks. Overall, the conducted changes in the regulatory framework, especially regarding corporate governance, seem to meet the objective of ensuring safety and soundness of the European banking system. Room for improvement is found regarding proportionality and transparency of the supervisory practices as well as its influence on banks’ profitability.
Volodymyr Mishchenko, Svitlana Naumenkova, Svitlana Mishchenko, Viktor Ivanov
Banks and Bank Systems, Volume 13, pp 153-163; doi:10.21511/bbs.13(2).2018.13

Abstract:The article analyzes the influence of inflation on economic growth and substantiates the main directions of increasing the effectiveness of the central bank's anti-inflation policy. In order to determine the limit of inflation, the excess of which has a negative impact on the economic growth, the relationship is analyzed between the inflation rate and the real GDP growth rate on the basis of IMF statistics using the example of 158 countries. It was determined that in 2010–2017, in the global economy, the 6.0% inflation was the marginal value of the inflation rate, beyond which the economic growth rate declined or slowed down. Given the inverse relationship between the inflation rate and the real GDP growth rates as well as empirical calculations for the period 1996–2017, the threshold for inflation rate for Ukraine at the level of 4.51% was determined based on empirical calculations for the 1996–2017 period. The results indicate that the National Bank of Ukraine set the inflation target above the level of the calculated threshold inflation. It has also been established that the link between the rates of nominal GDP growth, as opposed to real GDP, and the inflation rate, is more direct and more tight. It is substantiated that to analyze such dependence it is better to use GDP deflator instead of CPI. The results indicate that deflation constrains economic growth much less than inflation. In order to increase the effectiveness of the central bank’s pro-cyclical monetary policy aimed at supporting economic growth, the relationship between the rates of real GDP growth and the indicator characterizing the gap between the growth rates of M3 and inflation, which actually reflects the real money supply dynamics, is determined. The results obtained allowed to conclude that in 2009 and 2014-2017, the artificial “squeezing” of the money supply took place in Ukraine, resulting in a decrease in the level of the economy monetization by 22.0% in 2017 compared to 2013.It has been proved that in order to minimize the negative impact of inflationary processes on economic growth, the policy of the National Bank of Ukraine should be aimed at eliminating the artificial squeezing of the money supply through a reasonable increase in the economy monetization and the implementation of an effective monetary policy.
Emmanuel Carsamer
Banks and Bank Systems, Volume 13, pp 141-152; doi:10.21511/bbs.13(2).2018.12

Abstract:The purpose of this paper is to investigate the determinants of customer banking right awareness regarding banking products and services in Ghana. A survey of 569 bank customers was conducted in Metropolitan Assemblies in Ghana, using a structured questionnaire with Likert-type questions. Customers were conveniently intercepted as they walked out of universal banks. Ordered probit estimation technique was used to test the research hypotheses. The study revealed that whilst bank variables (duration and number of visits) improve customers’ knowledge on bank products and services, demographic factors (age, marriage, income) enhance the level of awareness customers have with regards to bank products and services. The study also revealed that education reduces it in Ghana. Sources of information such as banking exhibitions and fairs, family and mass media improve customer banking right awareness, however, bank staff negatively affect awareness level. The study advises banks to pay particular attention to sources of information, especially bank staff, bank brochures, mass media, exhibitions and fairs. Also, age and income segment of customers should be considered when attempting to improve customer banking right awareness for satisfactory service delivery.
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