The effects of revenue diversification and cross border banking on risk and return of banks in Africa

The paper analyses the implications of revenue diversification and cross-border banking for risk and return. We sample 320 banks across 29 African countries and employ System GMM estimator as a methodological approach to shed further light on the diversification-stability nexus by examining the complex interaction between three key variables: cross-border banking, diversification and bank stability. The results suggest that exploration risk reduces diversification as the level of capital increases when banks cross border to diversify across revenue generating activities. Our analyses further show that, banks in Africa derive absolute benefits from diversification if they cross border and diversify their revenue base concurrently. These results are robust to a range of controls including alternative variable specifications, regulatory environment that bank operate and methodology.     

Heterogeneous market structure and systemic risk: Evidence from dual banking systems

This paper investigates how banking system stability is affected when we combine Islamic and conventional finance under the same roof. We compare systemic resilience of three types of banks in six GCC member countries with dual banking systems: fully-fledged Islamic banks (IB), purely conventional banks (CB) and conventional banks with Islamic windows (CBw). We employ market-based systemic risk measures such as MES, SRISK and CoVaR to identify which sector is more vulnerable to a systemic event. We also compute weighted average GES to determine which sector is most synchronised with the market. Moreover, we use graphical network models to determine the most interconnected banking sector that can more easily spread a systemic shock to the whole system. Using a sample of observations on 79 publicly traded banks operating over the 2005–2014 period, we find that CBw is the least resilient sector to a systemic event, it has the highest synchronicity with the market, and it is the most interconnected banking sector during crisis times.     

The effect of foreign entry and ownership structure on the Philippine domestic banking market

We examine the response of domestic Philippine banks to the relaxation of foreign entry regulations that occurred in the Philippines. We find evidence that foreign bank entry is associated with a reduction in interest rate spreads and bank profits, but only for those domestic banks that are affiliated to a family business group. Foreign entry corresponds more generally with improvements in operating efficiencies, but a deterioration of loan portfolios. Overall, we conclude that foreign competition compels domestic banks to be more efficient, to focus operations due to increased risk, and to become less dependent on relationship-based banking practices.     

Conditional risk, return and contagion in the banking sector in asia

This paper investigates risk and return in the banking sector in three Asian markets of Taiwan, China and Hong Kong. The study focuses on the risk-return relation in a conditional factor GARCH-M framework that controls for time-series effects. The factor approach is adopted to incorporate intra-industry contagion and an analysis of spillovers between large banks and small banks. Finally, the study provides evidence on these relations before and after the Asian financial crisis of 1997. The results are generally consistent across the markets and with expectations.     

网络银行的技术风险及其防范策略

随着互联网和电子商务的迅猛发展,各行各业都纷纷在互联网上寻找商机,开拓新的领域,金融业也不可避免地要随着这一趋势发生新的变化.网络银行就是在互联网技术得到广泛应用和人们对金融产品要求不断提高的背景下产生的.     

Natural disasters and economic growth: The role of banking market structure

Following a natural disaster, the rate of economic growth recovers faster in less competitive banking markets. A 10% reduction in competition increases the rate of economic growth by 0.3%. In less competitive markets, banks respond to a disaster by increasing the supply of real estate credit by refinancing mortgage loans, but do not lend more to businesses or consumers. Instead, government agencies provide disaster loans to affected businesses and households. Smaller, profitable and well-capitalized institutions that rely more on traditional retail banking originate most mortgage credit.     

The term structure of banking crisis risk in the United States: A market data based compound option approach

We use a compound option-based structural credit risk model to estimate banking crisis risk for the United States based on market data on bank stocks on a daily frequency. We contribute to the literature by providing separate information on short-term, long-term and total crisis risk instead of a single-maturity risk measure usually inferred by Merton-type models or barrier models. We estimate the model by applying the Duan (1994) maximum-likelihood approach. A strongly increasing total crisis risk estimated from early July 2007 onwards is driven mainly by short-term crisis risk. Banks that defaulted or were overtaken during the crisis have a considerably higher crisis risk (especially higher long-term risk) than banks that survived the crisis.     

The effect of banking market structure on the lending channel: Evidence from emerging markets

This paper analyses the extent to which the level of bank competition influences monetary policy transmission. Using a large panel dataset of 978 banks from 55 countries, and employing the Lerner index model as a measure of market structure, our results show that an increase in banking sector competition weakens the effectiveness of monetary policy on bank lending. The findings are robust to a broad array of sensitivity checks including control of alternative measurements of the Lerner index, different samples and different methodological specifications. By extension, these results have important policy implications for regulators in assessing the effectiveness of monetary policy transmission mechanisms.     

银行IT外包及其风险管理策路

银行IT外包是指银行以固定的价格，在一定的IT服务水平基础上，以合同的方式委托IT服务商（以下简称服务商）向银行提供所需的部分或全部IT功能的一种信息服务。IT外包一般还伴随着银行的信息技术资产和技术人员交由IT服务商管理。常见的银行IT外包涉及银行通信网络管理、银行信息系统运行和管理、应用系统开发和维护、系统备份和灾难恢复等。     

银行IT外包及其风险管理策略

一、银行IT外包概述 银行IT外包是指银行以固定的价格,在一定的IT服务水平基础上,以合同的方式委托IT服务商(以下简称服务商)向银行提供所需的部分或全部IT功能的一种信息服务.IT外包一般还伴随着银行的信息技术资产和技术人员交由IT服务商管理.常见的银行IT外包涉及银行通信网络管理、银行信息系统运行和管理、应用系统开发和维护、系统备份和灾难恢复等.     

Stock market risk and return: an equilibrium approach

Empirical evidence that expected stock returns are weakly relatedto volatility at the market level appears to contradict theintuition that risk and return are positively related. We investigatethis issue in a general equilibrium exchange economy characterizedby a regime-switching consumption process with time-varyingtransition probabilities between regimes. When estimated usingconsumption data, the model generates a complex, non-linearand time-varying relation between expected returns and volatility,duplicating the salient features of the risk/return trade-offin the data. The results emphasize the importance of time-varyinginvestment opportunities and highlight the perils of relyingon intuition from static models.     

Deposit market competition,wholesale funding,and bank risk

Empirical research on the effect of bank competition on bank risk has so far produced very inconclusive results. In this paper we revisit this long-standing debate and propose a new empirical approach that is concentrated on the relationship between deposit market competition and bank risk. This approach closely follows the traditional theoretical views of the competition and risk relationship and is focused on testing the classical moral hazard problem of the bank: deposit market competition raises the optimal risk choice of the bank by raising the costs of bank liabilities. Since banks can substitute between retail and wholesale funding, we relate deposit market competition to wholesale market conditions and examine their joint effect on the risk of bank assets. The analysis is based on a unique, comprehensive dataset, which combines retail deposit rate data with data on bank characteristics and data on local deposit market features for a sample of 589 US banks. Our results support the notion of a risk-enhancing effect of deposit market competition.     

商业银行转型与市场风险管理面临的挑战

由传统业务模式向现代业务模式转型,是商业银行保持可持续发展的必然要求和趋势,但商业银行在推进业务转型中可能遇到一定的合规与市场风险,值得监管者和风险管理部门关注,文章基于当前商业银行内部业务运作与外部市场环境的现状,以理财业务、债券承销业务与交易全球化为代表具体分析了其中的风险点,并提出相关对策建议。     

The empirical relationship between risk and return: evidence from the UK stock market

Previous studies reach no consensus on the relationship between risk and return using data from one market. We argue that the world market factor should not be ignored in assessing the risk-return relationship in a partially integrated market. Applying a bivariate generalized autoregressive conditional heteroscedasticity in mean (GARCH-M) model to the weekly stock index returns from the UK and the world market, we document a significant positive relationship between stock returns and the variance of returns in the UK stock market after controlling for the covariance of the UK and the world market return. In contrast, conventional univariate GARCH-M models typically fail to detect this relationship. Nonnested hypothesis tests supplemented with other commonly used model selection criteria unambiguously demonstrate that our bivariate GARCH-M model is more likely to be the true model for UK stock market returns than univariate GARCH-M models. Our results have implications for empirical assessments of the risk-return relationship, expected return estimation, and international diversification.     

Pairs trading in the UK equity market: risk and return

In this paper, we provide the first comprehensive UK evidence on the profitability of the pairs trading strategy. Evidence suggests that the strategy performs well in crisis periods, so we control for both risk and liquidity to assess performance. To evaluate the effect of market frictions on the strategy, we use several estimates of transaction costs. We also present evidence on the performance of the strategy in different economic and market states. Our results show that pairs trading portfolios typically have little exposure to known equity risk factors such as market, size, value, momentum and reversal. However, a model controlling for risk and liquidity explains a far larger proportion of returns. Incorporating different assumptions about bid-ask spreads leads to reductions in performance estimates. When we allow for time-varying risk exposures, conditioned on the contemporaneous equity market return, risk-adjusted returns are generally not significantly different from zero.     

The effects of loan portfolio concentration on Brazilian banks’ return and risk

This paper tests whether diversification of the credit portfolio at the bank level leads to better performance and lower risk. We employ a new high frequency (monthly) panel data for the Brazilian banking system with information at the bank level for loans by economic sector. We find that loan portfolio concentration increases returns and also reduces default risk; the impact of concentration on bank’s return is decreasing on bank’s risk; there are significant size effects; foreign and state-owned banks seem to be less affected by the degree of diversification. An important additional finding is that there is an increasing concentration trend after the breakout of the recent international financial crisis, specially after the failure of Lehman Brothers.     

The market price of risk of the variance term structure

In this paper I examine the market price of risk of the variance term structure. To this end, the S&P 500 option implied variance term structure is used as a proxy for aggregate variance risk. Principal component analysis shows that time variation in the variance term structure over the 1996–2012 period can be explained mainly by two factors which capture changes in the level and slope. The market price of risk of each factor is estimated in the cross-section of stock returns. The slope of the variance term structure is the most significant factor in the cross-section of stocks returns and carries a negative risk premium. The slope factor has also some predictive ability over long horizon equity returns.     

Collateral affects return risk: evidence from the euro bond market

Covered bonds and senior bonds are prominent securities in the euro bond market. Senior bonds are unsecured, while covered bonds are secured—backed by collateral. Our results show that the presence of collateral reduces the total risk in individual bonds by more than 70%. Compared to diversified portfolios of senior bonds, diversified portfolios of covered bonds have a significantly lower level of systematic risk. However, the fraction of systematic risk to total risk is higher for covered bonds. By decomposing the variance of bond returns, we find that around 33% of the risk in senior bonds is systematic, versus 53% in covered bonds. Both types of bonds contain instrument-specific risk.

     

Ownership structure,risk and performance in the European banking industry

We compare the performance and risk of a sample of 181 large banks from 15 European countries over the 1999–2004 period and evaluate the impact of alternative ownership models, together with the degree of ownership concentration, on their profitability, cost efficiency and risk. Three main results emerge. First, after controlling for bank characteristics, country and time effects, mutual banks and government-owned banks exhibit a lower profitability than privately owned banks, in spite of their lower costs. Second, public sector banks have poorer loan quality and higher insolvency risk than other types of banks while mutual banks have better loan quality and lower asset risk than both private and public sector banks. Finally, while ownership concentration does not significantly affect a bank’s profitability, a higher ownership concentration is associated with better loan quality, lower asset risk and lower insolvency risk. These differences, along with differences in asset composition and funding mix, indicate a different financial intermediation model for the different ownership forms.     

发展网上银行与银行风险控制

网上银行(Intermet Banking)是依托互联网的发展而兴起的一种新型银行服务模式.现有的网上银行町分为两大类：一类是完全虚拟的网上银行(A类)，如美国安全第一网上银行；另一类是在传统银行的基础上发展，将银行业务拓展到互联网上来完成(B类)。前者是未来网上银行的发展方向，后者是目前大多数网上银行所采取的模式?目前我国的网上银行属于B类。