Systemic risk and interconnectedness in Gulf Cooperation Council banking systems

Highly concentrated banking system risks and the cumulative effect due to their accumulation act as a driver for improving the macro-prudential policy implemented by central banks. For this reason, an effectively and comprehensively assessed systemic risk in the banking system is declared an express condition for the early detection of its production sources and blocking of potential spreading channels, reducing the possible implementation. In light of this, the article develops an approach to the aggregated systemic risk assessment and interpretation of its results. The proposed approach is based on the considered influence exerted by financial risks of systemically important banks on the destabilized banking system and interconnections between banks in the context of the possible crisis impulse spreading. The following steps should be accomplished to form an aggregated systemic risk indicator in the banking system. Firstly, the differentiation of systemically important banks by the degree of their systemic importance; secondly, an integral assessment of the bank operation riskiness within certain bank groups; thirdly, the cumulative composition of the corresponding integral indicators, taking into account their weighting coefficients based on two criteria, namely values of the systemic importance indicator differentiating the bank groups, and the correlation of their risks. Interpreting the quantitative measurement results with regard to the systemic risk in the banking system is followed by the recommendations below: the systemic risk grading into high, medium and low levels and the respective definition of the threshold aggregated systemic risk indicator value which informs about the possible systemic crisis when approached; justification of the selected supervision regime types (strengthened, moderate or weakened) for systemically important banks, depending on the riskiness level specific for their operation and the systemic importance degree. The developed approach to measuring the systemic risk by means of constructing an aggregated indicator and interpreting the obtained results was being tested considering the financial risk indicators of the systemically important banks in Ukraine during 2009–2018.

Earnings Response Coefficient (ERC) reflects the market response to the company’s published earnings. It also reflects the quality of the company’s profits. This study aims to examine the factors affecting ERC in Jordan based on a sample of 17 Jordanian industrial companies listed on the Amman Stock Exchange during 2012–2018. The dependent variable of this study is the Earnings Response Coefficient (ERC). Five independent variables or factors were selected for testing their impact on the dependent variable, namely, leverage ratio, systemic risks, company’s size, company’s growth opportunity, and the company’s profitability. The results of panel data regression analysis showed that for companies with a higher leverage ratio, the market is less responsive to the change in their profits than those with a higher leverage ratio. Systematic risk has a negative and significant effect on ERC, which means that high systemic risks lead to a reduction in the ERC. The company’s size has no significant impact on ERC, indicating the irrelevance of the relationship between the size of Jordanian industrial companies and their profits. The company’s growth opportunity has a negative and significant impact on ERC, which means low market-to-book ratio and higher growth opportunities resulting in higher ERC. Finally, the company’s profitability measured by return on assets (ROA) has a positive and important impact on ERC, suggesting that higher profitability increases ERC. The study highlighted the importance of ERC and recommended that companies take the needed measures to increase their ERC. It also recommended raising investors’ awareness.

This study is devoted to assessing the level of individual segments interconnectedness within the financial market of Ukraine (FMU) and their dynamics in uncertain conditions. The methodology of the systematic approach is used to investigate the dynamic relationship between individual segments of the financial market of Ukraine, namely credit (deposit-credit) market, stock market (market of securities), government securities market, currency market, and interbank market. The study of financial market dynamics focuses on the description of the price indicators of individual market segments, which are monitored using time series analysis and statistical methods. The results of the time series assessment revealed the fractal characteristics of the Ukrainian financial market as a measure of sustainability (namely inertia). It is revealed that all segments of the financial market, except credit, are characterized by persistence. It is established that the development of market segments is uneven and is characterized as bifurcation. The credit segment is addicted to insider behavior and has the highest risk concentration. It is revealed that the foreign exchange market is still in crisis. The results of modeling the correlation relationships between market segments have shown that, in the presence of such relationships, they differ in the strength and nature of the interaction. They are volatile, unstable, and situational, dependent on external conditions. The credit market has a relationship with other segments, not significantly strong but stable. The results of the analysis indicate the dynamic development of segments within the Ukrainian financial market in the presence of interconnections between them.

Acknowledgment
The study was conducted within the framework of the State Budget of the Kyiv National Economic University named after Vadym Hetman on the topic “Innovative development of banking activities in the integrated financial environment” (state registration number 0117U001178).