Issue #3 (Volume 13 2018)

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.

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.

This study aims to examine the IFRS compliance in Jordanian banks and its relation to stock prices. The impact of compliance with International Financial Reporting Standards (IFRS) on stock prices in Jordanian banks is a rarely researched subject in accounting and finance, but whether IFRS compliance has a serious impact on stock prices, particularly in developing countries, is still unknown. Numerous factors in developing countries, such as cultural, political, and economic circumstances, can create different effects for IFRS compliance from those seen in developed countries.
This paper concludes that IFRS compliance negatively affects stock prices, and firm size has a positive relationship with stock prices in Jordanian banks. The paper has significant implications for IFRS compliance research on stock prices, particularly across Jordanian banks, in responding to recent calls to bridge the gap that has been identified as a result of the revolutions in the Middle East. This study has been carried out in order to attract investors to avoid opposite results compared with prior literature that has studied the same subject. Hence, there are essential implications for the way in which successful IFRS compliance can be positively associated with stock prices in Jordanian banks.

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.

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.

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.

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.

This study aims to identify the extent of the response of operating banks in Jordan to the anti-money laundering and terrorism financing instructions set by the Central Bank of Jordan, and to enumerate the effectiveness of these sets of laws, the echelon of cooperation with the relevant government agencies and the impact of contiguous political and security conditions on the anti-money laundering and financing of terrorism. To attain the objectives of this study and to test its hypotheses, a descriptive analytical method was followed based on related data of the Central Bank instructions and the engaged procedures by operating banks to combat money laundering and financing of terrorism. Therefore, a questionnaire was designed and distributed to the managers of anti-money laundering departments in operating banks in Jordan. The study shows various outcomes, the most important is the high responding of operating banks in Jordan to the instructions of the anti-money laundering and terrorism financing issued by the Central Bank of Jordan. The existence of practical application of money laundering and terrorism financing instructions fights against money laundering and terrorism financing in banks in Jordan at a soaring level. In addition to the functional cooperation by the competent governmental authorities in the fight against money laundering and terrorism financing, this study introduces a set of recommendations to reinforce the cooperation level for every related party to achieve a high level of cooperation in the field of the anti-money laundering and financing terrorism.

The recent series of banking crises in the United States and in the Eurozone has resulted in numerous bank failures. In this paper, an agent-based model is employed to test for factors that determine bank viability in times of distress, focusing mainly on the endogenous risk of financial institutions. The authors test for the effects of both management and financial factors on the institutions’ ability to weather the storm during times when the banking system experiences distress. The agent-based simulation process is split into a setup period, when the simulation builds the structural characteristics of each bank, and a testing period, where these characteristics are tested against the final result, which is the bank’s viability. A risk estimation model is built and it is found that the proposed model is successful in predicting whether a particular bank can endure a stress testing situation. The empirical results confirm the relevant literature and put further emphasis on the policy implications regarding banking supervision and regulation, particularly in context of the Eurozone banking union.

This research analyzes the determinants of bank profitability by investigating the internal factors that affect the profitability of Islamic banks and conventional banks. It then compares the results from the two types in order to understand how they differ from each other. As previous researchers focus on either Islamic or conventional banks, this research will analyze both by comparing how they are each influenced by profitability factors. Few researches have attempted to compare the profitability of Islamic and conventional banks using a relatively small sample. This research uses a fixed effect panel data analysis on a large sample of 68 banks (42 Islamic and 26 conventional banks) from 13 MENA countries, covering the period of 2006 until 2016. Using several variables, including bank size, equities to assets, loans to assets, deposits to assets, cash to assets and securities to assets, the results show that bank size, equities to assets and deposits to assets have a significant positive effect on Islamic banks’ profitability, while they have a significant negative effect on conventional banks’ profitability; loans to assets and cash to assets have no effect on bank profitability for either Islamic or conventional banks; and securities to assets has a significant negative effect on Islamic banks’ profitability, while it has a significant positive effect on conventional banks’ profitability. The results also show that bank size, equities to assets, deposits to assets and cash to assets contribute more to Islamic banks’ profitability compared to conventional banks, while loans to assets and securities to assets contribute more to conventional banks’ profitability compared to Islamic banks.

The banking system guarantees the economic strength of the country. Its sustainability is due to the sustainability of the credit portfolio. Therefore, scientific research on banking risks is always relevant. Basel recommendations and central bank regulations provide risk minimization in case of default of borrower by creating risk reserve, but the high range of macroeconomic factors creates a basis for creating credit risk. The model, which determines the risk factors, may be structurally the same, but the quality of the influence of factors is different in various countries. The influence of macroeconomic factors is particularly evident in developing countries. The impact of economic factors in different countries is high in GDP of these countries. The article focuses on determining the influence of macroeconomic factors on credit risk of systematic banks in Georgia. The coefficients of individual macroeconomic indicators are calculated by using Pearson’s correlation. The credit risk ratio is taken from the bank’s overdue credits and credit portfolio ratio. Based on the correlation coefficients obtained, the expected risk of shock changes is calculated.

In this paper, the banking system financial stability is assessed based on the differential approach. The differential approach provides for taking into account the specificity of the banking system structural organization (from the standpoint of the central bank and the second-level banks) and the sets of financial stability indicators, different in terms of their structure, and their volatility measures, according to this approach.
The banking system financial stability is assessed based on the two groups of indicators: the first one characterizes the central bank financial stability (indicators of gross international reserves, effectiveness of monetary policy and foreign exchange regulation, ability to create favorable conditions in order to ensure the effectiveness of the banking sector); the second one defines the financial stability level for state banks, banks with private and foreign capital (indicators of the capital adequacy, liquidity, structure of assets and liabilities, effectiveness of the activity, financial risks). The differences between the sets of financial stability indicators for different groups of banks and the expediency of taking them into account during the assessment are revealed and substantiated according to the results of using the principal components method.
The developed procedure of assessing the banking system financial stability provides for: constructing the banking system financial stability index (by multiplicative convolution of central bank financial stability subindex and three banks’ financial stability subindices); defining its high, medium and low level according to its quantitative values (according to interval scales, developed according to the rule “3σ”; interpreting the assessment results based on the scenario analysis, which is based on taking into account the dynamic change of the financial stability index during the analyzed period and allows to identify the state of the banking system (stable, conventionally stable or critical).

The study intends to explore the acceptance model of Syariah banking in Bali, Indonesia. It considers that local values, especially menyama-braya, are one of the local wisdoms, and they might encourage people to accept Syariah banks, since Syariah banking emphasizes harmonious relations. Environment marketing theory is useful to explain the importance of local values. Perceived benefit and fairness are thought as perceived values of Islamic banks. Quantitative approach is applied to find relationships between menyama-braya, perceived benefit, and perceived fairness and acceptance model. It follows Malhotra (1993) for sample size, and applies Smart PLS 3 for statistical analysis. The study conceives that menyama-braya as one of the local wisdom does have a significant effect on the acceptance, while perceived benefit does not. Perceived fairness is seen to have a direct effect on the acceptance. Perceived benefit and perceived fairness both have moderating effect on the relationship between menyama-braya and the acceptance. Managers and employers of Islamic banks should consider relevant local values to strengthen their institutional acceptance among non-Moslem majority population. The study is among the few that include local value in the acceptance model, and the first that attends Islamic banking in non-Moslem majority population.

At the present stage, commercial banks conduct their activities under constantly changing general economic, social and political conditions, which influence the reliability and efficiency of banking institutions performance. Nowadays, the problems of comprehensive assessment of the efficiency of main banking operations as well as the reliability of the Ukrainian banking system became relevant.
The purpose of the paper is to study the current state and diversification of bank lending in Ukraine, the problems that arise in the national economy due to the deteriorating performance of the banking system of Ukraine. The analysis has shown that a certain stable but not effective loan activity of Ukrainian banks for a long period of time was observed. Also, there is a demand for credit resources, which is currently not completely fulfilled.
The recommendations provided in this article contribute to the development of bank lending and the related increase in entrepreneurship and successful lucrative enterprises in Ukraine. Also, the analysis has revealed the direct correlation of the domestic credit provided by the financial sector with 14 relevant indicators and inverse dependence with 6 indicators.

The article assesses the influence of foreign banks on the financial and economic security of Ukraine. A scientific and methodological approach to the determination of the influence of foreign banks on the financial and economic security of the state using the correlation and regression analysis as well as scenario approach is offered. Such approach reflects mutual links between the indicators of foreign banking and the main indicators of financial and economic security of Ukraine. On the basis of analysis of foreign banking development, the indicators of financial and economic security of Ukraine have been forecasted. Positive and negative consequences of such influence in conditions of cyclic and crisis development of the national economy and bank system have been substantiated.