Banking system stability in crisis periods: The impact of the banking regulator independence
-
Author(s)Atik KerimovLink to ORCID Index: https://orcid.org/0000-0003-2493-6180
,
Azer BabayevLink to ORCID Index: https://orcid.org/0000-0002-9067-7562
,
Viktoria DudchenkoLink to ORCID Index: https://orcid.org/0000-0002-0054-8362
,
Yaryna SamusevychLink to ORCID Index: https://orcid.org/0000-0001-7048-8388
,
Milos TumpachLink to ORCID Index: https://orcid.org/0000-0003-3389-6803
-
DOIhttp://dx.doi.org/10.21511/bbs.18(3).2023.18
-
Article InfoVolume 18 2023, Issue #3, pp. 221-234
- Cited by
- 184 Views
-
73 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Local and global financial crises are caused by a wide range of geopolitical, macro-financial, and socio-economic determinants. The purpose of this study is to assess the role of central bank independence in preventing financial crises and mitigating their consequences. Two hypotheses were tested. A measure of the banking regulator independence is the CWN index of the central bank independence. The hypotheses were tested on data from 53 countries suffering from financial crises over the last 40 years (the sample includes both developed and developing countries from different continents). The tools of nonlinear logit regression (modeling the probability of loss of financial stability due to a financial crisis, considering different levels of the banking regulator independence) and panel regression with random effects (modeling the influence of the banking regulator independence on banking activities during crisis periods) were used for calculations. The study did not confirm that a high level of central bank independence is a necessary condition for preventing the occurrence of financial crises in the national economy. On the contrary, the likelihood of financial instability was found to be higher in countries with more independent central banks. Thus, during crisis periods, an increase in the CWN index by 1 ensures an increase in the regulatory capital adequacy parameter by an average of 0.28%, a decrease in return on assets by 0.59%, and an increase in the share of non-performing loans by 1.69%.
- Keywords
-
JEL Classification (Paper profile tab)E58, E63, G01, G21
-
References41
-
Tables11
-
Figures1
-
- Figure 1. Research approach for assessing the role of central bank independence in leveling financial crises
-
- Table 1. Results of logit regression modeling of the probability of a period of financial stability in the country depending on the development parameters of the central bank
- Table 2. Results of modeling the probability map of financial stability in the country under the influence of the central bank’s functioning parameters
- Table 3. Results of logit regression modeling of the probability of a period of financial stability in the country depending on the functioning parameters of the banking system
- Table 4. Results of modeling the probability map of financial stability in the country under the influence of parameters of the functioning of the banking system
- Table 5. Results of logit regression modeling of the probability of a period of financial stability in the country depending on the parameters of commercial activity of banks
- Table 6. Results of modeling the probability map of financial stability in the country under the influence of the parameters of commercial activity of banks
- Table 7. Results of assessing central bank independence in crisis periods on the adequacy of regulatory capital of banks in 53 countries of the world
- Table 8. Results of evaluating the independence of central banks in crisis periods on the indicator of financial stability of banks in 53 countries of the world
- Table 9. Results of assessing the independence of central banks in crisis periods on the level of non-performing loans in the loan portfolio of banks in 53 countries of the world
- Table 10. Results of assessing the independence of central banks in crisis periods on the level of profitability of bank assets in 53 countries of the world
- Table 11. Results of assessing the independence of central banks in crisis periods by the level of net interest margin of banks in 53 countries of the world
-
- Adama, J. I., Ohwofasa, B., & Onabote, A. (2022). Empirical assessment of the impact of external reserves on economic growth in Nigeria. Investment Management and Financial Innovations, 19(2), 295-305.
- Aiyedogbon, J. O., Zhuravka, F., Korneyev, M., Banchuk-Petrosova, O., & Kravchenko, O. (2022). Impact of public debt profile on economic growth: Evidence from Nigeria. Public and Municipal Finance, 11(1), 10-19.
- Aliyeva, A. (2022). Post-Oil Period in Azerbaijan: Economic Transformations, Anti-Inflation Policy and Innovations Management. Marketing and Management of Innovations, 2, 268-283.
- Andries, A. M., Podpiera, A. M., &Sprinceana, N. (2022). Central Bank Independence and Systemic Risk. International Journal of Central Banking, 18(1), 81-130.
- Babenko, V., Pasmor, M., Pankova, J., & Sidorov, M. (2017). The place and perspectives of Ukraine in international integration space. Problems and Perspectives in Management, 15(1), 80-92.
- Balls, E., Howat, J., & Stansbury, A. (2018). Central Bank Independence Revisited: After the financial crisis, what should a model central bank look like? (M-RCBG Associate Working Paper Series No. 87).
- Bilan, Y., Tiutiunyk, I., Lyeonov, S., & Vasylieva, T. (2020). Shadow economy and economic development: A panel cointegration and causality analysis. International Journal of Economic Policy in Emerging Economies, 13(2), 173-193.
- Blinder, A. S., Ehrmann, M., de Haan, J., & Jansen, D.-J. (2017). Necessity as the mother of invention: monetary policy after the crisis (Working Paper Series No. 2047). European Central Bank.
- Boiko, A., Zwolińska-Ligaj, M., Bozhenko, V., Florczak, E., & Ovcharenko, V. (2021). Readiness for implementing innovations in banking in advanced and emerging economies. Journal of International Studies, 14(4), 236-250.
- Bozhenko, V. V., Lyeonov, S. V., Polishchuk, E. A., Boyko, A. O., & Artyukhova, N. O. (2022). Identification of Determinants of Corruption in Government: A Mar-Spline Approach. Naukovyi Visnyk Natsionalnoho Hirnychoho Universytetu, 6, 176-180.
- Buriak, A., Lyeonov, S., & Vasylieva, T. (2015). Systemically important domestic banks: An indicator-based measurement approach for the Ukrainian banking system. Prague Economic Papers, 24(6), 715-728
- Chumachenko, D., Derkach, T., Babenko, V., Krutko, M., Yakubovskiy, S., & Rodionova, T. (2021). Development prospects of banking sector in central and eastern European countries in terms of financial integration. Estudios De Economia Aplicada, 39(7).
- Cukierman, A., Webb, S., & Neyapti, B. (1992). Measuring the Independence of Central Bank and Its Effect on Policy Outcomes. The World Bank Economic Review, 6(3), 353-398.
- Danylyshyn, B., & Bohdan, I. (2022). Monetary policy during the wartime: How to ensure macroeconomic stability. Investment Management and Financial Innovations, 19(2), 344-359.
- de Haan, J., & Eijffinger, S. (2016). The politics of central bank independence (DNB Working Paper No. 539). De Nederlandsche Bank.
- Elhassan, T. (2021). Impact of Covid-19 pandemic on stock market returns volatility of Gulf Cooperation Council countries. Investment Management and Financial Innovations, 18(4), 45-56.
- Garriga, A. C. (2016). Central Bank Independence in the World: A New Dataset. International Interactions, 42(5), 849-868.
- Habiba, M. (2023). Basel Agreements in the Efficiency of Algerian Banks Financial Evolution and Interdisciplinary Research. Financial Markets, Institutions and Risks, 7(1), 123-135.
- Hafez, H. M. M. (2022). Does the efficiency of banks adversely affect financial stability? A comparative study between traditional and Islamic banks: Evidence from Egypt. Banks and Bank Systems, 17(2), 13-26.
- Kashcha, M., & Dun, V. (2022). The impact of indicators of macroeconomic stability on the destructive manifestation of Covid-19 in Ukraine. SocioEconomic Challenges, 6(3), 107-113.
- Khan, T., & Suresh, G. (2022). Do all shocks produce embedded herding and bubble? An empirical observation of the Indian stock market. Investment Management and Financial Innovations, 19(3), 346-359.
- Kozmenko, S., & Vasylieva, T. (2008). Specialized innovative investment banks in Ukraine. Banks and Bank Systems, 3(1), 48-56.
- Kuznetsova, A., Azarenkova, G., & Olefir, I. (2017a). Implementation of the “bail-in” mechanism in the banking system of Ukraine. Banks and Bank Systems, 12(3), 269-282.
- Kuznyetsova, A., Boiarko, I., Rudevska, V., & Maslov, V. (2022). Development of Business Architecture of the Banking Sector Based on Public-Private Partnership. Banks and Bank Systems, 17(2), 150-162.
- Kuznyetsova, A., Misiats, N., & Klishchuk, O. (2017b). The equilibrium model of demand and supply at the Ukrainian interbank foreign exchange market: Disclosure of problematic aspects. Banks and Bank Systems, 12(4), 31-73.
- Maris, M. (2022). Management of Competitiveness in the EU Member States: The Main Strengths and Weaknesses. Marketing and Management of Innovations, 2, 110-120.
- Melnyk, L., Kubatko, O., Piven, V., Klymenko, K., & Rybina, L. (2021). Digital and economic transformations for sustainable development promotion: A case of OECD countries. Environmental Economics, 12(1), 140-148.
- Moskalenko, B., Lyulyov, O., & Pimonenko, T. (2022). The investment attractiveness of countries: Coupling between core dimensions. Forum Scientiae Oeconomia, 10(2), 153-172.
- Njegovanović, A. (2023). Financial Evolution and Interdisciplinary Research. Financial Markets, Institutions and Risks, 7(1), 71-95.
- Olonila, A., Amassoma, D., & Babatunde, B. O. (2023). Impact of Monetary Policy on Credit and Investment in Nigeria (1981–2020). Financial Markets, Institutions and Risks, 7(1), 136-144.
- Rizk, S. (2022). Efficiency in the MENA banking industry, the stochastic frontier approach (SFA). Financial Markets, Institutions and Risks, 6(2), 56-59.
- Sinaga, A. P. A. (2022). Inflation, Foreign Exchange, Interest Rate, Trade Balance, Payment Balance on Growth in The Covid-19 Pandemic. SocioEconomic Challenges, 6(4), 52-59.
- Suhendra, I., & Anwar, C. J. (2022). The response of asset prices to monetary policy shock in Indonesia: A structural VAR approach. Banks and Bank Systems, 17(1), 104-114.
- Tahat, I. A. M. (2022). Association Between Factors Likely to Have an Influence on Foreign Direct Investment: The Case of Jordan. SocioEconomic Challenges, 6(4), 34-45.
- Tiutiunyk, I., Cieśliński, W., Zolkover, A., & Vasa, L. (2022). Foreign direct investment and shadow economy: One-way effect or multiple-way causality? Journal of International Studies, 15(4), 196-212.
- Vasilyeva, T. A., Leonov, S. V., & Lunyakov, O. V. (2013). Analysis of internal and external imbalances in the financial sector of Ukraine’s economy. Actual Problems of Economics, 150(12), 176-184.
- Vasylieva, T., Dudchenko, V., Samusevych, Y., Marci, A., & Sofronov, V. (2022). The impact of governance quality on central bank’s independence. Public and Municipal Finance, 11(1), 113-127.
- Vasylyeva, T. A., Leonov, S. V., & Lunyakov, O. V. (2014). Countercyclical capital buffer as a macroprudential tool for regulation of the financial sector. Actual Problems of Economics, 158(8), 278-283.
- Wachtel, P., & Blejer, M. I. (2020). A fresh look at central bank independence. Cato Journal, 40(1), 27.
- Yuni, D. N., & Attama, M. I. (2022). How does the central bank recapitalization policy affect competition in commercial banks of Sub-Saharan Africa? Banks and Bank Systems, 17(2), 98-112.
- Zolkover, A., Tiutiunyk, I., Babenko, V., Melnychuk, M., Ivanchenkova, L., & Lagodiienko, N. (2022). The quality of tax administration, macroeconomic stability and economic growth: Assessment and interaction. Review of Economics and Finance, 20, 654-661.
-
Positive contribution of the good corporate governance rating to stability and performance: evidence from Indonesia
RR. Iramani , Muazaroh Muazaroh , Abdul Mongid
doi: http://dx.doi.org/10.21511/ppm.16(2).2018.01
Problems and Perspectives in Management Volume 16, 2018 Issue #2 pp. 1-11 Views: 2987 Downloads: 251 TO CITE АНОТАЦІЯThis paper aims to examine the impact of Good Corporate Governance (GCG) practice on bank stability and performance. Governance is measured using the GCG rating that covers eleven aspects. The authors apply instrumental regression to link governance to performance and stability. The study covers a sample of 150 banks. The result shows that bank stability can mediate bank governance and bank performance. On the determinant of bank performance, it can be concluded that the GCG rating is positive and directly influences bank performance. Bank stability is also positive for bank performance indicating the indirect contribution of the GCG rating to bank performance. NPL, LDR, CAR and bank’s size (LASSET) are all negative and significant. The aim of this paper is to provide strong empirical evidence on the importance of governance and stability for performance. The limitations of this paper are the size of the sample and that it only covers public banks which are theoretically required to apply better governance in all aspects of their business by the Capital Market Authority.
-
Inflation and economic growth: the search for a compromise for the Central Bank's monetary policy
Volodymyr Mishchenko ,
Svitlana Naumenkova ,
Svitlana Mishchenko ,
Viktor Ivanov
doi: http://dx.doi.org/10.21511/bbs.13(2).2018.13
Banks and Bank Systems Volume 13, 2018 Issue #2 pp. 153-163 Views: 2153 Downloads: 609 TO CITE АНОТАЦІЯThe 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. -
Regulating Big Data effects in the European insurance market
Donatella Porrini
doi: http://dx.doi.org/10.21511/ins.08(1).2017.01
Insurance Markets and Companies Volume 8, 2017 Issue #1 pp. 6-15 Views: 1991 Downloads: 350 TO CITE АНОТАЦІЯThe article analyzes the regulatory framework in the insurance market in connection with the advent of Big Data, such as information collected from different sources that can be manipulated by new technologies. The use of Big Data offers significant opportunities to the insurance companies in terms of digitization of the distribution channels and greater knowledge of the customers, which is instrumental to a more effective identification of the individual’s risk profile, as well as improvement of the competitiveness. However, regulatory measures are needed for a proper use of Big Data in terms of respect of the individual privacy, potential discrimination and constraint on competition.
