Funding Liquidity and Bank Risk-Taking:Empirical Evidence from China

Liquidity risk has a significant impact on the prudent operation of financial institutions and the stability of fi nancial system.Funding liquidity risk has played an important role in banking crises in history.This paper uses the data of 338 commercial banks in China from 2002 to 2016 to analyze the relationship between funding liquidity and bank risk-taking.The findings show that:(1)Banks with lower funding liquidity risk take more risks,which is evidenced by lower Z-score and capital adequacy ratio,as well as higher risk-weighted asset ratio and liquidity creation.(2)Funding liquidity risk has an impact on the factors of bank risks.Lower funding liquidity risk increases bank profitability and reduces capital level.(3)Funding liquidity risk can affect bank risk-taking behavior through the intermediary effect of bank loans.(4)With a lower funding liquidity risk,larger asset and higher leverage ratio can restrain banks from taking more risks,and the banks can take less risks during the international fi nancial crisis or higher economic risk periods.

Fintech,Bank Risks,and Business Performance:From the Perspective of Inclusive Finance

Recent years have seen an increasing integration of fintech and inclusive loans,leading to significant changes in banking business models and operations.The paper analyzes the impact of fintech on bank risks and performance.The research findings show the following results.First,fintech has made banks more willing to issue inclusive loans.Second,by leveraging fintech,banks have lowered the risks associated with inclusive loans and improved their performance,particularly manifested by inclusive loans to small and micro enterprises.Third,in regard to financial geographic heterogeneity,with the increasing distance between branches and sub-branches,and head office,fintech,as an effective regulating tool,can help to improve the inclusive loan operations and risk control capabilities of remote branches and sub-branches.This paper argues that digital financial inclusion contributes to the stable operation of banks;banks can take advantage of fintech to digitalize and intelligentize financial inclusion,thereby improving business efficiency,reducing risk exposures and expanding profitability.Therefore,banks should adhere to the“prudent and stable”risk appetite and“small and decentralized”credit granting principle to make safe,convenient and impartial inclusive finance services available to a variety of market entities.When implementing the inclusive finance development strategy,head office should consider different results among branches and sub-branches due to their varied financial geographic locations,and release differentiated assessment and incentive policies to branches and sub-branches based on economic regions in a bid to minimize policy spillovers.

Central bank digital currency,loan supply,and bank failure risk:a microeconomic approach

Central bank digital currencies(CBDCs),which are legal tenders in digital form,are expected to reduce currency issuance and circulation costs and broaden the scope of monetary policy.In addition,these currencies may also reduce consumers’need for conventional demand deposits,which,in turn,increases banks’loan provision costs because deposits require higher rates of return.We use a microeconomic banking model to investigate the effects of introducing an economy-wide,account-type CBDC on a bank’s loan supply and its failure risk.Given that a CBDC is expected to lower the cost of liquidity circulation and become a strong substitute for demand deposits,both the loan supply and the bank failure risk increase.These increases are countered by subsequent increases in the rates of return on term deposits and loans,which,in turn,reduce the loan supply and thus bank failure risk.These offsetting forces lead to no significant change in banking,as long as the rate of return on loans is below a certain threshold.However,once the rate is above the threshold,bank failure risk increases,thereby undermining banking stability.The problem is more pronounced when the degree of pass-through of funding costs to the loan rate is high and the profitability of a successful project is low.Our results imply that central banks wishing to introduce an economy-wide,account-type CBDC should first monitor yields on bank loans and consider policy measures that induce banks to maintain adequate liquidity reserve levels.

Application of the Credit Metrics in the Credit Risk Management of Commercial Banks

Credit risk is one of the main risks the commercial banks faces all over the world,especially in the risk structure of the banks of China.In order to control credit risk more scientifically,we shall connect the qualitative analysis and the quantitative analysis.Put forward by J.P.Morgan Credit Metrics model is the application of the VaR in the field of credit risk,showing great advantage in quantitative bonds and credit risk of loan.This paper studies the Credit Metrics model and analyzes the hypothesis and framework of this model,attempting to explore the application of the model in China in order to promote the realization of the risk quantification of the commercial banks of China.

Intelligent Decision Support System for Bank Loans Risk Classification

Intelligent Decision Support System (IISS) for Bank Loans Risk Classification (BLRC), based on the way of integration Artificial Neural Network (ANN) and Expert System (ES), is proposed. According to the feature of BLRC, the key financial and non-financial factors are analyzed. Meanwhile, ES and Model Base (MB) which contain ANN are designed . The general framework,interaction and integration of the system are given. In addition, how the system realizes BLRC is elucidated in detail.

Designing of Commercial Bank Loans Risk Early Warning System Based on BP Neural Networks

According to the index early warning method, a commercial bank loans risk early warning system based on BP neural networks is proposed. The warning signal is mainly involved with the financial situation signal of loaning corporation. Except the structure description of the system structure the demonstration of attemptive designing is also elaborated.

Risk Management in On-Line Banking

In the context of goal setting, the more difficult the goal, given feedback on performance, the more focused is individuals’ attention and persistence to accomplish the goal and in turn, their performance is also improved. Similarly, when the goal is multi-complex and performance time constraint, the deployment of specific strategies maybe the best approach developed. In effect of the above, this investigation takes a socio-psychological and organizational perspective in setting information systems (IS) security goals. In doing so, three important issues of goal setting are identified, these are: trust, culture and risk communication. Since system security breaches are still on the rise, the performance of managing such online risks is not the one expected. The framework suggested in this paper aims to contribute to socio-psychological and organizational values by enhancing the performance of the IS risk management process with a focus on security risks.

Systemic Risk of Conventional and Islamic Banks: Comparison with Graphical Network Models

The main aim of this paper is to compare the stability, in terms of systemic risk, of conventional and Islamic banking systems. To this aim, we propose correlation network models for stock market returns based on graphical Gaussian distributions, which allows us to capture the contagion effects that move along countries. We also consider Bayesian graphical models, to account for model uncertainty in the measurement of financial systems interconnectedness. Our proposed model is applied to the Middle East and North Africa (MENA) region banking sector, characterized by the presence of both conventional and Islamic banks, for the period from 2007 to the beginning of 2014. Our empirical findings show that there are differences in the systemic risk and stability of the two banking systems during crisis times. In addition, the differences are subject to country specific effects that are amplified during crisis period.