Are Capital Ratios Procyclical? Evidence from Turkish Banking Data

Topbaş, Turguttopbas Neslihan

doi:10.2478/jcbtp-2018-0028

Cited by 7 publications

(1 citation statement)

References 35 publications

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“…Some studies found that bank's capital buffers acting counter-cyclically. This indicates that banks tend to boost their capital in normal times to be drawn during weak economic conditions (Turguttopbas, 2018). According to Mahdi and Abbes (2018), the undeveloped Islamic financial market forces Islamic banks in particular to keep larger capitals because it is challenging for them to raise money.…”

Section: Literature Reviewmentioning

confidence: 99%

Capital Decision of Islamic Banks in Developing Countries

Rokeman,

Ahmad

2024

E-BPJ

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The study investigates capital decisions of Islamic banks in developing countries. The study uses 96 Islamic banks in developing countries from period of 2007 to 2021. By applying the random effect model with cluster regression, the findings reveal that all variables are found to be negatively correlated with the capital buffer. The results recommend regulators in developing countries to ensure Islamic banks maintain consistent capital ratios at all times to address the moral hazard issue that is apparent in larger banks. In response to economic cycles, Islamic banks are also encouraged to manage their capital buffers in a counter-cyclical manner.

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Section: Literature Reviewmentioning

confidence: 99%

Capital Decision of Islamic Banks in Developing Countries

Rokeman,

Ahmad

2024

E-BPJ

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Cyclicality of capital adequacy ratios in heterogeneous environment: A nonlinear panel smooth transition regression explanation

et al. 2021

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Our study uses a new business cycle (BC) index and a nonlinear panel smooth transition regression model on quarterly data of 1538 bank holding companies of the United States to investigate response of capital adequacy ratios (CARs) to changes in economic activity. Our findings confirm the existence of nonlinear effects of BC on CARs. Although we use a nonlinear model and a new proxy of BC, our results about CARs are not only consistent with existing mainstream literature but also improve estimation and goodness of the estimation of CARs. The study outcome is useful for policymakers for CARs' standards adjustments during recessions.

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Macro Stress Testing Credit Risk: Case of Madagascar Banking Sector

Rakotonirainy

Razafindravonona

Rasolomanana

2020

Journal of Central Banking Theory and Practice

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This study proposes to assess the vulnerability of banking sector’s credit portfolio under macroeconomic shocks and to evaluate its impact on banking system capitalization. Our method uses the Global Vector Autoregressive (GVAR) Model to generate adverse macroeconomic scenarios. The GVAR model is combining by the satellite credit risk equation to find the non-performing loan under stress conditions. The advantage of using GVAR model is that on the one hand, it captures the transmission of global, external and domestic macroeconomic shocks on banks non-performing loans. On the other hand, this model considers the nonlinear pattern between business cycle and the bank credit risk indicator during the extreme events as highlighting by the macro stress test literature. The forecast of non-performing loan is then used to obtain stress projections for capital requirement for the banking system level. This article attempts to fill the lacks concerning the stress testing works about Madagascar which study is a recent framework, whose no study on dynamic macro stress testing was treated before. The Results outline the interaction of aggregate non-performing loan with macroeconomic evolution. The horizon of capital prediction shows that banking sector reacts most to a GDP shock. Also, Madagascar banking sector is quite resilient and remains sufficiently capitalized under all macroeconomic scenarios designed with a solvency ratio higher than the minimum regulatory CAR ratio.

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Are Capital Ratios Procyclical? Evidence from Turkish Banking Data

Cited by 7 publications

References 35 publications

Capital Decision of Islamic Banks in Developing Countries

Capital Decision of Islamic Banks in Developing Countries

Cyclicality of capital adequacy ratios in heterogeneous environment: A nonlinear panel smooth transition regression explanation

Macro Stress Testing Credit Risk: Case of Madagascar Banking Sector

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