Banking and Effective Capital Regulation in Practice

Velez, Sophia Beckett

doi:10.4324/9781003057581

Cited by 2 publications

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“…Nevertheless, it affects the efficient functioning of credit institutions, including their ability to hedge bank risk resulting from prudential norms. This issue was indicated by various representatives of the scientific community because the newly implemented regulations increase demand for bank capital while changing its quality and financing structure in banks, which significantly determines the capital effectiveness of global financial markets [23][24][25][26][27][28][29][30][31][32]. The main aim of this paper is an extrapolation of risks appearing in the unstable environment of credit institutions, which are increasingly boldly directing their expectations on their inclusion in the sustainable finance concept implementation.…”

Section: Introductionmentioning

confidence: 99%

Banks’ Capital Requirements in Terms of Implementation of the Concept of Sustainable Finance

Pyka

Nocoń

2021

Sustainability

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In 2015, the governments of 193 United Nations member states adopted the 2030 Agenda for Sustainable Development, followed by the Paris Agreement. Their detailed solutions assume the inclusion of the concept of sustainable finance into investment decision-making processes, including directing capital towards sustainable investments and stopping climate change. The main subject of the study is sustainable finance, which is one of the pillars of the sustainable development of the global economy, which has also become an important objective of the European Union, enshrined in the Treaty of Lisbon. The main aim of the paper is an extrapolation of risks appearing in the unstable environment of credit institutions, which are increasingly boldly directing their expectations on their inclusion in the sustainable finance concept implementation. The empirical research included in the first stage a questionnaire survey, while in the second one, a quantitative comparative analysis. The research was aimed at verifying the research hypothesis stating that after the global financial crisis, banks meet the new prudential capital regulations, however by their inclusion in the concept of green finance, they will increase a share of mitigation in the bank risk management strategy. The research, carried out in the Polish banking sector, has shown that domestic banks meet all prudential requirements resulting from the new capital norms. However, investment strategies, based on the composition of the portfolio in accordance with the principles of sustainable finance and on high rates of return in the long term, will change banks’ resilience to key risks from the perspective of sustainable development.

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Section: Introductionmentioning

confidence: 99%

Banks’ Capital Requirements in Terms of Implementation of the Concept of Sustainable Finance

Pyka

Nocoń

2021

Sustainability

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Idiosyncratic Viral Loss Theory: Systemic Operational Losses in Banks

Velez

2021

JRFM

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Basel III regulation intent is to increase the resiliency of banks through effective risk management practices that can reduce significant idiosyncratic operational losses. A systemic risk event that leads to significant losses in a bank holding company (BHC) can expose them to become insolvent and cause significant volatility and unpredictable negative impact on the United States economy. The viral spread of operational losses through global markets by interconnected multinational banks can be compared to viruses spread through interconnected countries and the significant losses incurred; this can be referred to as idiosyncratic viral loss theory. This idiosyncratic viral loss theory discusses systemic operational losses that are evident in human error, fraud, and legal expenses that are aligned to systemic operational risk. The occurrences of significant losses that are idiosyncratic in nature and that are linked to failed internal processes, people, systems, and external events are defined by the Basel Committee on Banking Supervision as operational risk losses; these losses’ idiosyncratic nature makes them comparable to viruses. This study employs the Compliance and Ethics Group’s (OCEG’s) standard that integrates governance, risk management, internal control, assurance, and compliance (GRC capability model) into one functional goal to improve quality and principled performance through measurable tools that may enhance effectiveness and efficiency practices. This study concerns senior manager activities that can be effective towards meeting effective risk management practices posed by the Basel III regulation for BHCs, which may reduce the spread of significant losses in the banks. Through the use of a qualitative e-Delphi study, 10 banking finance experts were convened to build consensus on effective risk management practices. Data were collected from three electronic questionnaires submitted through Qualtrics. Data were analyzed using theoretical triangulation, coding, and thematic analysis. Four important considerations were identified that could bolster effective risk management practices: (a) a comprehensive enterprise-wide risk; (b) controlling fraud; (c) going beyond the minimum risk assessment requirements set forth by the banking regulators; (d) independent risk identification and management. These considerations towards effective risk management practices may help reduce systemic operational losses viral spread in banks.

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Banking and Effective Capital Regulation in Practice

Cited by 2 publications

References 0 publications

Banks’ Capital Requirements in Terms of Implementation of the Concept of Sustainable Finance

Banks’ Capital Requirements in Terms of Implementation of the Concept of Sustainable Finance

Idiosyncratic Viral Loss Theory: Systemic Operational Losses in Banks

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