This study investigates the factors affecting the #capitaladequacy of commercial #banks in #bangladesh using panel data from 28 banks over the period of 2013-2019. The study employs three analytical methods, including the Fixed Effect model, Random Effect model, and Pooled Ordinary Least Square (POLS) method, to analyze the Capital Adequacy Ratio (#car) and #tier1#capitalratio. The study finds that capital adequacy is significantly influenced by several factors, including #leverage, #liquidityrisk, #realgdp, net profit, size, and #inflation.
By analyzing the content of #rating#reports, the study identifies seven different mechanisms that rating analysts are concerned about, with the most significant being the #misstatement-related violations of #debt covenants that increase #liquidityrisk and #compliancerisk. The study finds that #creditratings and #reputationalrisk of #misreporting firms are adversely affected for up to seven years after an intentional misstatement becomes publicly known. The impact of an intentional misstatement on a firm's credit rating is most pronounced when rating analysts express concerns about covenant violations.
This paper discusses the origins of modern #riskmanagement concepts and applications in the #financialindustry, which were developed at Bankers Trust in the 1970s. The bank's "Resources Management" group applied #probability theory to measure #marketrisk, #creditrisk, #liquidityrisk, and #operationalrisk, which were later brought together in a metric called Risk Adjusted Return On Capital (RAROC). RAROC was used to evaluate profitability, guide strategic planning, capital allocation, and incentive compensation. The article also discusses how Bankers Trust's risk management culture deteriorated after 1995, leading to its acquisition by #deutschebank Bank in 1998.
" A model is set up which assumes that banks’ decisions regarding capital and risk are made endogenously in a dynamic pattern."
"This research contributes to bank liquidity risk management by employing supervised machine learning models to provide banks with early warnings of liquidity stress using market-based indicators."
"Building on the Liquidity Coverage Ratio created under the Basel III regulatory agreement, this paper introduces the notion of Liquidity Coverage at Risk (LCRisk), which is the probability that a bank becomes insolvent in the next 30-days. LCRisk has a closed-form expression and it can be computed using information contained in the bank’s balance sheet."