Suhyup Bank became to be subject to regulation of capital ratio by Basel III which was introduced in order to enhance stability of the financial institution. Accordingly, Suhyup Bank will require recapitalization. It is important to estimate the risk-weighted assets in calculating of Suhyup Bank's recapitalization scale. Therefor, this study aimed to present a scientific model as estimated the risk-weighted assets. Risk-weighted assets are calculated by applying different risk weights for loans, may have a certain relationship with the loans. Results show that the risk-weighted assets is affected by the previous year's risk-weighted assets and influenced the increase in loans during the year. Since the required basic capital adequacy ratio was specified, the risk-weighted assets should be predicted reasonably. Accordingly, on this study it was tried to derive the accounting equation to predict the risk-weighted assets based on management data of a bank since introduction of Basel III. As the risk-weighted assets were weighted differently according to the type of loans, if the accounting equation is derived by using the type of loans, then it would be helpful for the risk management of banks in the long-term. According to this, the increase of loan would be predicted on the basis of past management performance of Suhyup Bank, and for this reason, the future risk-weighted assets of Suhyup Bank were predicted. The result of this study was showed that 98.3% of risk-weighted assets of the previous year, 62.4% of the secured loan changes and 95.1% of the credit loan changes affected risk-weighted assets.
The Journal of the Korea institute of electronic communication sciences
/
v.9
no.3
/
pp.393-402
/
2014
ICT environment to the survey released by the Bureau of Statistics 2012 Household Finance. Korean Welfare survey 24.9% of all households in financial assets, real estate is about three times more than 69.9%, respectively. The problem is that the information is slow and income deciles(deciles 1-4), a relatively high proportion of households with low(78.8 to 69%) of the real estate assets of the expansion of the world economy with low growth and low uncertainty, work from home due to the information changes in the structure of the economy, such as increases in real estate prices remain exposed to the risk of a phenomenon such as Pour House Pour Talent and low-income people is bound to be more serious symptoms. This low correlation is by constructing a composite asset portfolio, the weighted average risk of the individual assets while increasing overall revenue decrease that risk is based on the principle of portfolio by type and different areas in the ICT environment in a portfolio of real estate price index low correlation to financial assets by including the effect of dispersion stable complex asset portfolio and empirical Growth was divided.
NAVAS, Jalaludeen;DHANAVANTHAN, Periyasamy;LAZAR, Daniel
The Journal of Asian Finance, Economics and Business
/
v.7
no.11
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pp.1113-1122
/
2020
The purpose of this study is to examine how the Indian banks have adjusted their risk-based capital ratios during 2009-2018 to meet the regulatory requirements. Banks can, in principle, increase their risk-based regulatory capital ratio, either by increasing their levels of regulatory capital or by shrinking their risk-weighted assets by adjusting asset growth or risk in the portfolio. We investigate banks' capital behavior by decomposing the change in the capital ratio into the contribution of its components and analyzing their variance across regulatory regimes and banks' ownerships. We further investigate how each component of the capital ratio is adjusted by the banks by breaking down them into balance sheet items. We find that the banks' capital behavior significantly differed between public and private sector banks and between the two regulatory regimes. During Basel II, banks, in general, followed a strategy of aggressive asset growth with increased risk-taking. The decline in the CRAR because of such an expansionary strategy was adjusted by augmenting additional capital. However, during Basel III, due to higher capital requirements, both in terms of quantity and quality, banks followed a strategy of cutting back their asset growth and reducing the risk in their portfolio to maintain their CRAR.
The Journal of Asian Finance, Economics and Business
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v.6
no.4
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pp.27-35
/
2019
The paper examines the level of disclosure on Islamic banks' performance in the United Arab Emirates (UAE). The data was collected through content analysis of annual reports and financial statements of all fully-fledged Islamic banks working in the UAE over the period 2009 to 2013. Return on Assets is used as a proxy for the performance of Islamic banks while disclosure index is used as a proxy for Islamic banks' disclosure. Also, predetermined variables are used in the study like Size, Deposits, Non-Performing Investments and Capital to Risk Weighted Assets Ratio. Two-Stage Least-Square regression method is used to check the interdependence relationships between disclosure and performance of Islamic banks in the UAE. The results show a significant relationship between performance and disclosure in the UAE Islamic banks. Our regression results show that Islamic banks with higher levels of disclosure lead to higher operating performance. Furthermore, the performance has a great impact on the level of disclosure which means Islamic banks with high performance measures will disclose more information for investors and other institutions in order to reduce the cost of equity and increase their values in the market. This study is considered as a battery for further studies in the relationship between disclosure and financial performance of Islamic banks at a global level.
The primary purpose of this study is to examine the impact of new BIS regulation, which is the preparations to incorporate not only credit risk but also market and operation risk, on the bank behaviors. As methodology, SUR(seemingly unrelated regression) and pool unit test are used in the empirical analysis of banks survived in Korea. It is employed that quarterly data of BIS capital ratio, ratio of standard and below loans to total loans, ratio of liquid assets to liquid liabilities, allowances for credit losses, real GDP, yields of corporate bonds(3years, AA) covering the period of 2000Q1~2009Q1. As a result, it could be indicated that effectiveness and promoting improvements of BIS capital regulation policy as follows; First, it is explicitly seen that weight of lending had decreased and specific gravity of international investment had increased until before BIS regulation is built up a step for revised agreement in late 2001. Second, after more strengthening of BIS standard in late 2002, banks had a tendency to decrease the adjustment of assets weighted risk through issuing of national loan that is comparatively low profitability. Also, it is implicitly sought that BIS regulation is a bit of a factor to bring about credit crunch and then has become a bit of a factor of economic stagnation. Third, as the BIS regulation became hard, it let have a effort to raise the soundness of a credit loan because of selecting good debtor based on its credit ratings. Fourth, it should be arranged that the market disciplines, the effective superintendence system and the sound environment to be able to raise enormous bank capital easily, against the credit stringency and reinforce the soundness of banks etc. in Korea capital market.
This study empirically analyzes whether bank capital channel and risk-taking channel for monetary policy work for domestic banks in South Korea by analyzing the impact of the expansionary monetary policy on the rate spread between deposit and loan, capital ratio, and loan amount. For the empirical analysis, the Uhlig (2005)'s sign-restricted SVAR(Structural Vector Auto-Regression) model is used. The empirical results are as follows: the bank's interest rate margin increases, the capital ratio improves, risk-weighted asset ratio increases, and the amount of loans increases in response to expansionary monetary shock. This empirical results confirm that bank capital channel and risk-taking channel work in domestic banks, similar to the previous research results. The implications of this study are as follows. Although the expansionary monetary policy has the effect of improving the bank's financial soundness and profitability in the short term as bank capital channel works, it could negatively affect the soundness of banks by encouraging banks to pursue risk in the long run as risk-taking channel works. It is necessary to note that the capital ratio according to the BIS minimum capital requirement of individual banks may cause an illusion in supervising the soundness of the bank. So, the bank's aggressive lending expansion may lead to an inherent weakness in the event of a crisis. Since the financial authority may have an illusion about the bank's financial soundness if the low interest rate persists, the authority needs to be actively interested in stress tests and concentration risk management in the pillar 2 of the BIS capital accord. In addition, since system risk may increase, it is necessary to conduct regular stress tests or preemptive monitoring of assets concentration risk.
Since the publication of Markowitz's (1952) mean-variance portfolio model, research on portfolio optimization has been conducted in many fields. The existing mean-variance portfolio model forms a nonlinear convex problem. Applying Dantzig's linear programming method, it was converted to a linear form, which can effectively reduce the algorithm computation time. In this paper, we proposed a Dantzig perturbation portfolio model that can reduce management costs and transaction costs by constructing a portfolio with stable and small (sparse) assets. The average return and risk were adjusted according to the purpose by applying a perturbation method in which a certain part is invested in the existing benchmark and the rest is invested in the assets proposed as a portfolio optimization model. For a covariance estimation, we proposed a Gaussian kernel weight covariance that considers time-dependent weights by reflecting time-series data characteristics. The performance of the proposed model was evaluated by comparing it with the benchmark portfolio with 5 real data sets. Empirical results show that the proposed portfolios provide higher expected returns or lower risks than the benchmark. Further, sparse and stable asset selection was obtained in the proposed portfolios.
Recently banks and large financial institutions have introduced lots of Robo-Advisor products. Robo-Advisor is a Robot to produce the optimal asset allocation portfolio for investors by using the financial engineering algorithms without any human intervention. Since the first introduction in Wall Street in 2008, the market size has grown to 60 billion dollars and is expected to expand to 2,000 billion dollars by 2020. Since Robo-Advisor algorithms suggest asset allocation output to investors, mathematical or statistical asset allocation strategies are applied. Mean variance optimization model developed by Markowitz is the typical asset allocation model. The model is a simple but quite intuitive portfolio strategy. For example, assets are allocated in order to minimize the risk on the portfolio while maximizing the expected return on the portfolio using optimization techniques. Despite its theoretical background, both academics and practitioners find that the standard mean variance optimization portfolio is very sensitive to the expected returns calculated by past price data. Corner solutions are often found to be allocated only to a few assets. The Black-Litterman Optimization model overcomes these problems by choosing a neutral Capital Asset Pricing Model equilibrium point. Implied equilibrium returns of each asset are derived from equilibrium market portfolio through reverse optimization. The Black-Litterman model uses a Bayesian approach to combine the subjective views on the price forecast of one or more assets with implied equilibrium returns, resulting a new estimates of risk and expected returns. These new estimates can produce optimal portfolio by the well-known Markowitz mean-variance optimization algorithm. If the investor does not have any views on his asset classes, the Black-Litterman optimization model produce the same portfolio as the market portfolio. What if the subjective views are incorrect? A survey on reports of stocks performance recommended by securities analysts show very poor results. Therefore the incorrect views combined with implied equilibrium returns may produce very poor portfolio output to the Black-Litterman model users. This paper suggests an objective investor views model based on Support Vector Machines(SVM), which have showed good performance results in stock price forecasting. SVM is a discriminative classifier defined by a separating hyper plane. The linear, radial basis and polynomial kernel functions are used to learn the hyper planes. Input variables for the SVM are returns, standard deviations, Stochastics %K and price parity degree for each asset class. SVM output returns expected stock price movements and their probabilities, which are used as input variables in the intelligent views model. The stock price movements are categorized by three phases; down, neutral and up. The expected stock returns make P matrix and their probability results are used in Q matrix. Implied equilibrium returns vector is combined with the intelligent views matrix, resulting the Black-Litterman optimal portfolio. For comparisons, Markowitz mean-variance optimization model and risk parity model are used. The value weighted market portfolio and equal weighted market portfolio are used as benchmark indexes. We collect the 8 KOSPI 200 sector indexes from January 2008 to December 2018 including 132 monthly index values. Training period is from 2008 to 2015 and testing period is from 2016 to 2018. Our suggested intelligent view model combined with implied equilibrium returns produced the optimal Black-Litterman portfolio. The out of sample period portfolio showed better performance compared with the well-known Markowitz mean-variance optimization portfolio, risk parity portfolio and market portfolio. The total return from 3 year-period Black-Litterman portfolio records 6.4%, which is the highest value. The maximum draw down is -20.8%, which is also the lowest value. Sharpe Ratio shows the highest value, 0.17. It measures the return to risk ratio. Overall, our suggested view model shows the possibility of replacing subjective analysts's views with objective view model for practitioners to apply the Robo-Advisor asset allocation algorithms in the real trading fields.
The purpose of this paper examines the way the potential for increased procyclicality may arise in Korea according to the introduction of Basel II based on the empirical results of U.K. and Spain. Because of the limited retail banking data, the correlations between risk-weighted assets corresponding to the denominator of the capital ratio and procyclicality, and capital ratio and the procyclicality are analyzed in Korea. As a result, there is a high possibility that the procyclicality may occur in Korea. However, there are limitations in judging the existence of the procyclicality for the capital in Korea only based on those correlations. In the future, in case more of retail banking data are accumulated, the procyclicality in Korea should be examined based on the systematic model like the cases in England and Spain. Lastly, the policy implications are derived based on the calculation process of the regulatory capital(Pillar I), the process of the Financial Authorities(Pillar II), and the market discipline(Pillar III).
Journal of the Korea Institute of Information Security & Cryptology
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v.22
no.4
/
pp.851-868
/
2012
After the financial crisis in 2008, the financial market still seems to be unstable with expanding the insolvency of the financial companies' real estate project financing loan in the aftermath of the lasted real estate recession. Especially after the illegal actions of people's financial institutions disclosed, while increased the anxiety of economic subjects about financial markets and weighted in the confusion of financial markets, the potential risk for the overall national economy is increasing. Thus as economic recession prolongs, the people's financial institutions having a weak profit structure and financing ability commit illegal acts in a variety of ways in order to conceal insolvent assets. Especially it is hard to find the loans of shareholder and the same borrower sharing credit risk in advance because most of them usually use a third-party's name bank account. Therefore, in order to effectively detect the fraud under other's name, it is necessary to analyze by clustering the borrowers high-related to a particular borrower through an analysis of association between the whole borrowers. In this paper, we introduce Analysis Techniques for detecting financial loan frauds in advance through an analysis of association between the whole borrowers by extending SNA(social network analysis) which is being studied by focused on sociology recently to the forensic accounting field of the financial frauds. Also this technique introduced in this pager will be very useful to regulatory authorities or law enforcement agencies at the field inspection or investigation.
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