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Bank Profitability - Science topic

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What are the key differences between banking credit risk management and banking cyber risk management in the context of the development of online and mobile banking?
Improving bank credit risk management is particularly important to reduce the scale of the share of bad loans that are not repaid on time, deteriorating loan portfolios, including paracredit products in commercial banks, including investment banks investing in securities and other speculative investment assets. Thanks to the efficient process of improving bank credit risk management, the scale of financial and economic crises is also reduced. How important it is to improve bank credit risk management and reliably carry out credit risk management, reasonably carry out bank lending, carry out banking in accordance with the principles of business ethics, respect bank customers, apply the principles of corporate social responsibility, shape a high level of good reputation of financial institutions, maintain a high level of public confidence in banks and other financial institutions, etc. this has been shown by the global financial crisis of 2007-2009. Breaking the above-mentioned principles and failing to follow good practices, ignoring the issue of sound application of credit risk management principles leads to serious crises in the financial system, bankruptcy of banks and, consequently, economic crises. On the other hand, in recent years, the greatest number of threats to banking have emerged from the Internet, i.e., the environment in which online and mobile banking is developing. Also during the pandemic of the SARS-CoV-2 coronavirus (Covid-19), due to the strong increase in the scale of e-commerce, online payments and settlements, the scale of development of online banking and also the scale of cybercrime increased. As a result, the importance of banking cybercrime risk management is growing in banks, and the scale of allocating a portion of banks' surplus funds to secure financial transactions, transfers, payments and settlements made remotely through online and mobile banking is increasing. I researched the issue of credit risk management, bank lending procedures, the importance of an effectively conducted credit risk management process, the mistakes made in this regard, i.e. unreliable implementation of the credit risk management process in banks, violations of business ethics and good banking practices, leading to the global financial crisis of 2007-2009. The results of my research are included in publications on the issues of credit risk management, bank lending procedures, the methodology of assessing the creditworthiness of potential borrowers and credit risk of the bank, the scoring method of assessing the creditworthiness of customers and credit risk, the origins of the global financial crisis 2007-2009, etc. can be found in the publications I have posted on my profile of this Research Gate portal. I am currently conducting research in the field of benchmarking on the comparison of procedures, instruments, systems, etc. for credit risk management and cyber risk management. I invite you to cooperate with me on this issue. I request the results of the analogous analyses and studies conducted.
In view of the above, I address the following questions to the esteemed community of researchers and scholars:
What are the key differences between banking credit risk management and banking cyber risk management in the context of the development of online and mobile banking?
What is your opinion on this issue?
Please answer,
I invite everyone to join the discussion,
Thank you very much,
Warm regards,
Dariusz Prokopowicz
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Credit risk management occurs when bank funds are extended, committed, invested, or otherwise exposed through explicit or implicit contractual arrangements, reflected on or off the balance sheet. Therefore, factors unrelated to the bank, such as overall unemployment rates, shifting socio-economic situations, debtors’ views, and political difficulties, determine risk.
According to the Basel Committee on Banking Supervision (2001), credit risk is the potential loss of the outstanding loan, either partially or whole, due to credit events and default risk. That is to say, failure to make a required payment, repudiation or moratorium, or modification and restructuring of the loan.
Cyber risk, on the other hand, is categorised as an operational risk. Therefore, firms require expensive risk management and mitigation techniques. Implementing cyber risk management can lessen exposure. Due to the nature of cyber risk as a highly dynamic risk with catastrophic loss potential, considerable information asymmetry, and a lack of appropriate data, standalone cyber insurance products are risky even for insurers. Therefore firms invest more in cyber risk management when the consequences of a cyberattack are more costly for businesses.
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The literature on the subject is very poor. As a result, many companies use inappropriate methods, which are based on fixed cost sharing.
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The contribution margin per unit (MCU) is the best product profit metric.
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This question intents to get variables which can be use to measure innovation in banks and how they contribute to banks' profitability.
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Hello. I have some answers for you.
1. Volume of transactions on bank digital channels
2. Number of users of bank apps to conduct personal banking activities
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If artificial intelligence is implemented for the online mobile banking, can this banking segment be deprived of employing human capital altogether?
Please reply
Best wishes
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Dariusz Prokopowicz In my experience, bank employees are needed less and less banking applications, mobility, online services and even financial and credit analyzes are performed using artificial intelligence.
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Is there any underpinning theory, that can explain a framework testing the effect of bank-specific, industry-specific, and macroeconomic factors on banks profitability?
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I am looking to analyse the determinants of Islamic Bank's market share, but I need to find the Islamic bank's profit and loss sharing rate. Previous papers on this topic used the profit-sharing rate as an independent, but I cannot find any data on this for my own research.
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Is it better to have a Lot of bitcoins compared to rather having a lot of paper money or savings at the bank ? Thoughts
#cryptocurrency #money #bank
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Actually many people are using cryptos now to store the value of their money or assets. However, I think cryptos are not good always to store the value because of the volatility.
kindly see the the documentaries of (Plot) YouTube channel in the YouTube, they are talking more about this.
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I am currently researching the effect of mobile banking availability on bank profitability for 2015 - 2019. My data is a data panel with n = 30 and T = 5 (N = 150 data). In my model there are 8 independent variables and one of them is the mobile banking variable. I use a dummy variable for the mobile banking variable. 1 if the bank has mobile banking and 0 if the bank does not have mobile banking, in that year. For example, if a bank launched mobile banking in 2017, then in 2015 - 2016 it would be 0, and in 2017 - 2019 it would be 1. Is it possible to use such a dummy variable? what estimation method is most suitable?
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It depends on several factors
1. Type of dependent variable you are using i.e. limited discrete dependent variable, continues variable etc.
2. Is your model a dynamic model or not
3. Check for endogeniety, heteroscedasticity etc.
So depending upon above factors you will decide which estimation technique would b more appropriate for your model i.e. fixed / random effect model, FMOLS, GMM, logit probit model etc.
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I am a student working on bank profit and liquidity management. I get data from bankscope and find that about 1/4 banks provide consolidated financial statement and 3/4 banks provide unconsolidated financial statement. Should I delete those banks providing consolidated financial statement. Or is it okay to use mixed ones ,like putting into one regression to examine relationship between bank profit and GDP.
thank you!
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That depends, if you want to unify your procedures, you can use consolidated only or non-consolidated. In my view, I think you can mix the statement and study all of them. Because it is batter to expand your sample to get the major trend or desired objectives. Zhan Yi
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Hi all, I am currently doing my thesis on bank profitability. I need to run a gmm test and I'm unsure how to generate the command as i'm unable to segregate my variables. My dependent variable is roa(return of assests beascially my profit) my explanatory variables that need to be segregated are lag of roa, size of the bank, capital, credit risk, expense management, managers risk, non interest income/total income, credit risk, asset quality(Non-performing loan/ total loan),liquidity, gdp rate, inflation rate, federal reserve interest rate. Can someone please guide me?
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Jan Jansen NO PROBLEM:) ths is actually my thesis in which I was required to analyse a few variables and find out the determinants that contribute and have a significance on bank profitability. I first ran my regressions. checked for multicollinearity. I found 2 variables that were highly colinear. so I dropped one of them. I went on to check collinearity again and this time everything was fine. so I then went on to run my fe re hausman tests out of which I concluded fe test is to be used. My next test was supposed to be gmm as assigned by my professor. Now im my gmm test, I had many issues. I had 0 p values for ar 1 ar2 Hansen and sargan. SO I thought I was doing something wrong. I read some papers that suggested to 2nd lag all explanatory variables to assume endogenity. I did that and my tests are as shown below in e attachment. My ar2 is not good but my hansen is still 0.00. Anyway I can improve this please?
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Hi all, I ma currently doing my thesis on determinants of bank profitability and I am facing a lot of issues in my GMM test. My p values for ar 1 ar2 sargan and Hansen are being shown as 0.00. My command is as follows....and my variables ar as such...Can someone please guide me where I am going wrong?
xtabond2 roa l.roa s ea em rwa totrbcr nii llp npl liqa gdpgr cpi fedrate , gmm(l.roa s ea em rwa totrbcr nii llp npl liqa, collapse) iv(gdpgr cpi fedrate) nolevel
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Peter Foldvari hi peter, I tried your method, I 2nd lagged all my explanatory variables to assume endogenity. My ar2 has improved but my Hansen is still 0.00. Any idea how can improve that?
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I'm a little bit understanding economy. I want to know about the most beneficial way for a country's economy. Sending money from another country in national currency or in foreign currency.
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Dear Ahmed Hesham,
There is no unifying principle in this matter. It depends on the form in which money is sent from country to country, via which type of transfer or in another form. Besides, through a bank or other institution? In addition, it also depends on various currency systems that may operate in individual countries, from international settlements implemented in specific countries. Besides, the optional currencies are just as exchangeable in individual countries, etc.
Best wishes
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I want to analyse commercial banks profitability. (I have panel data). I use ROAA as dependent variable and liquidity ratio, capital ratio, NPL, staff-expenses ratio, total asset, non-interest income ratio as determinants. I have not sufficient knowledge in banking system, so I can't decide precisely which of determinant use as threshold variable. I have two ideas: liquidity ratio or asset. could you give me a advice which variable may I apply as "threshold variable"? or, is there necessity of using any "threshold variable"? thank in advance.
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look at the variable from CAMEL and or EAGLE model and zoom into the respective dimension and elements if required
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Hi guys,
Most publications on applying machine learning to credit scoring focus on finding the probability of default. However, eventually, it seems that identifying profitable customers is what really matters.
I wonder if there are any reasons why we should apply machine learning to predict the probability of default instead of predicting profitability / predicting the probability of a customer being profitable.
Thanks!
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I think both are correlated. High credit score -> Low Default and NPAs -> Higher Profitability. There is empirical evidence that suggest negative association between NPAs and Banks Profitability. The huge issues banks face today is default and every bank would like to minimize it. Higher default rates also increases the cost of the banks in terms of collection efforts and opportunity cost leading to lower profitability. Moreover, profitability calculations are infected with measurement errors, hence endogenity issues.
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I'm wishing to conduct my PhD thesis in the area of Islamic Finance. Initially, I've planned to conduct a research on the "Performance of Islamic Banks" with a comparison of two countries. I'm seeking advice from global community on my chosen area. Please advice me;
- How plausible is this topic and how can I contribute in the existing knowledge?
- What are the possible new dimension can be consider for this well practiced research?
- What would be some different ideas, if you have?
Please share any relevant literature available.
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There is a review paper in Islamic bank that provide suggestion for future research in Islamic banks. In this paper, you may find the review of previous studies that discuss performance of Islamic banks and also the comparison between Islamic banks vs its counterparts. I hope it is help
Abedifar, P., Ebrahim, S.M., Molyneux, P. and Tarazi, A., 2015. Islamic banking and finance: recent empirical literature and directions for future research. Journal of Economic Surveys, 29(4), pp.637-670.
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I am analyzing the determinants of bank profitability and i am working on a paper that i would like to submit for publication.  When i use one step estimator, i get theoretically consistent results while also observing the wald and the sargan test requirements. When i use two step estimator all my independent variables are insignificant. I am tempted to use the one-step estimator but i am not sure whether one step estimator is still used as almost all the papers i have looked into have used two step estimator. I am also not sure how i can justify the use of one step over two step estimator. i am using stata for my analysis
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sorry for the lag of clarity, it is General Methods of Moments (GMM) , it is a dynamic form of panel data model, it uses a lagged variable of a dependent variable as one of the independent variable. in the family of these models there is arellano-bond and arellano, bover and blundell methods 
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Can anyone suggest good research articles/ papers on measuring performance of banks with Financial Ratios?
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Hi,
You may be interested by this paper:
Financial penalties and bank performance
Journal of banking and finance, June 2017, vol 79, Pages 57-73
Hannes Köster, Matthias Pelster
Best regards
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If one bank reduces 100 basis points in lending, all banks try to follow the same bandwidth rather than be ready to take a hit on their margins but cutting the rate heavily and engage in competition.
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Hi,
You may be interested by this paper:
Bank opacity and the efficiency of stock prices
Journal of Banking and Finance, March 2017, vol 76, Pages 32-47
Benjamin M. Blau, Tyler J. Brough, Todd G. Griffith
Best regards
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The study is going to cover the Indian Commercial Bank over a period of a decade.
Operational efficiency and its effect on a bank's sustainability is to be studied. 
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Hi,
You may have a look to this paper:
Liquidity creation, regulatory capital, and bank profitability
International Review of Financial Analysis, December 2016, Pages 98-109
Vuong Thao Tran, Chien-Ting Lin, Hoa Nguyen
Best regards
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Are there any research methods to study the effects of the financial transaction tax on banks profitability and risk taken ? Thank you for any help!
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My thesis is proving the impact of banking systemic size on their profitability using the liabilities over GDP ratios (relative size). Does the ratio represents the "systemically large banks" terminology?
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An empirical analysis of the relationships between different capital ratios and bank
failure suggests that two simple ratios—the leverage ratio and the ratio of capital to gross revenue—may merit a role in the revised framework. I just want to know more about those ratios. How im going to calculate them? Can I find these on the income statements or balance sheets from banks?
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CAMELS is a model for performance evaluation of Commercial Banks in India. C stands for Capital adequacy, A stands for Asset Quality, M stands for Management, E stands for Earning, L stands for Liquidity and S stands for sensitivity. Researcher have worked a lot on CAMEL model parameter but very few have touched the last component i.e. Sensitivity. Please guide me as to how I can approach this technical aspect for my study. My study is covering 34 Indian commercial banks over a period of 10 years.
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I find sensitivity as an indicator which is responsible for the adaptiveness of banks. Risk, customer knowledge management and innovation management are amongst the options of secondary data that could be analyzed. Look at the attachment - it is a research on bank innovative products (market research).
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After forming the clusters of customers of Banks, using various algorithms like - kmeans and decision tree. What are the ways we can validate the clusters formed by our method.
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Dear Mayur, here is the link to the clustering validation in general:
I have recently published a paper on clustering in banking, by using SOM methodology, and we used a predetermined methodology provided by the Viscovery (software that we have used). However, we have provided a logical validation of the clusters. It would be even better if you can apply a validation by the experts from the field, and also present this in the paper (we do not have this in our paper). 
Here are the links:
Bach, M. P., Juković, S., Dumičić, K., & Šarlija, N. (2014). Business Client Segmentation in Banking Using Self-Organizing Maps. South East European Journal of Economics and Business, 8(2), 32-41.
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I am writing a paper on testing the significance of various regulations implemented over 4 time periods to understand the impact on a bank's profitability.  Would appreciate any guidance on how to conduct this.  I am happy to engage someone on a consulting basis to help me with this.
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Hi Henry,
You need to provide details about your study in order to get a meaningful response. More specifically, you need to describe the outcome under study, what are all the variables you have, how you believe they are related, the sample size, and ultimately, what you are trying to ascertain.
The more information you provide, the more likely the answers you receive will be helpful.
Ariel 
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I need help about the methodology to measure how bank regulations will affect bank risks and also bank profits. also i need help on the kind of data to use.  thanks for facilitating
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Since I have not much details about your hypothesis, there are couple of scenarios.
  1. If you a time series data, introduce the dummy variable in the years you have regulation introduced and test the significance of coefficient.
  2. just for one bank, the approach may not be ok and you may be required to panel data (cross section and time series data).
  3. There would be a number of challenges. We have tried this in one of the papers on you developed a bank profitability econometric model, one can then introduce a dummy variable during the time series to see whether the profitability behaves 
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Can anybody recommend some papers and analytical materials, marketing research results about the Branch Appiarance influence (interior and exterior of branch bank) on the client's loyalty and the bank profit? I know about the Branch Appiarance impact on  loyalty and profit, but I can't find any research materials with  with figures (% or values). Can you give me information about this? Thank you
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You should look for papers on service quality in banking. Tangibles (staff appearance, branch atmosphere and etc.) are among the service quality factors. See, for  example:
Titko, J., Lāce, N. Service Quality Evaluation in Latvian Banking // Economics & Management, No. 17 (1) – Kaunas: Technologija, 2012. – pp. 304-310 . – DOI: 10.5755/j01.em.17.1.2282
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The volume of banks' credit to the Gross Domestic Product (GDP) is used as an indicator to the participation of banking sector in the economy of a country. What is the minimum acceptable ratio of the volume of banks' credit to the GDP?
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The maturity of the financial sector is a key variable.  Empirical estimation is likely to show a negative and significant coefficient.  For low income countries (LICs) and emerging economies the degree of financial integration (formal and informal sectors) is low vis a vis mature economies.
The speed of transaction approval related to technology, bureaucracy and corruption will impact in negatively.  The depth of the financial markets will play an important role as will the openness of the economy.
Regulatory framework is obviously important but the next big variable is the difference between Islamic and non-Islamic financial systems.
If you are not undertaking empirical research my suggestion is to start with 100%, as Burakov, noted in his cogent response, and then argue theoretically pluses and minuses to make additions and deductions.  You may not have percentage adjustments that you can make but you should get a good feel for the direction.
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what is the latest technique to measure credit allocation efficiency of banks. Credit allocation efficiency may be defined as more credit should be advanced to industries that contribute more to GDP (Toboado, 2011).
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This is in stark contrast to what most journalists and economists are putting in print about the Japanese financial industry. Do you think that this undermines ideas of protectionism? Or is this a limited factor? The lack of interest rate reduction is also a parallel to what we have seen in the USA and EU.