scholarly journals THE EFFECT OF CREDIT RISK MANAGEMENT ON PROFITABILITY: AN EMPIRICAL STUDY OF PRIVATE BANKS IN SYRIA

2018 ◽  
Vol 3 (2) ◽  
pp. 43-51
Author(s):  
Allam Yousuf ◽  
János Felföldi
Keyword(s):  
Risk Management ◽  
Empirical Study ◽  
Credit Risk ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Financial Reports ◽  
Capital Adequacy Ratio ◽  
Private Banks ◽  
Quantitative Manner ◽  
The Relationship

The objective of this study is to investigate the effect of credit risk management on profitability in private banks in Syria. Two main criteria have been adopted for the management of credit risk in banks: capital adequacy ratio and non-performing loans. In order to achieve the objectives of the research and to test the hypotheses, an appropriate non-probability sample numbering 6 private banks was selected from those private banks in Syria for which financial reports and risk management reports were available sequentially from 2007 until 2011, because the researchers wanted to investigate the relationship between variables within normal conditions not in the light of instability in Syria. Credit risk was measured by the capital adequacy ratio (CAR), and non-performing loans (NPL), whereas profitability was measured by the ROE indicator by calculating the data and financial reports of sampled banks and showing them in a quantitative manner and identifying the relationship between the variables by using the SPSS program to study the correlation and build the regression equation. The study concluded that there is a statistically significant relationship between capital adequacy and profitability, the capital adequacy ratio affects profitability negatively. Non-performing loans do not effect profitability (ROE). In general, credit risk management accounts for 19% of the profitability of banks.

scholarly journals Analysis of Credit Risk, Intellectual Capital and Financial Performance of Listed Deposit Money Banks in Nigeria

2021 ◽  
Vol 06 (12) ◽  
Author(s):  
Rislanudeen Muhammad ◽  
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Intellectual Capital ◽  
Capital Adequacy ◽  
National Bureau ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Management Culture ◽  
Capital Adequacy Ratio

This paper examined the effects of credit risk, intellectual capital as well as credit risk moderated by intellectual capital on financial performance of fifteen listed deposit money banks in Nigeria (DMBs) from 2007 to 2016. Data were sourced from annual reports of banks and Nigerian National Bureau of Statistics and analysed using Generalised Method of Moments (GMM). The study finds that credit risk index by loan loss ratio negatively affects financial performance of the sampled banks; while capital employed efficiency, loan loss provision moderated by intellectual capital, capital adequacy ratio, income and diversification have positive relationship with banks’ financial performance. Thus, the study recommends that banks should strengthen their credit risk management culture to ensure prompt repayment of loans. The banks should operate within the required capital adequacy ratio to serve as buffer against loan loss provisions provided by the Central Bank of Nigeria. A strong credit risk management culture should be embedded within intellectual capital structure of banks, where all persons at all levels appreciate and understand the banks’ risk management policies as well as strategies and incorporate same into decision-making and business processes.

scholarly journals Effect of Credit Risk Management on Financial Performance Of Nepalese Commercial Banks

2022 ◽  
Vol 10 (1) ◽  
pp. 19-30
Author(s):  
Dr. Guna Raj Chhetri
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Significant Relationship ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Negative Effects ◽  
Management Quality ◽  
Capital Adequacy Ratio

The main purpose of this study is to investigate the effect of credit risk on the financial performance of commercial banks in Nepal. The panel data of seventeen commercial banks with 85 observations for the period of 2015 to 2020 have been analyzed. The regression model revealed that non – performing loan (NPLR) has negative and statistically significant impact on financial performance (ROA).Capital adequacy ratio (CAR) and bank size (BS) have negative and statistically no significant impact on financial performance (ROA). Credit to deposit (CDR) has positive but no significant relationship with the financial performance (ROA) and the study concluded that the management quality ratio (MQR) has positive and significant relationship with the financial performance (ROA) of the commercial banks in Nepal. The study recommends that, it is fundamental for Nepalese commercial banks to practice scientific credit risk management, improve their efficacy in credit analysis and loan management to secure as much as possible their assets, and minimize the high incidence of non-performing loans and their negative effects on financial performance.

scholarly journals Impact of risk management strategies on the credit risk faced by commercial banks of Balochistan

2019 ◽  
Vol 5 (1) ◽  
Author(s):  
Zia Ur Rehman ◽  
Noor Muhammad ◽  
Bilal Sarwar ◽  
Muhammad Asif Raz
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Quantitative Data ◽  
Management Strategies ◽  
Capital Adequacy ◽  
Regression Analyses ◽  
Credit Risk Management ◽  
Capital Adequacy Ratio ◽  
Risk Management Strategies

AbstractThis study aims to identify risk management strategies undertaken by the commercial banks of Balochistan, Pakistan, to mitigate or eliminate credit risk. The findings of the study are significant as commercial banks will understand the effectiveness of various risk management strategies and may apply them for minimizing credit risk. This explanatory study analyses the opinions of the employees of selected commercial banks about which strategies are useful for mitigating credit risk. Quantitative data was collected from 250 employees of commercial banks to perform multiple regression analyses, which were used for the analysis. The results identified four areas of impact on credit risk management (CRM): corporate governance exerts the greatest impact, followed by diversification, which plays a significant role, hedging and, finally, the bank’s Capital Adequacy Ratio. This study highlights these four risk management strategies, which are critical for commercial banks to resolve their credit risk.

scholarly journals The Impact of Credit Risk Management on the Commercial Banks Performance in Nigeria

2014 ◽  
Vol 3 (5) ◽  
pp. 295-306
Author(s):  
Idowu Abiola ◽  
Awoyemi Samuel Olausi
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Commercial Banking ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Financial Reports ◽  
Return On Equity ◽  
Management Indicators ◽  
The Impact

Credit risk management in banks has become more important not only because of the financial crisis that the industry is experiencing currently, but also a crucial concept which determine banks’ survival, growth and profitability. The aim of this study is to investigate the impact of credit risk management on the performance of commercial banks in Nigeria. Financial reports of seven commercial banking firms were used to analyze for seven years (2005 – 2011). The panel regression model was employed for the estimation of the model. In the model, Return on Equity (ROE) and Return on Asset (ROA) were used as the performance indicators while Non-Performing Loans (NPL) and Capital Adequacy Ratio (CAR) as credit risk management indicators. The findings revealed that credit risk management has a significant impact on the profitability of commercial banks’ in Nigeria.

scholarly journals Pengaruh Credit Risk Management Pada Financial Performance Bank Konvensional Yang Terdaftar di BEI

2021 ◽  
Vol 26 (3) ◽  
pp. 447
Author(s):  
Ervina, Vivi N. Fatimah, H.S.Lestari
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Secondary Data ◽  
Sampling Technique ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Capital Adequacy Ratio ◽  
Conventional Banks ◽  
The Impact

The purpose of this study is to analyze the impact of credit risk management on the financial performance of Indonesian conventional banks in 2016-2020. The sample in this study was 32 conventional banks from 160 observations using purposive sampling technique and secondary data. The dependent variable in this paper is measured by profitability using the return on assets proxy while credit risk management as an independent variable. From the research results, LDR and NPLR have no effect on financial performance. CAR has a positive influence on financial performance so that bank managers are expected to be able to maintain their capital adequacy ratio in accordance with the provisions set by Bank Indonesia to maintain their financial performance because a high capital adequacy ratio is considered safe and tends to meet its financial obligations, while CIR and LDR negative effect on financial performance. By increasing the ratio of costs to income indicates a low level of efficiency in banking operational costs, and low liquid assets will increase cash reserves to reduce liquidity risk. Investors can invest their funds in banks that have a high capital adequacy ratio, cost of income ratio and liquidity ratio to avoid financial risk.

scholarly journals Effects of Basel III Framework on Capital Adequacy of Commercial Banks in Kenya

2016 ◽  
Vol 1 (1) ◽  
pp. 61
Author(s):  
Kevin Kombo ◽  
Dr. Amos Njuguna
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Financial Stability ◽  
Safety Net ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Credit Risk Management ◽  
Management Staff

Purpose:The purpose of the study was toassess the effects of Basel III framework on capital adequacy requirement in commercial banks in Kenya. The study sought to address the following research questions: why are capital adequacy regulations important in commercial banks in Kenya? What challenges are commercial banks facing in the implementation of capital adequacy requirement? What measures have commercial banks taken to ensure compliance with the capital adequacy requirement?Methodology:A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group.Primary data was gathered using questionnaires which were dropped off at the bank’s head offices and picked up later when the respondents had filled the questionnaires. Descriptive analysis was used to analyze quantitative data while content analysis was used to analyze qualitative data.Results:The findings show that capital adequacy requirement is important in commercial banks because it leads financial stability in the Kenyan economy, improves credit risk management techniques as poor credit risk management requires more capital and leads to reduced vulnerability to liquidity shocks due to the sound capitalization policies being implemented under the Basel III framework. Findings also revealed that capital adequacy affected the balance sheet structure of the commercial banks in Kenya.Unique contribution to theory, practice and policy: The study recommends that banks should continue the pursuit of various strategies to ensure that they are in compliance with Basel III requirements and the Central Bank of Kenya’s Prudential Guidelines. The staff of this committee should be drawn from mainly the finance, legal, compliance and treasury departments. Compliance with the capital requirements will lead to a safety net for all commercial banks as the additional capital will act as a cushion that absorbs losses in case of distress in the commercial banking sector.

scholarly journals The Effect of Credit Risk and Capital Adequacy on the Profitability of Rural Banks in the Philippines

2017 ◽  
Vol 64 (1) ◽  
pp. 83-96 ◽  
Author(s):  
Rufo Mendoza ◽  
John Paolo R. Rivera
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Internal Control ◽  
Management Practices ◽  
The Philippines ◽  
Capital Adequacy ◽  
Control Measures ◽  
Credit Risk Management ◽  
Bank Profitability ◽  
Regulatory Bodies

Abstract This paper examines the credit risk and capital adequacy of the 567 rural banks in the Philippines to investigate how both variables affect bank profitability. Using the Arellano-Bond estimator, we found out that credit risk has a negative and statistically significant relationship with profitability. However, empirical analysis showed that capital adequacy has no significant impact on the profitability of rural banks in the Philippines. It is therefore necessary for the rural banks to examine more deeply if capital infusion would result in higher profitability than increasing debts. The study also implies that it is imperative for the banks to understand which risk factors have greater impact on their financial performance and use better risk-adjusted performance measurement to support their strategies. Rural banks should establish credit risk management that defines the process from initiation to approval of loans, taking into consideration the sound credit risk management practices issued by regulatory bodies. Moreover, rural banks need to enhance internal control measures to ensure the strict implementation of internal processes on lending operations.

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