Two Major Economic Crises in the Early Twenty-First Century and their Impact on Central Bank Independence

Two major economic crises in the early twenty-first century have had a serious impact on monetary policy and CB independence. Disruption in financial intermediation and associated deflationary pressures caused by the global financial crisis of 2007–2009 and European financial crisis of 2010–2015 pushed central banks (CBs) in major currency areas towards adoption of unconventional monetary policy measures, including large-scale purchase of government bonds (quantitative easing). The same approach has been taken by CBs in response to the COVID-19 crisis in 2020 even if the characteristics of this crisis differ from the previous one. As a result of both crises, CBs have become major holders of government bonds and de facto – main creditors of governments. Against rapidly deteriorating fiscal balances, CBs have become hostages of fiscal policies, which compromises their independence. Risks to the CB independence also come from their additional mandates (beyond price stability) and populist political pressures.

Digital Inclusive Finance, Financing Constraints, and Technological Innovation of SMEs—Differences in the Effects of Financial Regulation and Government Subsidies

Deepening the development of digital inclusive finance, dredging the impact of digital inclusive finance on the innovation path of small and medium-sized enterprises (SMEs), and strengthening financial supervision and government support are of great significance to promoting the technological innovation of SMEs. This paper selects listed companies on the New Third Board as research samples and analyzes and empirically tests the relationship between digital inclusive financial and technological innovation of small and medium-sized enterprises. The results show that digital inclusive finance can significantly promote the technological innovation level of SMEs, especially the higher the degree of digitalization, the more obvious the promotion effect. Upon further testing, it was more pronounced in the sample of high-tech industries and eastern SMEs. Digital inclusive finance can effectively alleviate the financing constraints of SMEs, thereby promoting the technological innovation of SMEs. Reasonable financial supervision and adaptive government subsidies have a positive regulating effect on the innovation incentive effect of digital inclusive finance.

ANALYZING A MACROPRUDENTIAL INSTRUMENT DURING THE COVID-19 PANDEMIC USING BORDER COLLISION BIFURCATION

Bank Indonesia, el banco central de Indonesia, ha realizado ajustes en un instrumento de política macroprudencial llamado índice de intermediación macroprudencial (IIM) para impulsar el crecimiento de los préstamos en el contexto de la recuperación económica nacional debido a la pandemia de COVID-19. En este artículo, se desarrolla un modelo dinámico de préstamo bancario con comportamiento procíclico, y se equipa con el instrumento predecesor del IIM denominado requerimiento de reserva basado en la relación préstamo-depósito (RR-RPD). Examinamos los efectos de los parámetros RR-RPD en la dinámica del préstamo utilizando el análisis de bifurcación de colisión de fronteras para determinar los valores umbral de los parámetros RR-RPD para que se pueda mantener la estabilidad del equilibrio del préstamo. Este modelo se aplica a los datos mensuales de los bancos comerciales de Indonesia antes y durante la pandemia de COVID-19 para evaluar la región de estabilidad de los parámetros del instrumento.Alternate :Bank Indonesia, the central bank of Indonesia, has made adjustment settings in a macroprudential policy instrument called macroprudential intermediation ratio (MIR) to boost loan growth in the context of national economic recovery due to the COVID-19 pandemic. In this paper, a dynamic model of bank loan with procyclicality behavior is developed, and it is equipped with the predecessor of the MIR instrument called loan-to-deposit ratio based reserve requirement (LDR-RR). We examine the effects of LDR-RR parameters on the dynamics of loan using the border collision bifurcation analysis to determine the threshold values of the LDR-RR parameters so that the stability of loan equilibrium can be maintained. This model is applied to monthly data of Indonesian commercial banks before and during the COVID-19 pandemic to assess the stability region of the instrument parameters.

THE MICROPRUDENTIAL STRESS TESTING FOR BANKING SYSTEM. A STUDY CASE ON ALGERIAN PRIVATE BANK, USING ACCOUNTING APPROACH

The aim of this article is to highlight the importance and effectiveness of stress testing as part of microprudential policy. We focus on microprudential stress testing to assess financial stability, the resilience and solvency of one important private bank in Algeria in the face of liquidity risk. Our empirical analysis adopts a bottom-up approach based on an accounting method. It studies the relationship between the bank solvency ratio (ratio cook) and bank portfolios, such as loans to the construction, trade, industry, and automotive sectors. Microeconomic stress tests assess the credit risk of a bank's loan portfolio by bottom-up accounting approach, applying eleven pessimistic and plausible multi-variable scenarios with potential risks. The tests introduce several types of microeconomic shocks into the scenarios, which are designed to replicate those that occurred during the global financial crisis. The tests results show that this private bank is highly resistant to liquidity risk, despite significant losses on its investment portfolio. The stress tests prove once again, and especially after the 2008 financial crisis, that they are indispensable tools in the management of banking risks and against systemic risks.

A Review of Competitive Balance in European Football Leagues before and after Financial Fair Play Regulations

This paper analyses competitive balance in 24 top-division domestic football leagues in Europe before and after the implementation of UEFA's Financial Fair Play (FFP) regulations. Our analysis covers 22 seasons between 2000/01 and 2021/22 and utilises indicators of overall league concentration and dominance. Seven of the 24 leagues examined have seen a statistically significant worsening of league concentration post-FFP, fourteen leagues experienced a decline in the number of top-four finishers and thirteen saw a reduction in the number of unique title winners. The weight of evidence indicates that FFP has adversely affected competitive balance in several European football leagues.

Financial regulation in the age of the platform economy

Platform businesses allow for collaboration with nontraditional partners and bring together different categories of customers, in the financial context savers and investors or lenders and borrowers, creating large, scalable networks of users. Their entry into finance promises potential benefits to consumers in the form of new products, lower prices, wider choice, and enhanced consumer experience. At the same time, their new business models and technologies potentially threaten the dominant position of traditional financial services providers and create challenges for regulators. Platform businesses can use their preferential access to customer data to skim off high-quality loans, leaving only low-quality customers for other lenders. Their ability to offer complementary nonfinancial services that cannot be supplied by FinTech start-ups and banks can make it difficult or unattractive for customers to switch to alternative providers. This danger is especially acute when BigTech firms have monopoly power in other markets that complement financial services.

Reexamine the Role of the Financial Institution Management During Card Debt Crisis or the COVID-19

Due to the increasing popularity of financial technology and the lifting of financial regulations, various financial institutions have become increasingly competitive and actively expand their consumer finance business. Changes in generational consumption behavior have led to excessive credit expansion, excessive debt or bad credit records. All of these result in the emergence of adverse selection and moral hazard problems of information asymmetry, and finally cause the card debt crisis in 2005. This article focuses on variables such as the number of cards in circulation, retail sales volume, revolving balance, and overdue ratios of credit cards in public and private banks, and examine whether the information asymmetry in the credit card market has been improved ,with the financial institution management. Furthermore, due to the COVID-19 exploring whether the information asymmetry has been worsened or improved deserves the attention of the financial authority again. The results reveal that continuous financial institution management is very important and effective during the card debt period or the pandemic.

Global assessment of the COVID-19 impact on IFRS 9 loan loss provisions

PurposeThis article aims to analyze the impact of COVID-19 measures by governments and central banks on International Financial Reporting Standards (IFRS) 9 loan loss provisions (LLPs). Changes in the total amount of LLPs, distribution of outstanding loan balance among IFRS 9 stages and credit risk parameters used for calculation are investigated for each world region where banks report under IFRS.Design/methodology/approachData for a global selection of 105 banks reporting under IFRS were collected from 2019 to 2020 annual reports, financial statements, and Pillar III reports. These data provide the basis to empirically analyze the impact of COVID-19 on LLPs.FindingsIn most world regions Stage 2 balances increase while Stage 3 balances remain comparatively stable. The credit risk parameters used for computing LLPs remained stable in 2020. However, in China, the impact of COVID-19 on banks was not detected. Mean Stage 1 balances for Chinese banks increased slightly during the pandemic. Aside from the COVID-19 impact, we find that LLPs, credit risk parameters, and loss absorption capacities are significantly lower for banks in Canada, Oceania and Western Europe compared to those in the rest of the world.Originality/valueThere exists previous research examining the COVID-19 impact on financial stability, implementation of emergency rules and country-wide analyses to anticipate default rates depending on recovery scenarios. However, this is the first global study on the immediate impact of COVID-19 on LLPs. It reveals the significant differences between world regions and provides implications about their resilience against future credit shocks.

Financialization, Structural Power, and the Global Financial Crisis for Europe's Core and Periphery

In the aftermath of the Global Financial Crisis (GFC), European governments intervened to support domestic financial systems;several years later, peripheral European economies were at greater risk of having domestic financial crises transform into fiscal crises. While mainstream economic thinking predicts financial markets will punish risky bank behavior with higher interest rates and punitive resolution measures, in fact, banks in core European economies, which engaged in riskier activity in the subprime mortgage market, faced preferential treatment in the aftermath of the GFC. This article argues that financialization, the increased structural economic power of financial institutions, increased the structural power of core members of the Eurozone to direct supranational policies after the GFC. It supports these claims with financial data from balance sheets for a sample of EU economies, as well as institutional analysis of the financial aspects of European integration, and the financial, monetary, and fiscal responses that followed the onset of the GFC. While banks in the Eurozone core were more likely to have engaged in risky behavior, they were more likely to receive liquidity assistance from monetary authorities like the Federal Reserve due to their activity in the US. As Eurozone governments consider how to respond to crises, such as the Covid-19 pandemic going forward, policies that more equitably support governments rescuing domestic financial actors should be considered in tandem with broader financial regulations of structurally important economic institutions.

Bank-specific performance indicators, macroeconomic variables and capital adequacy of Nigerian banking industry

[...]we canvass those Nigerian banks should reduce dividend payouts and increase retained profits as a buffer against exposed risks. To ensure the healthiness of banks in the banking industry as well as facilitate international transaction, the central bank of ten countries (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the UK and the US) formed the committee of banking supervision in 1988 (the Basel Committee on Banking Supervision). Since the formation of this committee, it has undergone at least three stages called the Basel I, Basel II and Basel III. Premised on shock to the economy brought on by the coronavirus pandemic, with economic growth in 2020 expected to contract by as much as 4.4 percent to 8.94 percent, a drop in oil receipt and a devalued Naira in the range of 380-450 to US dollar, the capital adequacy of banks could be severely threatened, (Egba, 2020). [...]scholars have extensively shown that bank specific performance indicators and macroeconomic factors affected capital adequacy ratio. [...]this paper examined the effect of banks specific-performance indicators and macroeconomic factors on bank financing which is the minimum funds required for their short-term obligation or capital adequacy ratio.

Enforcing Double Materiality in Global Sustainability Reporting for Developing Economies: Reflection on Ghana’s Oil Exploration and Mining Sectors

While the development of globally accepted sustainability reporting standards initiated by the IFRS Foundation has largely engaged stakeholders in developed economies, the stakes for developing economies could be compromised without an explicit consideration of their sustainability issues within this standard-setting framework. This paper examines the need to develop global sustainability reporting standards based on the principle of double materiality to warrant that both the target towards carbon net-zero by 2050 under the Paris Agreement and the subsequent promise to accelerate under COP26 are achieved with efficacy. Adopting a multiple-case study approach, this paper reveals the limitations of existing sustainability reporting in the absence of double materiality in a developing economy. Specifically, the analyses reveal limited climate-related disclosures among selected cases in Ghana. Available disclosures connote increasing GHG emissions over the period under consideration. This study also shows weak disclosure comparability across the companies following similar reporting standards. Overall, it argues that enforcement of double materiality to embrace sustainability issues impacting both developed and developing economies is necessary for an effective transformation towards a low-carbon global economy. It contributes to the existing body of knowledge by elucidating double materiality as a pertinent interdisciplinary concept and devising a holistic framework for the emerging global sustainability reporting system to underscore governance accountability for external costs to the environment. Global sustainability reporting standards with a myopic focus on conventional financial matters in the absence of double materiality remain a disclosure system with implausible impact on climate change.

"EU INVEST PROGRAM" - FINANCING UNION MECHANISM OF MEMBER STATES FOR POST-PANDEMIC ECONOMIC RECOVERY

This research material aims to approach from an analytical perspective the implications that the implementation of the InvestEU Program generates at the level ofthe European Union. The Union framework rule governing this program and its implications at Member State level is Regulation (EU) 2021/523 of the European Parliament and of the Council of 24 March 2021 establishing the "InvestEU Program" and amending Regulation (EU) 2015/1017. Specifically, the InvestEU Program contributes to the achievement of some of the objectives proposed by the Union coordinator in terms of energy effectiveness1, in the field of investments in the infrastructure of the European Union, especially in the creation of a unique transport space, in the field of sustainable infrastructure policy, regarding funding for innovation, research and digitization. All these goals are considered essential for achieving the Union's sustainable development goals committed by the European Commission under the leadership of President Ursula von der Leyer in the 2030 Agenda for Sustainable Development. The research methods used in the research are: a) the logical-concretized method by using the union framework norms as well as the internal transposition norms as a source of information and analysis;b) comparative method - in order to carry out a comparative analysis of the main financing mechanisms at Member State level.

Sri Lanka sees scientists’ exodus amid economic crisis

The war in Ukraine only served to worsen the situation as Russia is Sri Lanka’s third biggest export market for tea and, together with Ukraine, are major sources of tourist arrivals. <span data-mce-type="bookmark" style="display: inline-block;width: 0px;overflow: hidden;line-height: 0;" class="mce_SELRES_start"></span> In April, the Rajapaksa government announced that it would default on payment to creditors totalling a staggering US$51 billion and begin a loan restructuring process. Vithanage, who is doing research on chronic kidney disease that affects farmers in remote rural areas, says it has become prohibitively expensive to do basic work, such as collecting water samples and talking to patients. “Initially, we cooked at our boarding house, but now we are forced to buy food from outside due to shortage of gas, but buying food outside is costly as prices doubled over a year,” says Madushika Sewwandi, a chemical technology graduate student from Matara, a town in southern Sri Lanka.

EDITORIAL TO THE SPECIAL ISSUE

This is an editorial to the Special issue of Management - Journal of Contemporary Management Issues, dedicated to novel coronavirus-related crisis and crisis management. Guest editors for this special issue are Boštjan Aver (GEA College, Faculty of Entrepreneurship, Ljubljana, Slovenia) and Mihone Kerolli-Mustafa (International Business College, Mitrovica, Kosovo).

The impact of financial distress, sustainability report disclosures, and firm size on earnings management in the banking sector of Indonesia, Malaysia, and Thailand

Research Question: Does financial distress, sustainability report disclosures, and firm size have an effect on earnings management? Motivation: Researchers want to know the effect of financial distress, sustainability report disclosures, and firm size on earnings management. Idea: The purpose of this paper is to determine the impact of Financial Distress (FD), Sustainability Report (SR), and Firm Size (FS) on earnings management in the banking sector of Indonesia, Malaysia and Thailand. Data: The data for this research is taken from the financial reports, annual reports, and sustainability reports issued by the companies from 2019 to 2020. The populations in this study are banking companies listed on the Indonesian, Malaysian, and Thailand Stock Exchanges. The samples used are 43 public banking companies in Indonesia, 10 public banking companies in Malaysia, and 8 public banking companies in Thailand. Tools: This study uses a regression model made with E-Views 10. Findings: The results show that financial distress has a significant influence on earnings management, sustainability reports have no influence on earnings management, and firm size has an influence on earnings management, but only in Malaysia's and Thailand's banking companies. Contribution: The results of this study are expected to provide ideas and reference materials regarding financial distress, disclosure of corporate sustainability reports, firm size, and earnings management practices. For companies, especially from the banking sector, this study is expected to provide information that they must be careful in reporting financial statements that will be published considering that banking companies are a business entity that receives and safeguards money owned by the public and lends out this money in the form of loans or credits. Banks are the main financial institutions in the financial system that drive the economy in a country. If a banking company experiences a financial crisis, it will have a wide impact on the financial system and economic sector in a country. The results of this study are also expected to help investors make investment decisions in a company and the results of this study are expected to help creditors in making funding decisions in a company.

How bank capital structure decision-making change in recessions: Covid-19 evidence from Pakistan

Purpose>This study contributes to existing literature by investigating bank capital structure dynamics during the Covid-19 pandemic. The role of contemporary bank-specific determinants of capital structure during this period is analyzed.Design/methodology/approach>An independent t-test is carried out to check the response of bank leverage to the crisis. Using fixed effect estimation and difference general method of moments (GMM), the impact of the shock is examined. An unbalanced quarterly data set from 2016q1 to 2020q3 of all commercial banks in Pakistan is used.Findings>The study finds that due to procyclicality of capital, during the Covid-19 crisis, the banks preempted a fall in capital and improved their capital positions. The role of bank specific variables in determining capital structure like profitability, size and competition weakened during this period. Evidence suggests that policy rate intervention by the central bank was a significant factor in capital structure decisions during the Covid-19 period. The study finds that macroeconomic shocks have significant impact on capital structure decision-making of banks which goes beyond the bank-specific factors.Originality/value>It finds evidence of a moderating role of monetary policy in capital structure decision-making which has not been previously highlighted in literature. Monetary policy is found to become an important factor deciding the capital structure of banks during the Covid-19 first 3 quarters. This study also explores the impact of Covid-19 on the bank-specific determinants of capital structure of banks.

Basel III Capital Regulation – A Brief Discussion

[...]the latest Master Circular chooses continuity over radical change in capital regulations. Even Indian banks which were brought under the Prompt Corrective Action (PCA) framework exhibited a chronic deficiency of Tier I capital. [...]the stated goal of the Basel III regulations was to increase bank reliance on Tier I Capital, under normal and stressed conditions. [...]the credit risk capital requirements in India are at least as high as the global benchmarks. Under this approach, Operational Risk Capital Charges are equal to 15 per cent of Average Gross Income over the last three years (provided gross income is positive each year). [...]for regulatory capital charge estimation, banks will continue to assume that the size of operational losses increases with the scale of business (i.e. gross income) and there are no diversification benefits across business lines.

Emerging Risks in the FinTech Industry – Insights from Data Science and Financial Econometrics Analysis

The FinTech industry has exhibited very high growth levels since the Global Economic and Financial Crisis of 2008. The sector growth has been accelerated because of the disruption caused by COVID-19 and that derived in the global health crisis, a crisis with significant implications for global economic stability. To examine the risk profile of FinTech firms, the CRISP-DM methodology was followed to aid in the implementation of clustering and classification algorithms, combined with time series regression models. This research paper offers insights on financial risk assessment by combining machine learning techniques and traditional econometric modeling to acknowledge challenges associated with the analysis of time series in the financial context and framed in the US FinTech sector. The main findings revealed a lack of significant differences between the FinTech and Non-FinTech firms in the US stock market. The results were surprising as the FinTech sector's speed of development and fast changes in financial innovation have led to the emergence of significant risks that do not seem to be captured by the examined market and firm-specific data sets. The research outcomes point to a substantial vacuum on the regulatory framework at both national and international levels to ensure efficient FinTech governance and adequate industry development amid very ambitious growing prospects.

Financial Fraud Detection Approach Based on Firefly Optimization Algorithm and Support Vector Machine

The usage of credit cards is increasing daily for online transactions to buy and sell goods, and this has also increased the frequency of online credit card fraud. Credit card fraud has become a serious issue for financial institutions over the last decades. Recent research has developed a machine learning (ML)-based credit card fraud transaction system, but due to the high dimensionality of the feature vector and the issue of class imbalance in any credit card dataset, there is a need to adopt optimization techniques. In this paper, a new methodology has been proposed for detecting credit card fraud (financial fraud) that is a hybridization of the firefly bio-inspired optimization algorithm and a support vector machine (called FFSVM), which comprises two sequential levels. In the first level, the firefly algorithm (FFA) and the CfsSubsetEval feature section method have been applied to optimize the subset of features, while in the second level, the support vector machine classifier has been used to build the training model for the detection of credit card fraud cases. Furthermore, a comparative study has been performed between the proposed approach and the existing techniques. The proposed approach has achieved an accuracy of 85.65% and successfully classified 591 transactions, which is far better than the existing techniques. The proposed approach has enhanced classification accuracy, reduced incorrect classification of credit card transactions, and reduced misclassification costs. The evaluation results show that the proposed FFSVM method outperforms other nonoptimization machine learning techniques.

THE EU COMMISSION PLAN TO SUPPORT THE ECONOMY: THE COMPATIBILITY OF STATE AIDS IN EMERGENCY SITUATIONS

The serious risk of a general economic crisis within the internal market, due to the development of the COVID-19 pandemic, has pushed the EU Commission to react in the context of the economic and financial support to the undertakings. The EU Communication of 13 March 2020 offers a first coordinated answer to the prospected crisis. Its most interesting aspect is the clarification of the financial and economic intervention in the economy. The EU Commission suggests that the best actor for the intervention to maintain the competition in the internal market is that of the State(s), but rush to subsidies shall be avoided. Therefore, parts of the Communications are devoted to the evaluation and to the compatibility of State aid projects, in the creation of a new Temporary Framework on State aids. This general approach has proved not-efficient as the pandemic had started affecting all the (Member) States, which reacted with different lock down measures. Therefore, the following amendments to the Communications focus on the future applicable criteria for the compatibility of State aids to face the economic crisis. This paper analyses the EU Commission Temporary Framework on State aid, in order to detect the extent to which it derogates or softens the previous system. For this purpose, the article analyses in depth the EU Commissions Communications in the light of regulation n. 651/2014. After a brief analysis of the practice, the continuity of the Temporary Framework with the common State aid regulation is stressed.