Research

Efficiency , Risk, Bank Regulations, Capital Requirements, Liquidity Requirements.

• The European Banking Authority (EBA)‘s capital exercise and the technical efficiency of the banks‘ - Forthcoming, Review of Economic Analysis .(https://openjournals.uwaterloo.ca/index.php/rofea/article/view/1774).

Abstract :- This study uses a sample of 194 banks from 15 EU countries and two-stage data envelopment analysis (DEA) to provide evidence on the impact of the European Banking Authority (EBA)'s capital exercise on banks' efficiency. In the first stage of the analysis, we measure the efficiency by employing DEA. We then use Tobit regression to investigate the impact of the capital exercise on banks' technical efficiency. We estimate several specifications while controlling for bank-specific attributes and country-level characteristics accounting for macroeconomic conditions, financial development and market structure. The results indicate that EBA's capital exercise came, as a shock for the banks would be contributing towards making the banks more stable. It would be preventing banks from excessive risk-taking activities. Furthermore, it would be allowing the banks to withstand the financial distress and contributing in banks be- coming less prone to the systemic risk. The study finds that the capital requirements would be creating favourable economic conditions, which would be, affect the extent, depth and quality of financial intermediation and banking services.

• An analysis of Risk measures on the Cost Efficiency of the Banks.

Abstract :- The financial crisis revealed the problems in the banking sector for supervisors and other stakeholders in identifying and comparing bank’s information across different jurisdictions. The Basel Committee found that there are no consistent international standards for categorizing problem loans. This study looks into the role of the harmonized definition of Non-Performing Exposures and Funding Liquidity Risk on the cost efficiency of the banks. The study uses a sample of 2630 banks from 163 countries, which is comprehensive in terms of geographical coverage. This study looks into the marginal effects of the risk measures on the cost efficiency. In addition, the study investigates the marginal effects on risk measures on the cost efficiency over time and across different regions. Heteroscedastic stochastic frontier model is used for the estimation, which will allow finding the effect of each risk measures on the mean and variance of the cost efficiency. The study aims to provide a comprehensive analysis of the effects of risk measures on the cost efficiency of the banks. The results indicate Funding Liquidity Risk has a positive effect on the mean and the variance on the inefficiency effect. This means a bank with a higher Funding Liquidity Risk will have a lower and more varied cost efficiency. Non-Performing Exposures has significantly positive effect on the mean and variance of the inefficiency effect. The study compares average cost efficiency and marginal effects of the risk measures on the mean and variance across the groups sorted by the criteria variables. . The results indicate that there is non-linear effects of some of the risk factors such as Funding Liquidity Risk and Non-Performing Exposures on the mean and variance of the inefficiency effect.

• The role of Cross-Border Exposures and Liquidity Shock on Technical Efficiency of the banks.

Abstract :- Using the data for 1931 banks in 15 countries in Europe for the period 2005-2019. The study investigates the role of the cross-border exposures with liquidity shock on the technical efficiency of the banks. Using Duijm and Schoenmaker (2017) methodology ,the study measures the cross-border exposures from the different regions. The study uses Weighted Russell Directional Distance model to measure technical efficiency of the banks. The results indicate that the technical efficiency of the banks declined after the Global Financial Crisis. The changes in the technical efficiency of the banks facing liquidity shocks is more unstable. The technical efficiency of the banks facing Liquidity Shocks is much lower during the Global Financial Crisis. The decline in the cross-border exposures was witnessed with decline in the efficiency. But, the decline was minimum in the domestic exposures.Following this, the Tobit second stage results provide evidence of the cross-border exposures with liquidity shock on the efficiency of the banks. When controlling for domestic and cross border exposures, the results cross-border exposures has a significance impact on the technical efficiency of the banks. When controlling for domestic exposures and exposures from different regions, the results indicate that the exposures from different regions are highly significant. This reveals the significance of the financial integration and globalization on the banking sector. The banks are looking for different asset portfolios, which would be generating better returns and requires different resources to be managed. The banks have become more involved in managing their activities and not limiting their activities to their located country.