Following the government''s decision to shift from command economy to a free market one in 1991, the banking business in Ethiopia is booming and as a result, the number of banks is increasing as time passes. With the increasing number of banks, the need to regulate their liquidity in particular is of great concern.This very sensitive issue, however, is not being well addressed in the different agenda set to discuss it. Moreover, there are no or only very few literatures on the area.Regulation of banks'' liquidity is a very challenging task and cannot be effectively carried out in a regulatory environment which is poorly equiped interms of human, material resources and modern technology. This book, therefore, closely analyses, inter alia, the concept of liquidity regulation, its rationale, the regulatory modalities set in place and the consequences in case of failure to comply with liquidity requirements and gives a comparative analysis of the law against the practice. The book is a big contribution to the scarce academic discourse in the area and could be useful to bankers, regulators or others having interest in the area.
The recent turmoil on financial markets has made evident the importance of efficient liquidity risk management for the stability of banks. The measurement and management of liquidity risk must take into account economic factors such as the impact area, the timeframe of the analysis, the origin and the economic scenario in which the risk becomes manifest. Basel III, among other things, has introduced harmonized international minimum requirements and has developed global liquidity standards and supervisory monitoring procedures. The short book analyses the economic impact of the new regulation on profitability, on assets composition and business mix, on liabilities structure and replacement effects on banking and financial products.a??
This book elaborates the Determinants of Commercial Banks' profitability in Ethiopia taking five bank specific variables namely:capital adequacy,bank size,asset composition,loan loss provision and liquidity and ROA and ROE were used to measure profitability.Ten years data(2003-2012) gathered from seven commercial banks(CBE,Awash,Dashen, Nib ,Wugagen,Abyssinia,United banks) were analyzed using descriptive ,correlation and regression analysis.
This monograph focuses on the liquidity risk of commercial banks in the Visegrad countries in the period from 2000 to 2011. This risk is comprehensively evaluated with several different methods: six liquidity ratios, panel data regression analysis with fixed effects, probit model and scenario analysis. The liquidity position, net position on the interbank market and strategy of liquidity risk management differ significantly in individual Visegrad countries. The capital adequacy is the most important determinant of bank liquidity. However, some other factors such as size of the bank, credit portfolio quality or macroeconomic development are significant as well. All three tested stress scenarios would have a negative influence on bank liquidity. A run on the bank would have most serious impact on the bank liquidity in all Visegrad countries. The use of committed loans is the second most severe scenario for Czech and Slovak banks and a crisis confidence in the interbank market for Hungarian and Polish banks.
Ethiopia being a third world country she’s taking baby steps towards modernized finance. In doing so she’s incorporating different kinds of computerized systems. The most recent one is The Ethiopian Transfer System. This system enables customers to engage any branch of the bank where they possess an account and deposit or withdraw in their convenience. It also enables customers from different banks to transact with out wasting anytime going to each others banks. Especially with the private sector being the driving force in the country’s Business sector the handling of cheques and other money connected transactions in a very organized, fast and safe manner is and issue the government has been working on. There for in this senior Essay I tried to look for the newly established transfer system, its benefits, problems faced while implementing and different aspects of the system.
The book focuses on international banking regulation, particularly the capital adequacy requirements known as the Basel Accords. In the first part, we study the rationale for regulating the banks and describe the evolution of the Basel Accords, including the newly presented measures known as Basel III. The main conclusion of this part is that the regulation is heavily shaped by the banks themselves and does not always serve the best for protecting the financial system. In the second part dedicated to systemic risk modelling, we first introduce the used methodology and then build an agent-based model which enables us to simulate the impacts of various types of negative shocks given various settings of the banking system and the regulatory environment, including the capital and liquidity measures. Our simulations show firstly that sufficient capital buffers are crucial for systemic stability, secondly that the discretionary measures have little effect once a crisis breaks out and thirdly that liquidity measures are a relevant regulatory tool.
This research was conducted on performance analysis of private banks in Ethiopia, taking Awash International Bank S.C as a case study. Banking system is really a thing which makes our economy grow up. But the banking industry is not yet well developed. Therefore, the study focuses on the detail of the performance of the bank in economic endeavor and assesses the impact of those regulatory measures on the banks operation. The study was conducted by using primary and secondary sources of data. The analysis show that, AIB is performing more in economic endeavor and besides this it is facing some problems like, lack of diversification of financial instruments, lack of space for opening new branches, lack of stock exchange market, lack of determination of interest rate by market forces,etc. Based on the above problem, possible recommendations were forwarded.
Financial Performance Evaluation is one of the central features of any organization. Financial analysis is usually carried out to study the financial position of the company from the point of view of the management, shareholders, the public (customers of the bank), the regulator (the government), the financial sector, and the economy as a whole. The book has been written in accordance with the requirements of Students pursuing Masters Degree in the field of Accounting, Finance, Commerce, Management or Banking Sector. This book is especially for Researcher who wants to carry in depth research in the financial performance evaluation of the banks. Present book is based on the first private commercial bank in Ethiopia, in comparison with industry average with respect to liquidity; profitability; credit risk & solvency and efficiency for the period of 2003-2009.
This paper analyses the liquidity effect in Norway by examining the relationship between a range of liquidity variables and five different measures of the short-term interbank premium. In a floor system the key policy rate is equal to banks’ deposit rate in the central bank, and as such, this analysis provides new information on the liquidity effect in a floor system. Both excess liquidity (total central bank reserves in the banking system) and structural liquidity (central bank reserves in the system before Norges Banks’ market operations) have, as expected, a negative a significant effect on almost all dependent variables. Furthermore, in periods of financial turmoil European and Norwegian banks may face higher USD rates in the interbank market either because of a general USD liquidity premium or an institution specific credit premium. My analysis provides additional insight in the division between the liquidity premium and the credit premium in a way, to my knowledge, not done in earlier literature. The results indicate that during the financial crisis (2007-2009) the liquidity premium dominated in USD as the availability of credit deteriorated.
Recent developments in law, public policy, and regulation have ensured that questions regarding the relationship between banks and their customers have seldom been out of the spotlight. This important book provides a timely, original, and critical examination of the role of the law in regulating banks in the interests of the consumer. The work examines the social and economic rationales for, and the objectives of banking regulation. In so doing, it focuses on the crucial role of regulation in the protection of the consumer. The book then provides a critical appraisal of the principal techniques by which regulation is delivered and protection ensured. Such techniques include prior approval by licensing, continued supervision, and information remedies such as disclosure. The work also looks at how the law protects depositors of insolvent banks through financial compensation schemes, and how it provides consumer redress through mechanisms for ensuring access to justice, in particular ombudsmen. Finally, the book looks at the topical question of consumer access to banking services, and considers the extent to which the law can justify placing social obligations on banks in the consumer interest. This is the first monograph to examine these important topics in this way.
To the extent that financial institutions have a crucial role in the development and stability of the economy, poor performance of banks affects the financial fragility of the whole economy. In turn, accounting and regulatory bodies propose an array of regulations to shape banks’ operations and risk. This book investigates financial accounting, regulation and governance issues in banks. It comprises three studies that cover these issues. In the first study, there is strong evidence of regulatory capital management and income smoothing behavior using loan loss provisions in US bank holding companies. The procyclicality inherent in loan loss provisions tends to accentuate regulatory capital management during economic downturns. In the second study, The results reveal that the association between the regulatory capital ratio and bank distress becomes significant if the bank holding company has a capital ratio of less than 6 percent, below which U.S. bank regulators do not regard banks as being well capitalized. In the third study, concentrated shareholders discourage banks from investing in risky positions with respect to total assets, loans and off-balance-sheet items.
When one talk about the growth and development of a nation’s economy, hardly can there be any living soul that will not agree with the spur catalyst is the nation’s bank, whether in a developed or developing economy. However, the ability or inability of banks to successfully fulfill their responsibility of functioning well for the country economic health has been a central issue in some of the financial crisis that has been witnessed so far in worldwide. With this respect, scholars ascertain that fraud and its management have been the impulsive factor in the distress of banks, and as much as various measures have been taken to minimize the incidence of fraud, it still rises by the day because fraudsters always device tactical ways of committing fraud. Accordingly, although this phenomenon is not unique to the banking industry or peculiar to Ethiopia alone, the high incidence of fraud within the banking industry has become a problem to which solution must be provided in view of the large sums of money involved and its adverse implications on the economy.
Liquidity risk is always present in our financial system and has in the last years been a major contribution to the financial crisis. Market liquidity risk has an effect on for example security prices, risk management, and the speed of arbitrage. The banks and their funding liquidity drives the market liquidity risk. Liquidity crisis arises through losses, increasing margins, tightened risk management, and increased volatility. When this happens the traditional liquidity providers becomes liquidity demanders which affect prices in a negative way. To get a sound understanding of liquidity risk we have to specify and describe liquidity. Market liquidity and funding liquidity are two kinds of liquidity. Market liquidity can be described as good when a security is easy to trade. Easy to trade is defined as small bid ask spread, small price impact and high resilience. If a bank or investor have good funding liquidity they have good availability of funds by their own capital or from loans. The main objective in this paper is to show if liquidity risk has a significant impact on option price and depends on a real supply curve.
… Ethiopian banks have not introduced credit card payment system till now. The research is a survey on what are the potential opportunities and challenges to introduce credit card payment systems in Ethiopia. Data was collected through two types of questionnaires (from bank employees and consumers). Results of this research have shown that the potential opportunities to introduce credit card in Ethiopia are the level of awareness of existing employees of Ethiopian banks and their skill, the financial capacity Ethiopian banks and merchants, the capacity of banks to keep electronic accounts of merchants and consumers. Potential challenges to introduce credit card in Ethiopia are low level of awareness of merchants and consumers, weak infrastructural issues (lack of immediate authorization, financial literacy initiations, well established credit bureau, and required infrastructure of merchants), lack of skill of both the merchants and the consumer, weak economic capacity of the consumers, unclear legal system and non existence of consulting firms that can help consumers in managing their credit card expenses.
The standard of corporate governance in Ethiopia in general is very poor. The absence of an adequate legislative framework to regulate modern complex bank governance issues political parties'' involvement in business enterprises, and the absence of an organized share market are among the characteristics of bank corporate governance in Ethiopia. Furthermore, there is a major credibility problem in the Ethiopian banking regulatory environment since the regulatory organ enforced rules discriminate between state and private banks. This book identifies the different aspects of bank corporate governance in Ethiopia such as ownership structures, board size and composition, accounting and auditing standards, succession planning, and their influence on bank performance by taking a sample of four private banks. By exploring best bank governance practices and international bank governance principles, this book recommends thorough reform and adoption or adaptation of good corporate governance principles in the Ethiopian banking sector.