Risk Profile Assessment ofRisk profile assessment of core capital adequacy: capital adequacy tier-book strategy Core Capital Adequacy: Capital Adequacy Tier-Book Strategy

  • Lis Sintha Oppusunggu 
    Universitas Kristen Indonesia
    Indonesia
  • Yusuf Rombe M.Allo
    Universitas Kristen Indonesia
    Indonesia

Abstract

The purpose of this study is to analyze the effect of risk profile variables both on the fulfillment of core capital adequacy and to find out which risk variables have a dominant influence on core capital adequacy in bank books 1 and 2. This research is included in quantitative analysis. This study uses purposive sampling, and data collection is carried out using the documentation method by looking at the annual financial reports on the OJK (Financial Services Authority) website, BI (Bank Indonesia) website, and the Bank's website object of research. The results of this study using the level of capital ratios by banks, namely the ratio of CAR, ROA, OEOI, NIM, LDR, and RAR, show good results. Because the standard deviation reflects very high variations, the distribution of data shows expected results and does not cause bias. Assessment of the Bank's Soundness Level using a risk approach (Risk-based Bank Rating) is executed based on a thorough analysis of the Bank's performance, risk profile, problems, and development prospects of the Bank since the purpose of maintaining the soundness of banks through consideration of the aspect of capital adequacy is the most significant part in order to gain public trust.
Keywords
  • Risk Profile
  • Core Capital
  • Bank Health
  • Tier Bank
References
  1. Kadim, K., Nardi, S., Hendro, W., Dessy, A., & Endang, K. (2018). The Effects Of Bank Soundness With The RGEC Approach (Risk Profile, Good Corporate Governance, Earnings, Capital) Of Leverage And Its Implications On Company’s Value Of State Bank In Indonesia For The Period Of 2012-2016. IJER (International Journal of Economic Research), 15(11), 41–52.
  2. Anderson, R. C., & Fraser, D. R. (2000). Corporate control, bank risk taking, and the health of the banking industry. Journal of Banking & Finance, 24(8), 1383–1398.
  3. Andriyani, I., Mayasari, R. P., & Aryani, D. S. (2018). Soundness Rating of Commercial Banks Before and After Implementation of RGEC Method in Indonesia. Jurnal Keuangan Dan Perbankan, 22(1), 162–169.
  4. Artzner, P. (1999). Application of coherent risk measures to capital requirements in insurance. North American Actuarial Journal, 3(2), 11–25.
  5. Barakat, A., & Hussainey, K. (2013). Bank governance, regulation, supervision, and risk reporting: Evidence from operational risk disclosures in European banks. International Review of Financial Analysis, 30, 254–273.
  6. Barth, J. R., Dopico, L. G., Nolle, D. E., & Wilcox, J. A. (2002). Bank safety and soundness and the structure of bank supervision: a cross‐country analysis. International Review of Finance, 3(3‐4), 163–188.
  7. Carlson, M., Shan, H., & Warusawitharana, M. (2013). Capital ratios and bank lending: A matched bank approach. Journal of Financial Intermediation, 22(4), 663–687.
  8. Claessens, M. S., Kose, M. A., Laeven, M. L., & Valencia, M. F. (2014). Financial crises: Causes, consequences, and policy responses. International Monetary Fund.
  9. Demirgüç-Kunt, A., Detragiache, E., & Tressel, T. (2008). Banking on the principles: Compliance with Basel Core Principles and bank soundness. Journal of Financial Intermediation, 17(4), 511–542.
  10. Doff, R. (2008). Defining and measuring business risk in an economic‐capital framework. The Journal of Risk Finance.
  11. Duffie, D., & Singleton, K. J. (2012). Credit risk: pricing, measurement, and management. Princeton university press.
  12. Enoch, M. C., & Green, M. J. H. (1997). Banking Soundness and Monetary Policy. International Monetary Fund.
  13. Estrella, A. (2004). Bank capital and risk: is voluntary disclosure enough? Journal of Financial Services Research, 26(2), 145–160.
  14. Field, A. (2009). Discovering Statistics Using SPSS. In Statistics (Vol. 58, Issue 3). https://doi.org/10.1016/j.landurbplan.2008.06.008
  15. Gambacorta, L., & Shin, H. S. (2018). Why bank capital matters for monetary policy. Journal of Financial Intermediation, 35, 17–29.
  16. Gambetta, N., García-Benau, M. A., & Zorio-Grima, A. (2017). Corporate social responsibility and bank risk profile: evidence from Europe. Service Business, 11(3), 517–542.
  17. Gambetta, N., Zorio-Grima, A., & García-Benau, M. A. (2015). Complaints management and bank risk profile. Journal of Business Research, 68(7), 1599–1601.
  18. Gasbarro, D., Sadguna, I. G. M., & Zumwalt, J. K. (2002). The changing relationship between CAMEL ratings and bank soundness during the Indonesian banking crisis. Review of Quantitative Finance and Accounting, 19(3), 247–260.
  19. Gayatri, Y. (2018). Analisis Penilaian Kesehatan Bank Dengan Menggunakan Metode Rgec (Studi Kasus: Pt. Bank Rakyat Indonesia (Persero) Tbk Tahun 2013-2016). Universitas Mercu Buana Yogyakarta.
  20. Goodell, J. W. (2020). COVID-19 and finance: Agendas for future research. Finance Research Letters, 35, 101512.
  21. Hendricks, D., & Hirtle, B. (1997). Bank capital requirements for market risk: The internal models approach. Economic Policy Review, 3(4).
  22. Imbierowicz, B., & Rauch, C. (2014). The relationship between liquidity risk and credit risk in banks. Journal of Banking & Finance, 40, 242–256.
  23. Ioannidis, C., Pasiouras, F., & Zopounidis, C. (2010). Assessing bank soundness with classification techniques. Omega, 38(5), 345–357.
  24. Karlan, D., McConnell, M., Mullainathan, S., & Zinman, J. (2016). Getting to the top of mind: How reminders increase saving. Management Science, 62(12), 3393–3411.
  25. Kim, D., & Sohn, W. (2017). The effect of bank capital on lending: Does liquidity matter? Journal of Banking & Finance, 77, 95–107.
  26. Laeven, M. L., Ratnovski, M. L., & Tong, M. H. (2014). Bank size and systemic risk. International Monetary Fund.
  27. Li, X., Feng, H., Zhao, S., & Carter, D. A. (2021). The effect of revenue diversification on bank profitability and risk during the COVID-19 pandemic. Finance Research Letters, 101957.
  28. Martynova, N., Ratnovski, L., & Vlahu, R. (2020). Bank profitability, leverage constraints, and risk-taking. Journal of Financial Intermediation, 44, 100821.
  29. McConnell, P. (2012). The governance of strategic risks in systemically important banks. Journal of Risk Management in Financial Institutions, 5(2), 128–142.
  30. McConnell, P. (2013). Systemic operational risk: the LIBOR manipulation scandal. Journal of Operational Risk, 8(3), 59–99.
  31. Moudud-Ul-Huq, S., Zheng, C., Gupta, A. Das, Hossain, S. K. A., & Biswas, T. (2020). Risk and performance in emerging economies: do bank diversification and financial crisis matter? Global Business Review, 0972150920915301.
  32. Nicola, D., Manalu, S., & Hutapea, T. M. H. (2017). Effect of Bank Soundness Level Rgec Method on Index of Financial Inclusive in Indonesia. Jurnal Aplikasi Manajemen, 15(4), 702–709.
  33. Ozili, P. K. (2017). Bank profitability and capital regulation: Evidence from listed and non-listed banks in Africa. Journal of African Business, 18(2), 143–168.
  34. Rosdiana, R. (2019). Comparative Analysis Before And After Implementation Of Circular Letters Financial Services Authority Number 14/SEOJK. 03/2017 Concerning Assessment Of The Soundness Level Bank At PT. Bank Mega. Tbk. Saudi Journal of Business and Management Studies, 4(7), 596–601.
  35. Schroeck, G. (2002). Risk management and value creation in financial institutions (Vol. 155). John Wiley & Sons.
  36. Slywotzky, A. J., & Drzik, J. (2005). Countering the biggest risk of all. Harvard Business Review, 83(4), 78–88.
  37. Tangngisalu, J., Hasanuddin, R., Hala, Y., Nurlina, N., & Syahrul, S. (2020). Effect of CAR and NPL on ROA: Empirical study in Indonesia Banks. The Journal of Asian Finance, Economics, and Business, 7(6), 9–18.
  38. Varotto, S. (2011). Liquidity risk, credit risk, market risk and bank capital. International Journal of Managerial Finance.
  39. Vo, X. V. (2020). The role of bank funding diversity: Evidence from Vietnam. International Review of Finance, 20(2), 529–536.
  40. Yanti, N. M. Y. W. A., & Dwirandra, A. (2019). The effect of profitability in income smoothing practice with good corporate governance and dividend of payout ratio as a moderation variable. International Research Journal of Management, IT and Social Sciences, 6(2), 12–21.
  41. Yoshino, N., & Taghizadeh-Hesary, F. (2019). Optimal credit guarantee ratio for small and medium-sized enterprises’ financing: Evidence from Asia. Economic Analysis and Policy, 62, 342–356.

Downloads

PDF

Statistic

Abstract Views
: 590 times
PDF
: 1 times