Jul 2026· Journal of Sustainable Development· Vol 19, pp. 94· 0 citations· 41 references
Abstract
This study investigates the dynamic, non-linear relationship between private sector credit expansion and operational risk within financial institutions. Utilizing 2025 monthly loan data, the research proposes an integrative quantitative framework coupling Standard Score (Z-score) Probability Density Functions with the Weighted Expected Present Value (EPVw) model, incorporating a 0.995644 discount factor. Empirical results reveal a critical decoupling between credit volume and risk magnitude. While the loan portfolio expanded continuously from 6,742 billion in January to a peak of 7,318 billion in December, calculated risk (EPVw) followed a parabolic, bell-shaped distribution. Maximum risk exposure converged mid-year (June–August), driven by the highest statistical probability density as loan values hovered around the annual mean (μ = 6,997 billion). Conversely, despite peak volumes in December, year-end capital risk collapsed to its lowest point (377 billion) due to an extreme right-tail distribution shift (Z = 2.02) minimizing probability density weights (0.051). These findings challenge traditional linear risk assumptions, proving volatility concentrates within normal baselines rather than volume peaks. This study provides a vital framework for asset-liability management, ensuring capital reserves are optimally calibrated against market extremes, aligned with Clean Surplus Relation principles.
This paper examines the historical and projected equity risk premium (ERP) for the Russian stock market in view of the narrowing investment horizons of market participants and the increasing reliance on domestic resources. The study aims to substantiate the long-term advantages of equity investments. The methodology employs a comprehensive approach, including ERP calculation based on three risk-free rate proxies, the adaptation of expected return decomposition models, and formalized benchmarking via artificial intelligence (AI) models. The findings reveal that over 10-year horizons, Russian equities maintain a resilient historical advantage over bonds. The forecast for the 2025–2032 period points to an expected risk premium of approximately 7% per annum, driven primarily by dividend yields and the potential for valuation recovery from currently distressed levels (5.5 x CAPE). AI-based analysis confirms a consensus forecast for a positive premium within the 5.9–6.7% range. The analysis concludes that current market undervaluation is largely driven by temporary cyclical factors. Extending the investment horizon to 10 years serves as a strategic tool to mitigate interest rate volatility. To foster a framework grounded in fundamentals for investment analysis and forecasting, it is essential to implement regular CAPE ratio calculations and integrate long-term macroeconomic forecasts into institutional investment strategies. These measures are intended to facilitate the transformation of domestic savings into stable sources of long-term capital and promote the capitalization growth of the Russian stock market.
A. Radygin, A. E. Abramov, M. Chernova· Economic Policy· 0 citations
This study examines the effects of operational inefficiency, profitability, and independent commissioners on credit risk in Indonesian Regional Development Banks (RDBs). Regional Development Banks (RDBs), locally known as Bank Pembangunan Daerah, are provincially owned financial institutions that play a vital role in promoting regional economic development. Credit risk remains a major concern for RDBs because of their strategic intermediation function and their vulnerability to non-performing loans (NPLs). Using panel data from 23 conventional RDBs over the 2018–2024 period, this study analyzes 161 bank-year observations through panel data regression, with the Random Effect Model identified as the most appropriate estimation technique. Credit risk is measured by the non-performing loan (NPL) ratio, operational inefficiency by the operating expense-to-operating income (OEOI) ratio, profitability by return on equity (ROE), and board independence by the number of independent commissioners. The findings reveal that operational inefficiency has a positive and significant effect on credit risk, indicating that lower cost efficiency increases the deterioration of loan quality. In contrast, profitability has a negative and significant effect on credit risk, suggesting that more profitable banks are better able to maintain asset quality and absorb potential losses. Independent commissioners also have a negative and significant effect on credit risk, demonstrating the importance of board independence in strengthening oversight and mitigating risk. However, independent commissioners do not moderate the relationships between operational inefficiency and credit risk or between profitability and credit risk. This study contributes to the banking and corporate governance literature by providing empirical evidence from Indonesian RDBs, an underexplored segment of the banking industry in emerging markets. The findings suggest that, rather than functioning as a moderating mechanism, independent commissioners serve as an important direct governance mechanism for mitigating credit risk. From a practical perspective, RDBs should improve operational efficiency, maintain sustainable profitability, and strengthen board independence to enhance credit risk management and support long-term financial stability.
Iqbal Alfahruli, L. Lutfi· Golden Ratio of Finance Mana...· 0 citations
This study examines whether the accumulated stock of private credit provides early-warning information for subsequent deterioration in banking-sector asset quality. It combines annual Passport banking indicators with World Development Indicators for 58 countries over 2010–2024; the preferred sample contains 746 country–year observations. A second-order dynamic fixed-effects model links log(1 + NPL), where NPL denotes the non-performing loan ratio, to lagged private credit to gross domestic product (GDP), real credit growth, lending rates, bank capital, GDP growth, inflation, and unemployment. Its preferred credit-depth coefficient is 0.00377, implying that a 10-percentage-point increase is associated with approximately 0.15 percentage points more NPLs one year later at the sample median. To operationalize early-warning calibration without claiming a universal cutoff, the paper reports the sample credit-depth quartiles and estimates a country fixed-effects linear probability model using the European Banking Authority’s 5% gross-NPL supervisory trigger. In that alternative outcome, a 10-percentage-point increase in credit depth is associated with a 2.78-percentage-point higher conditional probability of NPLs reaching 5% or more (p = 0.002). On a strictly common 609-observation sample, the credit-depth coefficients at one-, two-, and three-year horizons are 0.00501, 0.00960, and 0.01266. Lending rates and unemployment are positive, whereas annual credit growth and capital ratios are not robust predictors. Pooled interactions do not reject equal slopes across broad country partitions. System generalized method of moments (GMM) passes conventional tests but violates a persistence-bound credibility check. The evidence supports an early-warning interpretation, not a causal claim.
Marco Antonio Ledesma Munive, Alejandro Anibal Aguirre-Rojas, Graciela Soledad Verastegui Velasquez et al.· Journal of Risk and Financia...· 0 citations
Immunization is a strategy that matches the duration of assets and liabilities to minimize the impact of interest rate changes. This can be achieved using Redington’s conditions. This paper addresses a gap in the existing literature: while prior immunization studies typically evaluate performance under stable market conditions or rely on real bond portfolios that confound interest rate risk with credit and liquidity risk, this study isolates pure interest-rate risk by constructing a synthetic default-free bond and liability portfolio priced on historical U.S. Treasury par yield curve data spanning January 2006 to December 2010 — the pre-crisis, crisis, and recovery phases of the GFC. Applying Redington's immunization conditions to this synthetic portfolio, the study finds that the present value of assets equals the present value of liabilities (Test 1: passed) and that asset convexity exceeds liability convexity (Test 3: passed); however, the volatility of the asset cashflows (4.50) diverges substantially from that of the liability cashflows (2.64), so the volatility-matching condition fails (Test 2: failed). Consequently, the portfolio is only partially immunized: it remains exposed to small parallel shifts in the yield curve despite its favourable convexity position for larger shifts. The findings indicate that duration-based immunization, even when correctly specified for present-value matching, requires explicit volatility matching to pro-vide reliable protection during periods of extreme interest rate volatility such as the 2008 GFC, and that partial immunization can still leave institutional investors exposed to material losses.
S. Padma Annakamu· Scholar Journal of Humanitie...· 0 citations
This study examines the effect of expected credit loss (ECL) provisioning on the ability of bank capital to mitigate systemic risk based on the Chinese regulatory context, where regulators emphasize the adequacy of loan loss provisions (LLPs) over their timeliness. We find that the ECL model increases LLP adequacy in Chinese banks, but offers no significant improvements in LLP timeliness and is accompanied by instances of manipulation. Despite these mixed first‐order effects, we find that the ECL model strengthens the effectiveness of capital in mitigating systemic risk. This effect is more pronounced when the ECL model improves LLP adequacy to a greater extent, and less so when LLPs, particularly those in stages 1 and 2, are subject to a high degree of manipulation. Our study demonstrates the limited effect of the ECL model on information quality in developing jurisdictions, while demonstrating its significantly positive impact on financial stability. These findings contribute to the International Accounting Standards Board's evaluation of the theoretical framework of the ECL model and the global implementation effects of IFRS 9, while also assisting banking authorities in assessing the impact of IFRS 9 on financial stability. The results should have particular relevance for countries with limited forward‐looking information, rules‐based provisioning frameworks, and weak enforcement.
Shanshan Zhang, Yu-Shi Ma, Deming Dai· Abacus. A Journal of Account...· 0 citations
The article substantiates and implements a synergetic approach to assessing the systemically
sensitive point-in-time probability of default (PD PIT) for non-financial corporations (NFCs)
amidst radical macroeconomic uncertainty. Traditional retrospective risk management paradigms
are proven ineffective due to unprecedented economic turbulence and structural breaks caused by
full-scale military aggression. The study proposes a hierarchical master-model (PD PIT.MM)
architecture that integrates an ensemble of specialized sub-models. This ensemble includes PD
TTC models for fundamental creditworthiness, adaptive expert adjustments using Saaty and
Fishburn methods to formalize war-related impacts (e.g., asset loss, logistics disruption) , and
GDP-transmission models. A distinctive feature of the proposed methodology is the inclusion of a
«Level» predictor to measure the depth of economic stress and a «KWAR» parameter characterizing residual economic uncertainty. The master-model provides high granularity by accounting forsectoral specifics and enterprise size. Impact calibration is achieved through a Sectoral GVA
Model, while risk for small NFCs is adjusted using the Cornish-Fisher expansion to handle
«heavy-tailed» crisis distributions. The mathematical core utilizes the Wilson logit-model, COBYLA non-gradient optimization to ensure scenario monotonicity, and HuberT robust regression to
isolate extreme war-induced outliers. Validation results demonstrate that the PD PIT.MM generates conservative, scientifically grounded estimates with high predictive power (Pseudo R2 > 0.6)
and statistical significance (p-value < 0.01). The implementation of this synergetic approach
ensures compliance with IFRS 9 Forward Looking requirements even during structural shifts.
Practically, it enables financial institutions to form objective, systemically sensitive credit risk
assessments and adequate reserves, fundamentally strengthening financial stability during wartime
and the subsequent recovery of Ukraine.
Nataliia Arkhireiska, Volodymyr Stulei, Andrii Poderiako· Actual Problems of Economics· 0 citations
