Reputational risks, value of losses and financial sustainability of commercial banks

Natalia Kunitsyna, Igor Britchenko and Igor Kunitsyn
Additional contact information
Natalia Kunitsyna: NCFU - North-Caucasus Federal University
Igor Kunitsyn: NCFU - North-Caucasus Federal University

Post-Print from HAL

Abstract: Currently, under the conditions of permanent financial risks that hamper the sustainable economic growth in the financial sector, the development of evaluation and risk management methods both regulated by Basel II and III and others seem to be of special importance. The reputation risk is one of significant risks affecting reliability and credibility of commercial banks. The importance of reputation risk management and the quality of their assessment remain relevant as the probability of decrease in or loss of business reputation influences the financial results and the degree of customers', partners' and stakeholders' confidence. By means of imitating modeling based on Bayesian Networks and the fuzzy data analysis, the article characterizes the mechanism of reputation risk assessment and possible losses evaluation in banks by plotting normal and lognormal distribution functions. Monte-Carlo simulation is used to calculate the probability of losses caused by reputation risks. The degree of standardized histogram similarity is determined on the basis of the fuzzy data analysis applying Hamming distance method. The tree-like hierarchy based on the OWA-operator is used to aggregate the data with Fishburne's coefficients as the convolution scales. The mechanism takes into account the impact of criteria, such as return on equity, goodwill value, the risk assets ratio, the share of the productive assets in net assets, the efficiency ratio of interest bearing liabilities, the risk ratio of credit operations, the funding ratio and reliability index on the business reputation of the bank. The suggested methods and recommendations might be applied to develop the decision-making mechanism targeted at the implementation of reputation risk management system in commercial banks as well as to optimize risk management technologies.

Keywords: value of losses; sustainable development; business reputation; commercial banks; reputation risks; risk level; economic modeling (search for similar items in EconPapers)
Date: 2018-06-29
New Economics Papers: this item is included in nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-01859319
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in Entrepreneurship and Sustainability Issues, 2018, 5 (4), pp.943 - 955. ⟨10.9770/jesi.2018.5.4(17)⟩

Downloads: (external link)
https://hal.science/hal-01859319/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01859319

DOI: 10.9770/jesi.2018.5.4(17)

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().