The Effect of Credit and Market Risk on Bank Performance: Evidence from Turkey

Aykut Ekinci
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Aykut Ekinci: Economist, Department of Risk Monitoring, Development Bank of Turkey, Ankara 06440, Turkey

International Journal of Economics and Financial Issues, 2016, vol. 6, issue 2, 427-434

Abstract: There is a strong connection between bank performance and economic growth. Therefore, understanding on the effects of credit and market risk on bank performance could contribute to the better functioning of the banking system. This study investigates the effects of credit and market risk, i.e., interest rate and foreign exchange (FX) rate risk, on the bank performance for the Turkish banking sector in a time-varying framework employing the generalized autoregressive conditional heteroscedastic approach for the 18.01.2002-30.10.2015 period by using weekly data. The results suggest two main findings: (i) Credit risk and FX rate have a positive and significant effect, but interest rate has insignificant effect on banking sector profitability, (ii) credit and market risk have a positive and significant effect on conditional bank stock return volatility

Keywords: Bank Lending Channel; Bank Performance; Credit Risk; Interest Rate Risk; Currency Risk (search for similar items in EconPapers)
JEL-codes: C32 E43 E44 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2016-02-9

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