Impact analysis of factors influencing bank capital management

Natalia Konovalova () and Aina Čaplinska ()
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Natalia Konovalova: RISEBA University of Applied Sciences, Latvia
Aina Čaplinska: Daugavpils University, Latvia

Entrepreneurship and Sustainability Issues, 2020, vol. 8, issue 1, 484-495

Abstract: Issues of bank capital management have always been topical for each commercial bank and for bank supervisory institutions. After-effects of the financial crises have encouraged strengthening of capital adequacy requirements and therefore supporting the reasonable risk level. Basel Committee on Banking Supervision adopted a range of guidelines, which promote raising of bank stability and safety, stressing the importance of capital as risk coverage. The aim of the research is the determination of factors influencing bank capital adequacy and assessment of financial strength of capital and especially equity in commercial banks. The subject of this research is focusses on commercial banks of Eastern Europe. Methodologically, research methods as comparison, factors analysis, ratio analysis, charts showing statistic information and others have been used by authors. As the result of the investigation, factors influencing bank capital adequacy have been identified. The most important of these factors is credit risk, which is specially analysed in this research. The obtained results allowed the authors to make a range of conclusions, of which some are: in the period of financial crises most of European commercial banks were operating on the verge of capital adequacy, banks did not have sufficient buffer capital, due to substantial losses during the period of crises capital adequacy was maintained only by the inflow of new share capital and subordinated capital. The authors have provided several suggestions concerning the management of bank capital adequacy to commercial banks.

Keywords: capital adequacy management; capital safety margin; bank assets; buffer capital; regression analysis (search for similar items in EconPapers)
JEL-codes: G20 G21 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ssi:jouesi:v:8:y:2020:i:1:p:484-495

DOI: 10.9770/jesi.2020.8.1(34)

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