Navigating the Digital Frontier: Unraveling the Impact of Bank Technology Innovations on Idiosyncratic and Systemic Risks

Aneta Hryckiewicz, Kinga Tchorzewska, Marcin Borsuk and Dimitrios Tsomocos
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Kinga Tchorzewska: Kozminski University
Marcin Borsuk: Narodowy Bank Polski

No 367, NBP Working Papers from Narodowy Bank Polski

Abstract: The recent development of technological innovation in the banking sector has the potential to bring numerous benefits, but it also raises concerns regarding financial stability, an aspect that has been relatively understudied in academic literature. Our research paper aims to explore the impact of banks' recent adoption of FinTech solutions on both individual and systemic risks within the banking sector. Specifically, we examine how banks' technological innovations influence non-performing loans (NPLs), asset correlation in the system, and measures of systemic risk. To accomplish this, we utilize a unique dataset generated through data mining techniques, which captures the scale, types, and sources of technological solutions implemented by the largest banks in 23 countries over an 11-year period. Our findings indicate that FinTech solutions implemented by banks reduce both individual and aggregated systemic risks in the banking sector, although there are certain areas where systemic risk increases.

Keywords: Fintech; innovation; IT technology; IT providers; bank; systemic risk; NPLs (search for similar items in EconPapers)
JEL-codes: G21 G23 G32 L13 (search for similar items in EconPapers)
Pages: 64
Date: 2024
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-mac and nep-pay
Note: The Project has been funded from the National Science Center under the number: 2019/33/B/HS4/02664. This paper represents the opinions of authors. It is not meant to represent the position of the NBP. Any errors and omissions are the fault of authors.
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:367

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