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Impacts of the foundation internal ratings based approach usage on financial performance of commercial bank

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dc.title Impacts of the foundation internal ratings based approach usage on financial performance of commercial bank en
dc.title Dopady Použitia Základného Prístupu Interných Ratingov Na Finančnú Výkonnosť Komerčnej Banky sk
dc.contributor.author Belás, Jaroslav
dc.contributor.author Cipovová, Eva
dc.contributor.author Novák, Petr
dc.contributor.author Polách, Jiří
dc.relation.ispartof E+M Ekonomie a Management
dc.identifier.issn 1212-3609 Scopus Sources, Sherpa/RoMEO, JCR
dc.date.issued 2012
utb.relation.volume 15
utb.relation.issue 3
dc.citation.spage 142
dc.citation.epage 155
dc.type article
dc.language.iso sk
dc.publisher Technicka Univ & Liberci
dc.publisher Technická univerzita v Liberci cs
dc.relation.uri http://www.ekonomie-management.cz/archiv/vyhledavani/detail/868-impacts-of-the-foundation-internal-ratings-based-approach-usage-on-financial-performance-of-commercial-bank/
dc.subject Cut-off strategy en
dc.subject Financial performance of bank en
dc.subject Internal rating based approach en
dc.subject Probability of default en
dc.subject Validation of internal model en
dc.description.abstract The aim of this article is to present theoretical, methodological and practical aspects of internal rating model's validation for commercial banks and quantify potential impact of foundation internal ratings based approach on financial performance of banks. The quality and the explanatory ability of internal rating systems can be different. Models used to measure credit risk are not perfect and give quite unreliable results, respectively; they contribute to the procyclical tendencies of the financial system. This article was based on the assumption that a suitably chosen rating system can significantly support long-term profitability and competitiveness of commercial banks. One part of the article also presents methodology of additional profitability on equity of the bank due to the usage of internal rating models. The analyses has proved that the usage of internal rating models increase profitability through substantial savings in equity, which allows the banks to accelerate lending activities in the banking practice. A comparison of standardized approach and foundation internal rating based approach demonstrates that requirement of equity capital can be decreased from 30 to 40 %. Under the condition of the anticipated savings in equity of 30 %, the usage of internal rating model could increase the profitability on equity up to 13 %, depending on the structure of assets, amount of the interest margins and profitability ratio. Future usage of internal rating based approach is quite uncertain since it has shown its procyclical character and has significantly contributed to the acceleration of the global financial crisis by lower capital requirement. However, internal rating based approach implementation is very intensive in the credit risk management of the bank, therefore there is rather suggested a gentle modification in this area and not a complete elimination. It has been considered a neccessity to reassess its status in area of solvency, because of its intensive impact on reduction of equity capital. en
utb.faculty Faculty of Management and Economics
dc.identifier.uri http://hdl.handle.net/10563/1003021
utb.identifier.obdid 43868045
utb.identifier.scopus 2-s2.0-84867797723
utb.identifier.wok 000309950000010
utb.source j-scopus
dc.date.accessioned 2012-11-12T19:34:25Z
dc.date.available 2012-11-12T19:34:25Z
dc.rights Attribution-NonCommercial 4.0 International
dc.rights.uri http://creativecommons.org/licenses/by-nc/4.0/
dc.rights.access openAccess
utb.contributor.internalauthor Belás, Jaroslav
utb.contributor.internalauthor Cipovová, Eva
utb.contributor.internalauthor Novák, Petr
utb.contributor.internalauthor Polách, Jiří
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