Faculty of Commerce, Law and Management (ETDs)

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Subject: search.filters.subject.Banking sector

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    Towards a framework for operational risk management in the banking sector
    (University of the Witwatersrand, Johannesburg, 2022) Hoohlo, Mphekeleli
    The objective of this study is three-pronged. One, it investigates the factors that influence capital adequacy as measured by the covariates (exposure, frequency and severity) used in banking operations that accompany firms data-log loss reports. Two, it assesses the differential impact of discretionary (by adding artificial data) and non-discretionary (using real world data) loss disclosure on firms’ value-at-risk. R software is used to determine the value-at-risk. GLM and GAMLSS techniques are employed and subsequent tests of significance derive aforementioned influential factors, accompanied by a data augmentation algorithm in Matlab software to determine the differential impact of artificial and real world operational loss disclosures on firms’ performance in relation to meeting capital requirements. Three, it challenges firms’ risk-neutral assumption inherent in operational risk practice, asserting that; in theory, banking operations are more risk averse. Rattle software is used in a k-means cluster analysis method to determine whether controls compensate for persistent losses due to the firms’ natural risk aversion. The research arrived at estimates on the number of losses and their sizes; whereby exposure positively influences the risk ceded by the bank having “learned” from possible variations in past data, therefore improving operational risk manage- ment frameworks by introducing ex ante forward-looking components, whereas the addition of artificial data points by data augmentation circumvents former dilemmas of large and rare events so one can do more “learning”, notwithstanding the nature of the data’s suspect quality as they are constructs not observations. Nevertheless, the artificial intelligent EBOR framework’s performance improves on (Hoohlo (2014)’s applied data scaling and parametization techniques arrived at a proxy of about ZAR3B) former techniques for capital adequacy calculation of OpRisk opening up exploration modeling beyond historical accounts of significance to incorporate forward-looking aspects. Furthermore, checks and balances set up based on operational negligence slow down operational risk losses over time thereby establishing the move of firm risk tolerance levels away from risk neutrality, suggesting that banks are more risk averse
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    Linking banking sector competition and access to finance: the case of select Sub-Saharan African countries
    (University of the Witwatersrand, Johannesburg, 2023) Molaba, Kamogkelo; Gwatidzo, Tendai
    Using multi-year firm-level data of 27 Sub-Saharan countries from the World Bank Enterprise Survey (WBES), this study investigates the link between banking sector competition and firms’ access to finance. The paper employs a probit model to measure the link between banking sector competition and access to finance by observing the impact of the four measures of competition namely: CR3, the Panzar and Rosse H-statistic, the Lerner index and the Boone indicator on credit constraints and financing obstacles whilst controlling for certain firm-level and country-level factors. The results are dominantly in line with the market power hypothesis which posits that banking sector competition improves access to finance. Additionally, the link between competition and access to finance depends on other firm-level variables such as top manager experience and industry as well as country-level variables such as institutional quality, credit information and strength of legal rights. The results of this paper are overall consistent with evidence provided by other studies that support the market power hypothesis which suggests that competitive conduct in the banking sector improves access to finance. The policy implications drawn from this study are that policymakers in the SSA region need to implement policies that strengthen competition in the banking sector without hindering efforts to strengthen banks. Policymakers need to also regulate the financing of business by banks to ensure that funds are directed at growing sectors and businesses that will in turn influence the growth of the economy
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    Assessing the impact of digital transformation on business performance in South Africa’s banking industry
    (University of the Witswatersrand, Johannesburg, 2023) Melamane, Siphokazi
    Background: The Fourth Industrial Revolution and the recent outbreak of the Covid-19 pandemic have created a strong interest in digital transformation. Organisations have been focused on advancing their technological capabilities, thus increasing their IT investment capabilities. In the banking sector, the implementation of digital technologies has introduced the existence of digital banks and other non-financial organizations that have tapped into the financial services, such as fintech and retailer organisations. This has been gradually leading to a diluted market share, which was previously dominated by South Africa’s traditional banks. Digitising has therefore become an important aspect of organisations’ growth strategy. Purpose: This research study aims to investigate the impact of digital transformation on the financial performance of the traditional South African banks. Methodology: This study uses the quantitative research method where financial performance, is measured by return on assets (ROA) and digital technology (data analytics, artificial intelligence, cloud computing, and the Internet of Things). The data was collected using secondary data accessed from the traditional South African banks, namely; ABSA, Standard Bank, FNB, and Nedbank’s annual reports and full-year consolidated financial statements, from the year 2014-2021. Findings: Findings from this research study indicate that there is a strong relationship between digital technology and business performance, meaning that digital transformation does have an impact on the business performance of the traditional South African banks. Further, the relationship between the variables, digital technology and business performance is negative. This has been found by previous literature to be due to the initial costs of investment in digital technology. Research limitations/implications: Digital transformation is an important concept that continues to be explored by researchers and organisations. Therefore this research is relevant to many industries in the market, which presents an opportunity for it to be expanded to other industries. The impact of digital transformation on other performance factors such as operational performance can be studieS
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    An analysis of the effect of systematic risk factors on returns of the South African banking sector
    (University of the Witswatersrand, Johannesburg, 2023) Malatji, Tumiso Chris; Chakamera, Chengete
    Understanding the risk-return relationship is vital to effectively allocate assets based on investors’ risk tolerances and return requirements. To achieve this, it becomes a peerless need to effectively manage investors’ exposure given the macroeconomic environment in which their investments operate. Addressing this will ensure a more comprehensive understanding of macroeconomic risk in the process of generating returns. This research seeks to understand the nature of the relation of systematic risk factors on the returns of the South African banking sector while also establishing what the combined impact of the risk factors is. Additionally, this research paper aims to demonstrate the existence, or lack thereof, of a long-term linkage between sectoral banking returns in South Africa and the macroeconomic risk factors. In addressing the first research objective, the OLS regression is applied. The PCA is used to create the composite index of the risk factors. To establish the existence of a long run link, ARDL test was performed. Of the eight risk factors used in this paper, only three were found to be statistically significant. The JSE ALSI was discovered to be positively related to banking returns while the gold price and rates of interest were surmised to be adversely correlated to returns. Nevertheless, the combined effect of the systematic risk variables was significant in describing the returns of the South African banking sector. Moreover, this research paper established the existence of a long-term linkage between the macroeconomic risk parameters and South African banking sectoral returns. The results of this research report deduce that careful assessment of banking sector exposure must be conducted given the macroeconomic environment movements in which banks operate. This will ensure that necessary adjustments, from Tactical Asset Allocation and Strategic Asset Allocation perspectives, are made so that risk budgets are not exceeded while pursuing returns.
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    Chinese stock market conditions and herd behaviour on the JSE: evidence from idiosyncratic volatile stock portfolios and industry sectors
    (2021) Bernstein, Shaun
    The intention of the study was to broaden the knowledge and understanding of herd mentality on the JSE 40. Herd behaviour has the potential to destabilise and deteriorate financial markets, and a better understanding of this behaviour could minimize investment loss. Therefore, the study examined herd behaviour in terms of various idiosyncratic volatile stocks and different industry sectors using a dispersion-based model. The study also investigated whether or not Chinese market conditions influenced herd behaviour regarding those stock portfolios. The results suggest that fully and partly diversified portfolios tend to show evidence of herd behaviour. However, Chinese market conditions affect each stock portfolio differently. For example, the Industrial Portfolio Index was influenced by Chinese market conditions across all tranquil and turbulent periods. Meanwhile, other portfolios were only influenced by long tranquil or extreme volatile periods in the Chinese market. Interestingly, the Banking sector was the only stock portfolio that was not influenced by the Chinese market. Perhaps investors can use this knowledge to enhance their future portfolio returns