Browsing by Subject "Bank"

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    Open Access
    Can a state-owned bank be a catalyst for financial inclusion and economic development in South Africa? Lessons from China and India
    (2025) Doko, Nkosindiphile; Makoni, Patricia Lindelwa
    The role of state-owned banks in the banking sector as well as countries' economic development is an important topic for debate. It should not be left to the private sector to address market failures. Several studies have been conducted on the role of banking in economic development, however few have examined the role of state-owned banks in financial inclusion and economic development, or the conditions required for the successful establishment and operation of a state-owned bank. The main objective of this study was to draw lessons from China and India as emerging economies that have been able to successfully establish and operate state-owned banks and use them as instruments to improve financial inclusion and economic development. To that end, the researcher produced a conceptual framework that can be used in South Africa to establish a state-owned bank. The research was carried out using qualitative documentary analysis to obtain secondary data from academic papers, central bank reports and statistics. The results of the study reveal that a clear government policy and political support are important conditions for the successful establishment of a state-owned bank (SOB), as these allow for the creation of enabling laws and a supportive regulatory environment. The study also found that SOBs have the capacity to expand the accessibility of their financial services nationwide using both physical and digital infrastructure. The success of SOBs in China and India – two BRICs countries – demonstrates that these banks will continue to play an important role in the world's banking industry and can positively contribute to the financial inclusion and economic development of these countries. The study therefore recommends that South Africa's policymakers consider the conceptual framework devised to establish an effective SOB that can help improve the level of financial inclusion and economic development in the country.
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    Open Access
    Investigating the significance of reputational risk In banks' financial performance
    (2025) Zinzindohoue, Senan Joseph Fitzgerald; Mukuddem-Petersen, Janine
    The field of organizational studies, particularly in the financial sector, has increasingly acknowledged the importance of effective risk management. This consensus is pivotal for the stability and health of the global financial system and is supported by studies showing the positive impact of managing key risks like credit, market, operational, and liquidity on a bank's overall performance. Despite these advancements, gaps remain, especially concerning nonfinancial risks like reputational risk. Reputational risk in banking is complex, with current research offering fragmented insights, particularly regarding its impact on financial outcomes. Many studies have focused on short- term market reactions, neglecting the long-term financial impact on banks, and often overlooking key financial metrics like Return on Assets (RoA) (Cummins et al., 2006; Eckert & Gatzert, 2017; Fiordelisi et al., 2013; Gillet et al., 2010; Perry & de Fontnouvelle, 2005). Heidinger & Gatzert (2018) and Gillet et al. (2010) contributed significantly to understanding the dynamics between reputational risk and RoA, but their research did not explore the direct impact of reputational events on RoA, leaving a crucial aspect unexplored. Furthermore, there's a notable lack of research directly linking the severe reputational damage stemming from operational risks, and especially internal frauds to a bank's financial well-being, specifically in terms of deviations in returns (mainly RoA). Also, most reputational research is confined to U.S. and European regions, lacking a global perspective. The aim of the research was to address these shortcomings by examining the diverse effects of reputational risk resulting from internal fraud on the financial performance of banks, with a particular emphasis on deviations in RoA. The study employed a comprehensive theoretical framework combining the Resource-Based Theory (RBT) and the Unified Theory of Reaction in Assets Market to analyze the dynamics of reputational risk in banking. In order to align with the aforementioned theoretical foundations, the study employs a positivist research paradigm, emphasizing empirical evidence and logical reasoning for the objective validation and generalization of the relationship between reputational risk and the financial performance of banks. The utilization of quantitative methodologies within this paradigm guarantees the requisite methodological rigor and objectivity for a comprehensive and detailed examination. By leveraging reputable data sources like the Global Operational Loss Database (GOLD) by Riskbusiness (UK) for operational loss details, the Bloomberg databases for essential financial metrics, and the World Bank databases for critical macroeconomic indicators, the study ensures it is built upon a foundation of accurate, reliable, and globally recognized data points. Consistent with previous studies, the research used a longitudinal dataset spanning ten years,focusing on commercial and retail banks with operational losses exceeding USD 100,000. The comprehensive and systematic process of identifying operational losses resulted in the selection of 61 instances of internal fraud. These losses are distributed across 18 different currencies, implicating 53 banks situated in 23 countries and 10 distinct geographical regions globally. Considering that the ultimate goal of managing reputational risk, much like the broader risk management framework within a bank, is to continually minimize its influence on pivotal financial indicators like RoA (Coskun et al., 2019; Wanjohi et al., 2017), this research considered adjusting the traditional "event study" methodology and the "market reaction" paradigm commonly employed in reputational research (Cummins et al., 2006b; Eckert & Gatzert, 2017; Fiordelisi et al., 2013b; Gillet et al., 2010b). Instead of focusing on market reactions within an "event window," the study used a panel longitudinal analysis. The estimation of reputational loss was based on the analysis of trends in RoA for a period of three years prior to and following each operational loss event. This was conducted using the Generalized Least Square (GLS) Random Effects model. The rigorous application of multicollinearity, heteroskedasticity, and autocorrelation tests ensures the validity of the random effects model employed. Additionally, the study utilized the Boehmer et al. (1991) test statistic Z, originally developed to detect event-induced volatility in stock returns, to assess the statistical significance of the mean abnormal returns (AR) associated with reputational loss. The collective results of these tests provide substantial evidence that the findings derived from the model are robust and reinforce the credibility of the conclusions drawn from the analysis. The study's findings revealed a substantial negative impact of internal fraud disclosures on banks' RoA, with an average reputational loss of around $54 million. The finding challenges the RBT, which suggests that larger banks (tangible and intangible assets) are better equipped to mitigate reputational crises. Instead, the study found a high positive correlation between the size of the bank and the intensity of the operational loss. Moreover, the research highlighted the importance of a global perspective, revealing significant regional variations in the impact of reputational losses. The study's conclusions contribute significantly to the understanding of reputational risk in the banking sector, offering both theoretical and practical insights. The rejection of the null hypothesis (H01) for banks with at least one negative AR post-event confirmed the critical impact of reputational events on financial outcomes. The study also challenged the assumption that the size of operational losses predicts the extent of reputational damage. Smaller banks were found to be more susceptible to reputational damage, supporting the alternative hypothesis (H3). Additionally, significant regional variations in the impact of reputational losses were confirmed, emphasizing the need for region-specific risk management strategies. This research not only advances academic discourse but also has substantial implications for real-world banking practices. It contributes to a deeper understanding of reputational risk dynamics, challenging existing theories, and offers banks crucial insights for tailoring their risk management strategies based on size and regional factors. Future research should focus on expanding the sample size for a more comprehensive analysis and investigate the integration of a capital charge for reputational risk in banking regulations.
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    Open Access
    Is corporate social responsibility a determinant of the capital structure of global systemically important banks?
    (2020) Ndebele, Nomphumelelo Cindy; de Jager, Phillip
    In the wake of the recent global financial crisis, the banking industry has come under heavy criticism for the negative externalities imposed on the economy and society. The distress of the financial system during the financial crisis has triggered public discussions about the role of bank capital structures in the stability of banking institutions. While it was previously thought that regulatory capital requirements are the sole determinant of bank capital structure, recent empirical studies suggest that, instead, the standard cross-sectional determinants that explain the capital structures of non-financial firms also apply to banks. The findings from these studies prompt further investigation into what other factors determine the capital structure of banks. More recently, engagement in Corporate Social Responsibility (CSR) activities has emerged as a vital dimension through which firms develop sustainable strategies that affect overall firm performance. In addition, the subsequent reporting of CSR performance has become increasingly important as more investors incorporate information about the social behaviour of firms in their investment decisions. This suggests that CSR has implications for the financing policies of firms. In light of the development of CSR as a relevant concept in the current corporate environment and especially in the banking industry, the goal of this study is to investigate whether CSR is a determinant of the capital structure of banks through a multiple regression analysis of panel data from 2009 to 2018 for a sample of 28 Global Systemically Important Banks. Using DataStream Refinitv ESG scores to proxy for CSR, the first hypothesis proposes that socially responsible banks tend to be less leveraged than those that are socially irresponsible due to the positive influence on equity financing from the lower costs of capital, informational asymmetries and risk associated with good CSR performance. The second hypothesis examines the effect of bank size on the proposed relationship. Initial results indicate no significant relation between aggregate CSR and bank leverage, however, further analysis shows a significant negative relationship between the governance dimension of CSR and bank capital structure, suggesting that the governance structures of banks are more relevant for bank capital structure decisions. Bank size is found to have no effect on the relationship. The findings from this study have important implications that are particularly relevant in today's financial environment as calls for the restoration of public trust in banking institutions accelerate.
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    Open Access
    Its not you, its me: an analysis of Multilateral Bank Finance in Botswana
    (2025) Keseabetswe, Lorato; Alhassan, Abdul Latif
    Multilateral Devebelopment Bank debt is hailed for its positive relationship to economic growth, represented by Gross Domestic Product. Botswana has a long history of demonstrating many positive attributes at macro and micro economic level that would typically attract multilateral bank funding, however the country maintains one of the lowest debt to GDP ratios on the continent. This study investigates the whether there is a direct relationship between Multilateral bank finance and key macro indicators in Botswana. Using Qunatitative research methodology, the research uses annual time series data from 1986 to 2023, and estimation techniques such as Autoregressive Distributed Lag (ARRDL) cointegration model, Unit Root, Error Correction Model and other diagnostic tests. The study's findings reveal a nuanced relationship between Botswana's macroeconomic conditions and its MDB debt accumulation. In the long run, trade balances significantly impact external borrowing, while economic growth, foreign exchange reserves, and government expenditure remain insignificant. In the short run, economic growth and trade balances exhibit statistically significant effects on borrowing, whereas foreign exchange reserves and government expenditure remain insignificant. These findings reinforce the role of external trade conditions in Botswana's debt accumulation while highlighting the country's cautious fiscal approach. Unlike many developing nations where economic growth, public expenditure, and foreign reserves directly influence external borrowing, Botswana's multilateral bank financing patterns are primarily shaped by its trade balance and counter-cyclical debt policies. The findings of this study have important policy implications and recommendations for Botswana, which are targeted towards diversification of its export base, efficient use of its resources including reserves, and finally, better negotiated positions with MDB loan terms given the country's strong credit rating. Botswana's approach to multilateral bank finance reflects a well-managed and prudent economic strategy that balances the need for external support with long-term fiscal sustainability.
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    Open Access
    National development banks' investments in climate resilient infrastructure: challenges and prospects
    (2025) Ramathuba, Vivian; Alhassan, Abdul Latif
    This thesis explores the challenges faced by National Development Banks (NDBs) in facilitating investments toward low-carbon and climate-resilient sustainable infrastructure in South Africa. It emphasises their critical role in addressing substantial financing gaps essential for meeting the Nationally Determined Contributions (NDC) commitments under the Paris Agreement. As global priorities increasingly shift toward sustainable development goals, NDBs are undergoing significant transformation, transitioning from their traditional roles as financiers to becoming proactive mobilisers of investment. This pivotal shift is examined in this study within the broader context of a renewed interest in these banks, recognising them as essential policy tools for spearheading rapid and sustainable development initiatives. Through qualitative interviews with 12 experts in climate finance and related fields, the study illustrates how NDBs utilise financial instruments such as concessional loans, blended finance, and long-term financing to mitigate perceived high risks and attract private capital, particularly in sectors prone to high risks like water management and climate-resilient transport. Additionally, NDBs can be mandated by the government to channel substantial international funds into national sustainable infrastructure projects effectively. This mission-oriented approach underscores the unique position of NDBs as critical intermediaries and implementers in the national climate strategy. Despite their potential to bridge vast funding gaps and align their focus with the Paris Agreement, NDBs encounter significant challenges, including policy inadequacies, coordination difficulties, financial constraints, and external economic pressures. This study proposes innovative strategies for NDBs, such as expanding blended finance models, implementing risk mitigation mechanisms, and enhancing institutional capacities to support mobilising funding for sustainable and low-carbon infrastructure. The findings highlight NDBs' ability to adapt to market conditions and regulatory environments, highlighting their pivotal role in transforming South Africa's infrastructure financing landscape to achieve its NDC objectives. Furthermore, this research underscores the importance of strategic policy alignment and innovative financing approaches, including using guarantees and partnerships with international climate funds to enhance project bankability and enable significant private sector participation. Ultimately, this study demonstrates that NDBs are crucial in driving the investment towards a climate-resilient infrastructure in South Africa.