Insolvency Risk Efficiency & Crisis of East Asian Banks

Product Code: 9789674124274
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  • 2017. ISBN 9789674124274
  • Soft cover (170 pages)
  • Alireza Tamadonnejad & Aisyah Abdul-Rahman


This book examines the impact of efficiency on insolvency risk exposure for the case of East Asian Banks. The first part of this book provide the basic information of the various type of risk exposures that may cause bank to become insolvent such as systematic and unsystematic risk. Among others, the examples of systematic risk are market risk, interest rate risk, exchange rate risk, political risk, and country risk. Meanwhile, Z-risk, Z-score and other bank-specific risk are the examples of unsystematic risk. The second part of this book elaborates on the efficiency and crisis prediction measures, and the final part offer the empirical findings for the case of East Asian banks, namely the various types of risk exposures; the efficiency estimates; the early warning system and finally, the factors affecting insolvency risk of the East Asian bank while capturing the efficiency and probability of crisis. The findings suggest that regulators should consider bank inefficiencies in risk-adjusted capital requirements because inefficiencies precede future risk, and hence, detect the increasing probability of insolvencies. In order to deal with this problem, manager can temporarily avoid issuing risky loans and increase capital buffer. Not only inefficiencies have capabilities to warn policymakers and managers can hardly avoid predicted crises, they can curtail repercussions and withstand deposit withdrawals. Last but not least, political and economic stabilities have crucial roles in the stability of banks because investors assess regulatory and country-specific conditions before investing in financial intuitions. The frequent changes of laws and monetary policies, government turnovers, and corruption undermine investors’ business plan and increase insolvency risk. 

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