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An Optimal Incentive Contract Preventing Excessive Risk-Taking by a Bank Manager
Высшая школа экономики
,
2012.
No. 03.
The Basel Committee of Banking Supervision initiated a discussion on the most efficient practices to prevent bank managers from excessive risk-taking. This paper proposes a game-theoretical approach, describing the decision-making process by a bank manager who chooses his own level of risk and effort. If the level of risk implies the variability of the future outcome, the amount of effort applied affects the probability of a positive outcome. Although effort is unobserved for the bank’s stakeholders, the risk level is under control, and is associated with certain indicators such as capital adequacy ratio or leverage level. The risk-neutral utility function of a bank manager and a binary game outcome of gaining profit or loss for a bank are assumed. Starting from the general incentive contract scheme having the fixed and variable parts of remuneration, it is proposed that differentiating the variable part of remuneration is sufficient to motivate bank managers to make fewer risky decisions. More precisely, the variable part of remuneration (e.g. the share of the bank’s profit) needs to be higher in proportion to the higher variance of outcome for the high -risk outcome case to stimulate a bank manager to opt for lower-risk decisions in place of higher-risk situations.
Tevanyan E., Penikas H. I., Банковское дело 2015 № 7 С. 72-81
Bank of Russia instruction No. 154-I requests to develop remuneration system for bank employees that take and control risks, particularly paying attention to defining variable and deferred parts of remuneration. This paper addresses the first issue to define veariable part of remuneration. Paper offers optimal incentive contract for agents that differ by risk-perception considering the ...
Added: July 5, 2015
Vernikov A. V., / Social Science Research Network. Series "SSRN Working Paper Series". 2015. No. 2600738.
The paper suggests a classification of Russian commercial banks for the purposes of empirical analysis. While most of the literature on comparative bank performance in transition identifies three broad categories of banks (state, domestic private and foreign), in the Russian case it may be proper to consider separately the core state-controlled banks that jointly account ...
Added: May 1, 2015
Peresetsky A., Karminsky A. M., Golovan S. V., Economic Change and Restructuring 2011 Vol. 44 No. 4 P. 297-334
This paper presents results from an econometric analysis of Russian bank defaults during the period 1997–2003, focusing on the extent to which publicly available information from quarterly bank balance sheets is useful in predicting future defaults. Binary choice models are estimated to construct the probability of default model. In the first part of the paper ...
Added: October 4, 2012
Popova P., Semenova M., Sokolov V., / HSE University. Series WP BRP "Series FE "Financial Economics"". 2023. No. WP BRP 92/FE/2023.
The COVID-19 pandemic caused a significant change in the consumption, savings, and
employment patterns of individuals. This study investigates the reaction of individual bank
depositors to the spread of COVID-19 from the perspective of the outflow of retail deposits and the
shift in their maturity structure across Russian regions which were differently hit by the pandemic.
Exploiting the cross-regional ...
Added: August 14, 2023
Karminsky A. M., Kostrov A., Murzenkov T., / Высшая школа экономики. Series FE "Financial Economics". 2012. No. WP BRP 06/FE/2012.
Under the Basel II accord, improving probability of default models is a key risk-management priority. There are four main aspects of this research: suggesting the bank default classification; using a wide time horizon (quarterly Russian banking statistics from 1998 to 2011); investigating the macroeconomic and institutional characteristics of the banking sector environment and finally, testing ...
Added: December 10, 2012
Vernikov A. V., Desenvolvimento em debate 2015 Vol. 3 No. 2 P. 29-45
The article examines the role of the state in the Russian banking industry. ...
Added: May 31, 2016
Mikhail Mamonov, Vernikov A. V., / Высшая школа экономики. Series FE "Financial Economics". 2015. No. 46.
This paper adds to the literature on banking in transition with regard to the comparative efficiency of public, private and foreign banks. We perform stochastic frontier analysis (SFA) of Russian bank-level quarterly data from 2005 to 2013. The method of computation of comparative cost efficiency is amended to control for the effect of the revaluations ...
Added: June 15, 2015
Glushkova E., Деньги и кредит 2010 № 12 С. 24-31
This article provides empirical analysis of the macroeconomic effects of state presence in the financial sector. We develop a set of criteria and execute statistical estimates of the phenomenon based on BRIC country-level data. We assume that at macro-level negative effects of state presence are not indisputable but considerably depend on the country's stage of ...
Added: October 7, 2012
Karminsky A. M., Kostrov A., Murzenkov T., Финансовая аналитика: проблемы и решения 2012 № 41(131) С. 2-13
В соответствии с Базельскими соглашениями одной из перспективных задач риск-менеджмента является совершенствование моделей вероятности дефолта. Авторы исследуют влияние на вероятность дефолта российских банков финансовых факторов, уделяя особое внимание расширению горизонта исследования и нелинейностям по объясняющим переменным. Проведен анализ адекватности модели. Отмечено, что учет нелинейностей по относительным финансовым переменным существенно улучшает качество модели. Выделены объясняющие переменные, ...
Added: December 7, 2012
Mamonov M. E., Pestova A., Солнцев О. Г., Вопросы экономики 2012 № 8 С. 4-31
The stability of Russian banking sector is threatened by three negative tendencies - overheating of the credit market, significant decrease of banks capital adequacy ratios, and growing problems associated with banks lending to affiliated non-financial corporations. The co-existence of these processes reflects the crisis of the model of private investments in Russian banking sector, which ...
Added: December 28, 2012
Vernikov A. V., Studies on Russian Economic Development 2015 Vol. 26 No. 2 P. 178-187
We look for typological similarity or dissimilarity between the banking systems of China and Russia. In both countries we have identified a multitier and hierarchically organized system of commercial banks headed by several institutions under direct control of the government. These core state-controlled banks combine commercial banking with development banking. The difference between the Chinese ...
Added: March 18, 2015
Vernikov A. V., Деньги и кредит 2014 № 11 С. 20-28
На базе статистических данных за 2000-2013 гг. сопоставляется макро-архитектура и институциональные характеристики банковских систем России и Китая, прежде всего состав и структура. ...
Added: February 20, 2015
Mamonov M. E., Вопросы экономики 2017 № 4 С. 79-99
This paper analyzes how banks react on the interest rate policy of their rivals when the industry-wide price competition is strengthening over different phases of business cycle in both retail and corporate segments of credit market in Russia. Our estimations, based on the models proposed in the literature on New Industrial Empirical Organization (NIEO), show ...
Added: June 14, 2017
Vernikov A. V., / Институт экономики РАН. Серия "Научные доклады Института экономики РАН". 2014.
We use statistical data for the period 2000-2013 to compare the macro-level structure and the core institutions of the banking systems in China and Russia. ...
Added: September 26, 2014
Khon O. D., Управление экономическими системами: электронный научный журнал 2015 № 78 (6/2015)
This article remains the new changes in collateral security regulation’s rules in case of bank credit risk with its influence on bank corporate loans. ...
Added: October 27, 2016
Kirdina S., Vernikov A. V., Journal of Economic Issues 2013 Vol. 47 No. 2 P. 475-484
We undertook an institutional anbalysis of commercial banks in Russia. After the failed experiment with private financial intermediation in the 1990s, Russia migrated towards a banking system consisting of three -- rather than two -- tiers and featuring core institutions controlled by the state directly or indirectly. This evolution is consistent with this country's historical ...
Added: May 28, 2013
Karminsky A. M., Rybalka A., Шевченко Е. А., Российский журнал менеджмента 2018 Т. 16 № 1 С. 95-108
The successful activities of any commercial organization, in particular the bank, are based on a
clear corporate financial architecture: an effective financial strategy and corporate governance
system (relationship management, board of directors and shareholders). CEO is the main representative
of the bank and a reflection of its success or failure in the market. In this regard
there is a ...
Added: April 3, 2018
Rozanova N. M., Мировая экономика и международные отношения 2017 Т. 61 № 1 С. 78-87
The article deals with risk management, risk culture, business-models and their trends in modern banking that have been evident after the global financial crisis of 2007-09. The vast experiences and deep investigations in the roots of banking risks and banks’ behavior patterns are provided on the basis of thorough analysis in the sphere of the ...
Added: January 13, 2017
Peresetsky A., Karminsky A. M., Golovan S. V. et al., / Научно-исследовательский центр РЭШ. Серия WP "Препринты Научно-исследовательского центра РЭШ". 2009. № WP/2009/084.
Kazakhstan banking system is traditionally supposed to be more advanced than the Russian one. Since 2003 international accounting system was adopted in Kazakhstan and since 2005 Basel-2 norms were introduced (In Russia — no earlier than 2009). In the paper banks’ data for 2002– 2006 are used to estimate models of the banks’ technical efficiency ...
Added: June 15, 2013
Vernikov A. V., / Social Science Research Network. Series "SSRN Working Paper Series". 2013. No. 2223686.
This paper tries to assess some of the effects from industrial policy of growing state-controlled "national champions" in the Russian banking industry. We look at market concentration and competitiveness and average bank efficiency. A modified method of calculating the indicators of market concentration suggests that main segments of the market have crossed the threshold of high ...
Added: February 25, 2013
Penikas H. I., Финансовая жизнь 2012 № 2 С. 33-37
In 2010 the Basel Committee on Banking Supervision approach the issue of the optimal remuneration scheme. It wished to incentivize the bank top-management not to take excessive risks. Current paper has a description of a game-theoretical approach how such contract might be designed. We analyze the game tree and conclude the following. The bank management ...
Added: May 19, 2020
Kostrov A., Karminsky A. M., Procedia Computer Science 2014 Vol. 31 No. 2014 International Conference on Computational Science P. 766-772
We develop the model for estimating the default probabilities of banks for Russia, Belarus, Kazakhstan and Ukraine using banking statistics from 2005 to 2013. We find that a binary logit regression works best. In addition, macroeconomic and institutional factors significantly improve model accuracy. The results indicate that there are significantly different sources of risk in ...
Added: June 17, 2014
Vernikov A. V., / НИУ ВШЭ. Серия WP1 "Институциональные проблемы российской экономики". 2014. № 4.
We use statistical data for the period 2000-2013 to compare the macro-level structure and the core institutions of the banking systems in China and Russia. ...
Added: November 17, 2014
Живайкина А. Д., Peresetsky A., Журнал Новой экономической ассоциации 2017 Т. 4 № 36 С. 49-80
We consider 11 credit ratings of Russian banks, assigned by international and Russian rating agencies during 2012—2016. Econometric models of these ratings designed on the public information reveal difference in the approaches of the rating agencies to the Russian bank ratings. We also design econometric models of the Russian bank defaults, where we consider default ...
Added: January 12, 2018