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Islamic fintech literature growth rapidly, and several literature trends have occurred. This paper conducts a systematic literature review of the papers about the challenges of Islamic fintech. For this goal, three main categories are created. The first focuses on the Shariah and legal issues of Islamic fintech because these are the main difference between Islamic finance and its conventional counterpart and therefore are unique to Islamic finance. The second category is on the challenges of Islamic crowdfunding, microfinance, SMEs, and other related institutions. The last category focuses on user and software-based challenges, as most Islamic financial institutions significantly lack experience in this area. Further studies must focus on each challenge and find solutions by opening stagnations.

The Cambodian banking sector has rapidly expanded in recent decades, although there are concerns about the performance of Cambodian banks and the country’s banking sector. A paucity of empirical evidence to clarify the real issues in the banking sector also makes it difficult to formulate effective policy measures to address any potential problems. This study provides empirical evidence by estimating the cost function and efficiencies of 34 commercial banks over the period from 2012 to 2015. We find that the average cost efficiency scores range from 0.60 when measuring bank outputs as loan and deposit amounts, and 0.77 when measuring bank outputs as interest and non-interest income, suggesting that if they are operated more efficiently, they could cut costs by 40% in fund mobilization and 23% in profit making while keeping the same output level. We also find that the Cambodian banks have experienced an improvement in efficiency scores over the period for both aspects of banking activities. Furthermore, we find that expanding a branch network into rural areas is inefficient for bank management, and holding excessive liquidity is associated with higher efficiency, but diversification in bank business operations is negatively associated with cost efficiency of Cambodian commercial banks.

This study examines the relationship between bank-specific variables, macroeconomic variables and non-performing loans (NPLs) in the seven countries of Southeast Asia (Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) during the pre-COVID-19and COVID-19 pandemic. This study adopts panel data regression and distributed lagged regression to examine the impact of bank-specific variables and macroeconomic variables as NPL determinants. The results show that bank-specific variables significantly correlate to NPL, but limited evidence indicates the influence of macroeconomic variables during pre-COVID. Nonetheless, macroeconomic variables are significant to NPL with the emergence of the pandemic, while the bank-specific variables are found to be insignificant. It shows that macroeconomic variables have a greater impact during the turbulent period as they affect most businesses, especially during the pandemic. Furthermore, macroeconomic variables are observed to have a stronger influence on developed countries, but the impact of bank-specific variables is stronger in emerging countries. The results of this study assist policymakers, regulators, banks and governments in identifying the determinants of high NPL as the indicator of a financial crisis. Greater emphasis shall be given to the changes in macroeconomic variables.

In the framework of literature devoted to corporate governance and board composition, we take a peculiar viewpoint and focus on the presence of university professors in the governing body of Italian banks. In particular, we test whether the gender quota regulation increased the presence of female professors as directors. We find evidence of a relevant increase in the probability of designating women from the academia in the years immediately following the entry into force of the gender quota regulation in Italy, whereas no significant increase is in place for male professors over the same period. Our results suggest the need to enhance the career opportunities for women up the C-levels in order to fuel diversity in the boardrooms, not only in independent but also in executive roles. In light of the empirical evidence provided, a re-thinking of gender quota regulations would also be advisable in order to better pursue the desired outcomes.

Synopsis

The research problem

We measured the sensitivity of bank market values to capital and regulatory adjustments (RAs) applied to bank capital using a novel approach of measuring value relevance.

Motivation or theoretical reasoning

Regulators require banks to apply adjustments to book equity to calculate regulatory capital, where book equity is the starting point of the calculation of capital ratios. The regulators emphasize the benefits of these adjustments. Making banks hold more capital, the adjustments should contribute to the reduction of procyclical amplification of financial shocks throughout the banking system, financial markets, and the broader economy. However, RAs are underresearched: empirical research focuses on a few of them, such as the prudential filter on AFS securities, and their effects in specific circumstances. This prompts questions about the overall relevance of RAs. This paper then examines the sensitivity, expressed in elasticities, of market values to capital and RAs. Are adjustments, on their own or in aggregate, value relevant? Are market values more or less sensitive to different measures of bank capital, such as book equity, Tier 1, or total capital? Does the sensitivity evolve over time? And if so, why?

The test hypotheses

• H₁:The elasticity of bank book equity with respect to market value is 1.
• H₂:The elasticities of RAs with respect to market values are 0.

Target population

US bank holding companies over the years 2001Q1–2022Q3.

Adopted methodology

We used panel data analyses to estimate log–log models. These models transform all variables such as market values and accounting values into logs.

Analyses

We used log–log models as an alternative to traditional additive-linear models because the coefficients of the latter are sensitive to sample choice, choice of time period, and outlier treatment. The response coefficients in log–log models are scale-free elasticities that measure, with some precision, the proportional change in the dependent variable associated with a proportional change in the independent variables.

Findings

Our results show that the sensitivity of bank book equity converges to 1 when market uncertainty is low and when banks’ Tier 1 ratios reach 12% of risk-weighted assets (RWAs). Market values are more sensitive to changes in capital of highly geared banks when market uncertainty is high, with shareholders responding positively in particular to increases in Tier 1 and total capital. This is consistent with risk-shifting by shareholders. Market values are generally less sensitive to prudential filters, such as those on unrealized gains and losses on AFS securities.

Synopsis

The research problem

The Basel framework has been a significant development in the world of banking and finance, and it is imperative to have a firm understanding of these regulations and their implications for empirical accounting research, particularly as they relate to bank capital and capital requirements.

Motivation

The motivation of this paper is to advance the understanding of the role of accounting in post-GFC bank regulations and to empower researchers by improving their understanding of the regulatory process and their understanding of regulatory resources.

Target population

Global banks, bank regulators, and bank standard setters.

Adopted methodology

This paper aims to provide an overview of the interactions between bank accounting and prudential regulation, focusing specifically on post-GFC regulations such as Basel III.

Findings

I document differences between bank regulation and financial reporting standards, which are in a constant state of flux. Differences manifest themselves in definitional distinctions, such as the fact that bank capital is not the same as equity, the scope of application and associated data availability, the standard setting process, and stakeholder interests. The disparities are dynamic and specific to each country or jurisdiction, which adds complexity to the research process. Despite the efforts of the Basel Committee to establish unified standards, there has been an increasing divergence in the implementation of global banking rules. These developments present new research opportunities.

In this paper, we analyzed the role of banks’ traditional lending on systemic stability. Firstly, we quantified the effect of correlation among banks’ results on systemic risk through Monte Carlo simulation. Secondly, we verified how traditional lending affects banks’ results correlation. Finally, combining the two effects, we assessed the importance of bank traditional lending on financial stability. Our results suggest that banks devoting a higher share of their assets to traditional lending show a lower correlation of their comprehensive income, thus having a mitigation effect on systemic stability.

We provide a detailed response to Ines Simac's (2024) discussion of our study on the sensitivity of bank market values to regulatory adjustments (RAs) of capital. Initially, we investigated the relevance of these adjustments, motivated by ongoing changes in the definition of bank capital aimed at ensuring financial stability. Our research utilized log-log models to address the challenges of alternative methodologies that may not effectively capture the value relevance of bank capital and RAs. Our results underscore the stability and predictability of coefficients that measure value relevance.

We further explore the valuation perspective, distinguishing between a “valuation” model for a theory of the relation between market and accounting values and a statistical model that estimates the sensitivity of market values to changes in accounting variables. We advocate for the use of log-log models due to their robustness in estimating response coefficients as elasticities. This approach minimizes issues related to scale and distribution assumptions inherent in additive-linear models.

We also address minor points raised in the discussion, including the coefficient values of goodwill and Tier 2 capital. Our findings contribute to a nuanced understanding of how regulatory adjustments influence bank valuations, offering implications for both academic research and regulatory policy.

This paper investigates the importance and the determinants of trust in a lending situation using a controlled experiment. We find that communication can facilitate collaboration between lenders and borrowers through three channels of trust: (1) an information channel, (2) a preference channel, and (3) a reciprocity channel. Our results highlight the role of trust in mitigating the moral hazard problem in lending.

Software development with its unique characteristics having knowledge-intensive and human-oriented aspects and complex domains, challenges organizations. The timely outcomes with high quality and desired cost that directly affect customer satisfaction have an important place in many organizations, including banks. In the last decade, as an emerging technique for business processes management, process mining has been applied in many domains, including manufacturing, supply chain, government, healthcare, and software engineering. There are limited number of studies on process mining techniques carried out for the software process, especially in the banking sector. A lack of tool infrastructure enabling to run the entire software development process and the challenges in integrating processed data from separated varying tools and assets complicate the use of process mining for software processes. This paper aims to identify the improvement points in the software development process of the Kuveyt Turk Participation Bank in Turkey through the surfacing actions. The findings and results are gathered by the application of process mining techniques of bupaR, and evaluation is provided by experts in the bank. After that, the relevant process improvements are identified. The results of this paper show that using process mining provides the organization with beneficial results, in particular, and a comprehensive view of the end-to-end Software Development Life Cycle (SDLC) processes.

Banks now are facing strong competition from both technological giants and small fintech startups. Under these conditions, banks also have started to implement disruptive technologies in their day-to-day operations. However, in some cases huge investments in different technological systems do not lead to the increase in company performance due to the resistance of employees. In this chapter, we focus on both internal and external factors that may influence employees’ labor productivity and performance of the whole company. The sample includes 148 employees with education in banking and finance. The model was estimated based on Partial Least Squares Structural Equation Modelling (PLS-SEM). We show that both motivation to use disruptive technologies and digital skills have a strong impact of labor productivity, while both labor productivity and organizational support positively contribute to the improvement of company performance that is based on the usage of new technologies.

Based on my more than 40 years of practical experience in banking and my forward-looking vision as a banker, I would share the five major development trends of banks with the distinguished guests under the theme of “The New Horizon of Banking”, including: (1) ESG as an essential embodiment of contemporary responsible finance; (2) the digital transformation of the banking industry as a long-term evolutionary process; (3) the evolution of payment models and the new state of money; (4) cross-industry alliances between the banking and nonbanking industries; and (5) the increasing importance of regulatory technology, RegTech.

High impact research in our fields of banking and finance, and more broadly that of economics, can take three main forms: (1) solving the major unsolved problems in the field, (2) posing major questions/ problems to be solved, and (3) providing a new framework/ approach to synthesize current and extant knowledge in the field. We analyze some recent research in different areas of banking and finance (institutions, risk, governance, bank capital/ regulation, innovation) with a view to distil the creative processes at work. We find that the common themes that emerge are consistent with the theory of bisociation proposed by Koestler in his seminal 1964 book, “The Act of Creation”. We also provide a simple combinatorial exercise in the process of creativity that can be used by the reader by adapting to the topics and areas of her research.

Theoretically optimal responses of banks to various liquidity and solvency shocks are modeled. The proposed framework is based on a risk-adjusted return portfolio choice in multiple periods subject to the default risk related either to liquidity or solvency problems. Performance of the model and sensitivity of optimal balance sheet structures to some key parameters of the model are illustrated in a specific calibrated setup. The results of the simulations shed light on the effectiveness of the liquidity and solvency regulation. The flexible implementation of the model and its semi-analytical solvability allows for various easy applications of the framework for the macro-prudential policy analysis.

The role of macroprudential policies (MPPs) in influencing bank behavior has expanded significantly in recent years. However, the evidence regarding the impact of MPPs in influencing bank behavior across countries with different Future time reference (FTR) of languages has not been adequately examined. To inform this debate, utilizing bank-level data during 2010–2019, we examine how MPPs affect bank return and risk across countries with varying FTR of languages. The findings show that using MPPs lowers risk in countries with strong FTR. This is manifest in baseline regressions as well as in robustness tests that incorporate additional dimensions of a country’s economic and institutional environment. Over and above, the results show that although borrower- and lender-focused macroprudential measures are equally effective, their efficacy differs, with the former set of instruments being more useful in Emerging Market and Developing Economies (EMDEs). In contrast, the latter holds greater traction in advanced economies.

We examine the relative efficiency of a unique set of banks, Minority Depository Institutions (MDIs). MDIs are led by minorities and typically serve minority populations. Given Social Economic Status (SES) skews across racial/ethnic groups in the United States, operation within minority communities appear, prima facie, to be relatively expensive and thus inefficient. We examine the return on assets (ROA) and small business lending efficiency of MDIs when compared to what we categorize as “non-MDI” depositories, ceteris paribus. We also examine these institutions for a period that includes a recent environmental shock, the 2008 financial crisis and the post-recessionary period. Using data from the Reports of Condition and Income (call reports) for a substantial set of FDIC-insured banks in the United States, we apply a data envelopment analysis (DEA) to determine how a set of MDIs perform relative to comparable institutions. Recognizing that MDIs are not homogeneous, we also examine relative efficiency across types of MDIs by racial/ethnic grouping. The results indicate that MDIs are not less efficient systematically and that there are differences across MDI types.

As a banking practitioner and a university adjunct professor of finance, I would like to share my observations on five major trends in financial education under the headline The New Horizon of Financial Education. The trends include (1) ESG as an Essential Embodiment of Contemporary Responsible Finance; (2) Digital Transformation as a Long-Term Evolutionary Process of the Financial Sector; (3) Cross-sector Alliances Between Banking and NonBanking Firms; (4) Total Compliance Mechanism in Risk Management; and (5) The Increasing Importance of Regulatory Technology, RegTech.

This article examines the dynamic relationships between competitive strategy and information technology (IT)-based product and process innovation in financial services. The study draws on detailed case studies of five IT-based innovations: Interbranch Online service, Automated Teller Machine service, Credit Card service, Remote Banking service, and Electronic Funds Transfer at Point of Sale service. It examines the development of these innovations in the Thai banking industry from the mid-1960s. The results indicate the limitations of the Reverse Product Cycle model approach, and an alternative conceptual framework and a country-specific innovation model are proposed. Possible avenues for further research on innovation in services and service innovation are suggested, together with steps towards developing a unified approach to innovation and competition for both the service and manufacturing functions.

Policy discussions are dominated by the view that governmental safety nets offered to banks cause moral hazard and encourage risk-taking. However, [Cordella, T and E Levy Yeyati (2003). Bank bailouts: moral hazard vs. value effect. Journal of Financial Intermediation, 12, 300–330.] proposed that government support offered during crises may increase bank franchise value, resulting in less risk-taking. This paper presents additional theoretical results on the franchise value effect. The franchise value effect can dominate over the moral hazard effect even when there are no specific crisis periods. The franchise value effect dominates if bank shareholders have a weak time preference and if the decision on the intensity of risk monitoring is a long-term choice.

The Indian banking industry is going through turbulent times. With the lowering of entry barriers and blurring product lines of banks and non-banks since the financial sector reforms, banks are functioning increasingly under competitive pressures. Hence, it is imperative that banks maintain a loyal customer base. In order to achieve this and improve their market positions, many retail banks are directing their strategies towards increasing customer satisfaction and loyalty through improved service quality. Moreover, with the advent of international banking and innovations in the marketplace, customers are having greater and greater difficulty in selecting one institution from another.

Hence, to gain and sustain competitive advantages in the fast changing retail banking industry in India, it is crucial for banks to understand in-depth what customers perceive to be the key dimensions of service quality and to evaluate banks on these dimensions. This is because if service quality dimensions can be identified, service managers should be able to improve the delivery of customer perceived quality during the service process and have greater control over the overall outcome.

The study suggests that customers distinguish four dimensions of service quality in the case of the retail banking industry in India, namely, customer-orientedness, competence, tangibles and convenience. A methodological innovation in this study has been in the use of TOPSIS in the field of customer-perceived service quality. TOPSIS has been used to evaluate and ranking the relative performance of the banks across the service quality dimensions. Identifying the underlying dimensions of the service quality construct and evaluating the performance of the banks across these factors is the first step in the definition and hence provision of quality service in the Indian retail banking industry.