Factors affecting risk taking behavior in Nepalese commercial banks / Subodh Adhikari 

Public ISBD Title : Factors affecting risk taking behavior in Nepalese commercial banks Material Type: printed text Authors: Subodh Adhikari, Author Pagination: 87p. Size: GRP/Thesis Accompanying material: 2/B General note: Including bibliography Languages : English Descriptors: Banks Commercial banks Nepal Risk taking behavior Keywords: 'risk behavior  banks  commercial banks  Nepal' Class number: 332.16 Abstract: Liquidity risk, credit risk, market risk, operational risk, interest rate risk etc have always been along with banks. But, since bearing risk is an integral part of banking business, it is not surprising that banks have been practicing risk management ever since there have been banks- the industry could not have survived without it. The only real change is the degree of sophistication now required to reflect the more complex and fast-paced environment. Thus, it is essential to identify the factors that affect risk taking of banks, so that risk management technique could be used more efficiently and effectively. This study attempts to identify the factors that affect the risk taking behavior of the commercial banks operating in Nepal. This study determines the factors affecting the risk taking behavior of selected commercial banks of Nepal. The specific objectives of this study were to analyze the relationship between credit risk and capital requirement, foreign investment, ex-NRB officers, loan growth rate, non performing loan, return on assets and log of total assets, to investigate the relationship between liquidity risk and capital requirement, foreign investment, ex- NRB officers, log of total assets, credit to deposit ratio, cash reserve ratio and bank lending rate, to examine the impact of capital requirement, foreign investment, ex-NRB officers, log of total assets, GDP, Inflation and net interest margin on market risk of the bank, to assess the employees views on bank risk taking behavior. The research was based on both the primary and secondary data with methods such as descriptive statistics and regression analysis for secondary data analysis and percentage frequency distribution and likert scale for primary data analysis. This study concludes that the presence of foreign investors and Ex-NRB officers seems to be affecting the level of risk taken by banks. It is also concluded that regulatory capital requirement also plays important role in determining the risk taken by banks. Besides, the study also concludes that nonperforming loan and return on assets explain the credit risk of the bank. This means the banks should focus these variables in order to maintain the credit risk of the bank. Similarly, capital requirement and credit to deposit ratio explain the liquidity risk of the bank. Likewise capital requirement, ex-off, bank size and inflation explain the market risk of the bank. Similarly in the case of primary study, the study concludes that rules and regulations formulated by central bank determine the level of risk taken by the bank. The rules and regulation regarding minimum cash reserve requirement, bank lending rate also affects the risk taking behavior of the bank. Similarly macroeconomic variables like GDP and inflation are equally important variables on bank risk taking. In case of Nepal interest rate is the most important factor for evaluation of market risk as other factors are not popular. Based on the findings and conclusion the study recommends that the regulatory authority should give importance in size of the banks. Similarly focus of banks should be on credit policies and guidelines, bank internal factors and formulation of appropriate rules and regulations to minimize the credit risk, operational risk and liquidity risk respectively. Factors affecting risk taking behavior in Nepalese commercial banks [printed text] / Subodh Adhikari, Author . - [s.d.] . - 87p. ; GRP/Thesis + 2/B. Including bibliography Languages : English Descriptors: Banks Commercial banks Nepal Risk taking behavior Keywords: 'risk behavior  banks  commercial banks  Nepal' Class number: 332.16 Abstract: Liquidity risk, credit risk, market risk, operational risk, interest rate risk etc have always been along with banks. But, since bearing risk is an integral part of banking business, it is not surprising that banks have been practicing risk management ever since there have been banks- the industry could not have survived without it. The only real change is the degree of sophistication now required to reflect the more complex and fast-paced environment. Thus, it is essential to identify the factors that affect risk taking of banks, so that risk management technique could be used more efficiently and effectively. This study attempts to identify the factors that affect the risk taking behavior of the commercial banks operating in Nepal. This study determines the factors affecting the risk taking behavior of selected commercial banks of Nepal. The specific objectives of this study were to analyze the relationship between credit risk and capital requirement, foreign investment, ex-NRB officers, loan growth rate, non performing loan, return on assets and log of total assets, to investigate the relationship between liquidity risk and capital requirement, foreign investment, ex- NRB officers, log of total assets, credit to deposit ratio, cash reserve ratio and bank lending rate, to examine the impact of capital requirement, foreign investment, ex-NRB officers, log of total assets, GDP, Inflation and net interest margin on market risk of the bank, to assess the employees views on bank risk taking behavior. The research was based on both the primary and secondary data with methods such as descriptive statistics and regression analysis for secondary data analysis and percentage frequency distribution and likert scale for primary data analysis. This study concludes that the presence of foreign investors and Ex-NRB officers seems to be affecting the level of risk taken by banks. It is also concluded that regulatory capital requirement also plays important role in determining the risk taken by banks. Besides, the study also concludes that nonperforming loan and return on assets explain the credit risk of the bank. This means the banks should focus these variables in order to maintain the credit risk of the bank. Similarly, capital requirement and credit to deposit ratio explain the liquidity risk of the bank. Likewise capital requirement, ex-off, bank size and inflation explain the market risk of the bank. Similarly in the case of primary study, the study concludes that rules and regulations formulated by central bank determine the level of risk taken by the bank. The rules and regulation regarding minimum cash reserve requirement, bank lending rate also affects the risk taking behavior of the bank. Similarly macroeconomic variables like GDP and inflation are equally important variables on bank risk taking. In case of Nepal interest rate is the most important factor for evaluation of market risk as other factors are not popular. Based on the findings and conclusion the study recommends that the regulatory authority should give importance in size of the banks. Similarly focus of banks should be on credit policies and guidelines, bank internal factors and formulation of appropriate rules and regulations to minimize the credit risk, operational risk and liquidity risk respectively.

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Factors affecting risk taking behavior in Nepalese Commercial Banks / Silu Sayami 

Public ISBD Title : Factors affecting risk taking behavior in Nepalese Commercial Banks Material Type: printed text Authors: Silu Sayami, Author Pagination: 118p. Size: GRP/Thesis Accompanying material: 11/B Languages : English Descriptors: risk taking behavior Class number: 332.16 Abstract: The result reveals that average credit risk is highest for ADBL (Rs. 1.86 billion) and lowest for SUBL (Rs. 0.07 billion). The average operational risk is highest for ADBL (63.04 percent) and lowest for NABIL (25.47 percent). The average capital adequacy ratio is highest for ADBL (17.26 percent) and lowest for CTBL (9.25 percent). The average return on assets is highest for NBBL (3.25 percent) and lowest for MBL (0.71 percent). The average liquidity ratio is highest for ADBL (104.03 percent) and lowest for SCBL (53.07 percent). The average bank size is highest for (Rs. 83.34 billion) and lowest for NCC (Rs. 22.87 billion).Likewise, money supply is highest in year 2011/12 (27.4 percent) and lowest in year 2015/16 (5.8 percent) and GDP growth rate is highest in year 2013/14 (13.7 percent) and lowest for 2015/16 (0.8 percent). The descriptive statistics indicates that the average credit risk, average operational risk, average capital adequacy ratio, liquidity ratio, average money supply, average GDP growth rate and average bank size is Rs. 0.324 billion, 39.95 percent, 12.28 percent, 78.64 percent, 14.24 percent, 3.61 percent and Rs 45.63 billion respectively. The study has more domestic banks than foreign owned banks as an average of foreign ownership is 0.30. The correlation matrix shows that capital adequacy ratio, return on assets, liquidity ratio and bank size are positively correlated to credit risk whereas foreign ownership, money supply and GDP growth rate is negatively correlated to credit risk. The result also shows that capital adequacy ratio, liquidity ratio, Money supply and GDP growth rate are positively correlated to operational risk whereas the return on assets, foreign ownership and bank size are negatively correlated to operational risk. The regression result shows that capital adequacy ratio and return on assets have positive and significant impact on credit risk. This indicates that higher the capital adequacy ratio and return on assets, higher would be the credit risk taking by banks. Similarly, liquidity ratio has positive and significant impact on credit risk. This reveals that higher the liquidity ratio, higher would be the credit risk. However, foreign ownership has negative impact on credit risk. The result denotes that higher the foreign ownership, lower would be the credit risk. Similarly, money supply and GDP growth rate have negative impact on credit risk. This reveals that higher the money supply, lower would be the credit risk Likewise, this also shows that higher the GDP growth rate, lower would be the credit risk. However bank size has positive and significant impact on credit risk which reveals that larger the bank size, higher would be the credit risk. The regression result shows that capital adequacy ratio has positive and significant impact on operational risk. This indicates that higher the capital adequacy ratio, higher would be the operational risk taking by banks. Similarly, return on assets and foreign ownership have negative and significant impact on operational risk. This indicates that higher the return on assets, lower would be the operational risk. This also indicates that higher the foreign ownership, lower would be the operational risk. However, liquidity ratio and money supply has positive and significant impact on operational risk. This reveals that higher the liquidity ratio, higher would be the operational risk. This also indicates that higher the money supply, higher would be the operational risk.Likewise, GDP growth rate has positive impact on operational risk. This shows that higher the GDP growth rate, higher would be the operational risk. Similarly, bank size has positive and significant impact on operational risk which reveals that larger the bank size, higher would be the operational risk. Factors affecting risk taking behavior in Nepalese Commercial Banks [printed text] / Silu Sayami, Author . - [s.d.] . - 118p. ; GRP/Thesis + 11/B. Languages : English Descriptors: risk taking behavior Class number: 332.16 Abstract: The result reveals that average credit risk is highest for ADBL (Rs. 1.86 billion) and lowest for SUBL (Rs. 0.07 billion). The average operational risk is highest for ADBL (63.04 percent) and lowest for NABIL (25.47 percent). The average capital adequacy ratio is highest for ADBL (17.26 percent) and lowest for CTBL (9.25 percent). The average return on assets is highest for NBBL (3.25 percent) and lowest for MBL (0.71 percent). The average liquidity ratio is highest for ADBL (104.03 percent) and lowest for SCBL (53.07 percent). The average bank size is highest for (Rs. 83.34 billion) and lowest for NCC (Rs. 22.87 billion).Likewise, money supply is highest in year 2011/12 (27.4 percent) and lowest in year 2015/16 (5.8 percent) and GDP growth rate is highest in year 2013/14 (13.7 percent) and lowest for 2015/16 (0.8 percent). The descriptive statistics indicates that the average credit risk, average operational risk, average capital adequacy ratio, liquidity ratio, average money supply, average GDP growth rate and average bank size is Rs. 0.324 billion, 39.95 percent, 12.28 percent, 78.64 percent, 14.24 percent, 3.61 percent and Rs 45.63 billion respectively. The study has more domestic banks than foreign owned banks as an average of foreign ownership is 0.30. The correlation matrix shows that capital adequacy ratio, return on assets, liquidity ratio and bank size are positively correlated to credit risk whereas foreign ownership, money supply and GDP growth rate is negatively correlated to credit risk. The result also shows that capital adequacy ratio, liquidity ratio, Money supply and GDP growth rate are positively correlated to operational risk whereas the return on assets, foreign ownership and bank size are negatively correlated to operational risk. The regression result shows that capital adequacy ratio and return on assets have positive and significant impact on credit risk. This indicates that higher the capital adequacy ratio and return on assets, higher would be the credit risk taking by banks. Similarly, liquidity ratio has positive and significant impact on credit risk. This reveals that higher the liquidity ratio, higher would be the credit risk. However, foreign ownership has negative impact on credit risk. The result denotes that higher the foreign ownership, lower would be the credit risk. Similarly, money supply and GDP growth rate have negative impact on credit risk. This reveals that higher the money supply, lower would be the credit risk Likewise, this also shows that higher the GDP growth rate, lower would be the credit risk. However bank size has positive and significant impact on credit risk which reveals that larger the bank size, higher would be the credit risk. The regression result shows that capital adequacy ratio has positive and significant impact on operational risk. This indicates that higher the capital adequacy ratio, higher would be the operational risk taking by banks. Similarly, return on assets and foreign ownership have negative and significant impact on operational risk. This indicates that higher the return on assets, lower would be the operational risk. This also indicates that higher the foreign ownership, lower would be the operational risk. However, liquidity ratio and money supply has positive and significant impact on operational risk. This reveals that higher the liquidity ratio, higher would be the operational risk. This also indicates that higher the money supply, higher would be the operational risk.Likewise, GDP growth rate has positive impact on operational risk. This shows that higher the GDP growth rate, higher would be the operational risk. Similarly, bank size has positive and significant impact on operational risk which reveals that larger the bank size, higher would be the operational risk.

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