Bank Market Risk and Efficiency of Commercial Banks in Malaysia

Mohd Fahmee Ab Hamid, Aisyah Abdul-Rahman, Mariani Abdul-Majid, Hawati Janor

Abstract


ABSTRACT

Since the global financial crisis, banking supervisors have realised that bank market risk is crucial to banking stability. Guided by the Financial Sector Master Plan, Bank Negara Malaysia has implemented risk-focused and pre-emptive regulation and supervision to control the market risk exposure. This paper examines the market risk and effects of cost and profit efficiencies on market risk using all listed banks in Malaysia for the 2000–2015 period. Using the Expected Shortfall and Stochastic Frontier Analysis, this paper estimates the cost and profit efficiencies and analyses the effects on market risk. The results show that the bank market risk exposure decreases and both cost and profit efficiencies affect market risk. Bank managers and supervisors could apply the results as a basis for formulating business strategy and developing banking policy.

Keywords: Malaysian banks; market risk; expected shortfall; stochastic frontier analysis; logit

ABSTRAK

Sejak krisis kewangan global, penyelia perbankan telah menyedari bahawa risiko pasaran bank adalah penting untuk kestabilan sistem perbankan. Berpandukan Pelan Induk Sektor Kewangan, Bank Negara Malaysia telah melaksanakan penyeliaan yang berorientasikan risiko dan pengawalan terhadap pendedahan risiko pasaran. Makalah ini mengkaji risiko pasaran dan kesan kecekapan kos dan kecekapan keuntungan terhadap risiko pasaran menggunakan kesemua bank yang tersenarai di Malaysia untuk tempoh 2000-2015. Menggunakan Kekurangan Dijangka (ES) dan Analisa Sempadan Stokastik (SFA), makalah ini menganggarkan kecekapan kos dan keuntungan dan menganalisa kesannya kepada risiko pasaran. Keputusan menunjukkan bahawa pendedahan bank terhadap risiko pasaran berkurangan dan kedua-dua kecekapan mempengaruhi risiko pasaran. Pengurus penyelia perbankan dapat menggunakan dapatan kajian sebagai dasar untuk merumuskan strategi perniagaan dan membangunkan polisi perbankan.

Kata kunci: Bank; risiko pasaran; kekurangan dijangka (ES); analisa sempadan stokastik (SFA); logit


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