Annals of the University of Oradea: Economic Science (Dec 2020)

AN INQUIRY ON TOP BANKS BY TIER 1 RANKING FROM CENTRAL AND EASTERN EUROPE

  • CUREA-PITORAC Ruxandra Ioana

Journal volume & issue
Vol. 29, no. 2
pp. 64 – 73

Abstract

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Tier 1 capital ranking represents an important instrument that measures a bank’s financial strength and efficiency and The Banker Database, a service provided by The Financial Times it is an important source of data and analysis for the banking sector. Under these circumstances, the objective of the article is to examine the financial and non-financial indicators that might have an impact on the Tier 1 capital ranking banks from Central and Eastern Europe. The research starts with a brief theoretical review of the indicators that influence the financial performance of the banks, the profitability, efficiency and the capital structure. The empirical research was conducted on the first 200 banks from Tier 1 capital ranking and the data was collected from The Banker Database, in the period 2015 - 2018. The banks included in analysis were from 23 countries with a total of 800 observations. The empirical research consists in a qualitative and a quantitative analysis of the banks, with focus on their structure, characteristics and their financial indicators. Using a panel data econometric model, the study highlighted the correlations between the financial and non-financial indicators and the rank of the banks. The researched results revealed that the highest number of the top banks were from Russia (57 banks), Poland (17 banks), Bulgaria (12 banks) and Romania (12 banks). The econometric analysis highlighted that the dependent variable had a positive correlation with Return on Asset (ROA), Total Liabilities to Total Assets (LTA), Loans to Assets Ratio (LTA) and Risk-Weighted Assets Density (RWA). A negative correlation was found with the number of employees and Return on Equity (ROE). The results obtained are in correlation with the recent studies in the field, a bank with smaller liabilities and higher revenues is more efficient and has a higher position in the Tier 1 capital ranking.

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