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Development of a Methodology of Evaluation of Financial Stability of Commercial Banks

Author

Listed:
  • Willem Karel M. Brauers
  • Romualdas Ginevičius
  • Askoldas Podviezko

Abstract

The field of evaluation of financial stability of commercial banks, which emanates from persistent existence of financial crisis, induces interest of researchers for over a century. The span of prevailing methodologies stretches from over-simplified risk-return approaches to ones comprising large number of economic variables on the micro- and/or macro-economic level. Methodologies of rating agencies and current methodologies reviewed and applied by the ECB are not intended for reducing information asymmetry in the market of commercial banks. In the paper it is shown that the Lithuanian financial system is bank-based with deposits of households being its primary sources, and its stability is primarily depending on behavior of depositors. A methodology of evaluation of commercial banks with features of decreasing information asymmetry in the market of commercial banks is being developed by comparing different MCDA methods. Key words: MOORA, MULTIMOORA, Bank evaluation, Financial stability, CAMEL.JEL: C44, C61, G21, O22.

Suggested Citation

  • Willem Karel M. Brauers & Romualdas Ginevičius & Askoldas Podviezko, 2014. "Development of a Methodology of Evaluation of Financial Stability of Commercial Banks," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(3), pages 349-367.
    • Handle: RePEc:voj:journl:v:61:y:2014:i:3:p:349-367:id:476
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    More about this item

    Keywords

    MOORA; MULTIMOORA; Bank evaluation; Financial stability; CAMEL;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis

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