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Navigating the Digital Frontier: Unraveling the Impact of Bank Technology Innovations on Idiosyncratic and Systemic Risks

Author

Listed:
  • Aneta Hryckiewicz

    (Kozminski University)

  • Kinga Tchorzewska

    (Kozminski University)

  • Marcin Borsuk

    (Narodowy Bank Polski
    Polish Science Academy
    University of Cape Town)

  • Dimitrios Tsomocos

    (Saïd Business School and St. Edmund Hall, University of Oxford)

Abstract

The recent development of technological innovation in the banking sector has the potential to bring numerous benefits, but it also raises concerns regarding financial stability, an aspect that has been relatively understudied in academic literature. Our research paper aims to explore the impact of banks' recent adoption of FinTech solutions on both individual and systemic risks within the banking sector. Specifically, we examine how banks' technological innovations influence non-performing loans (NPLs), asset correlation in the system, and measures of systemic risk. To accomplish this, we utilize a unique dataset generated through data mining techniques, which captures the scale, types, and sources of technological solutions implemented by the largest banks in 23 countries over an 11-year period. Our findings indicate that FinTech solutions implemented by banks reduce both individual and aggregated systemic risks in the banking sector, although there are certain areas where systemic risk increases.

Suggested Citation

  • Aneta Hryckiewicz & Kinga Tchorzewska & Marcin Borsuk & Dimitrios Tsomocos, 2024. "Navigating the Digital Frontier: Unraveling the Impact of Bank Technology Innovations on Idiosyncratic and Systemic Risks," NBP Working Papers 367, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:367
    Note: The Project has been funded from the National Science Center under the number: 2019/33/B/HS4/02664. This paper represents the opinions of authors. It is not meant to represent the position of the NBP. Any errors and omissions are the fault of authors.
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    More about this item

    Keywords

    Fintech; innovation; IT technology; IT providers; bank; systemic risk; NPLs;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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