The integration of knowledge management in the operations of Malaysian banks

The globalization of financial markets forced bankers to be knowledge-based and be more efficient in managing knowledge in their banking operations. The importance of this function is accentuated further by the call from the Central Bank of Malaysia (Bank Negara Malaysia) to integrate the concepts of knowledge management in banking operations. In this paper, we discuss a research model called: Banking Knowledge Management Model (BKMM),which encompasses knowledge creation, knowledge retention and knowledge sharing and more importantly, how each of these elements can be integrated to enhance the quality of banking operations. The various components of BKMM are explained and we illustrate the application of BKMM in two Malaysian commercial banks. We find that the two banks apply the concept of knowledge management in line with BKMM but differ in their knowledge management approach. Despite different approach, both banks derive many benefits from applying knowledge management in their operations. We expect a wider application of BKMM by other banks in Malaysia would create a culture that promote and enhance knowledge management in the banking sector

Key risk determinant of listed deposit-taking institutions in Malaysia

Risk management is a critical function in banking operations in the wake of several banking crises. However; we find few studies on risk management and a lack of empirical investigation on factors affecting the risk of Malaysian banks. These gaps have motivated us to identify the main factors associated with the risk of locally listed deposit-taking institutions. The findings show that three factors were signlficantly associated with unsystematic risk, while the systematic risk and the total risk of these deposit-taking institutions were significantly affected by four main factors. These four factors namely non-performing loans, cost of funds, loan to deposit ratio and inter-bank offered rate however; were found to have a more profound effect on the total risk than on the systematic risk or the unsystematic risk of Malaysian deposit-taking institutions

Global Financial Crisis: Lessons Learned

A financial crisis appears to occur in a certain pattern; it usually starts with a rally of bank credits against a backdrop of easier monetary policy, ample liquidity, and more relaxed banking regulations. Such financial environment stimulates excess leverage to fund assets in real estates and housing in which consumers take advantage of cheap money and borrow heavily, while bankers zealously lend out in order to achieve high loan growth targets. As with all levered instruments, this practice generates great profits when the asset value rises. In contrast, it produces great losses when the assets fall in value, forcing lenders to ration credits and to compete aggressively for funds to cover the resultant losses. Retrospectively, the Global Financial Crisis exhibits far reaching implications from the excessive leverage, deregulation and from the spiral effects of globalisation, financial speculation, product innovation, moral hazards, and incentives problems. This paper reflects how similar or different the Global Financial Crisis is from the past crises in terms of its causes and manifestations, how Malaysia was impacted, and what key lessons could be learned from it.   Keywords: Financial crisis; risk taking and banking

Global financial crisis: Lessons learned

A financial crisis appears to occur in a certain pattern; it usually starts with a rally of bank credits against a backdrop of easier monetary policy, ample liquidity, and more relaxed banking regulations.Such financial environment stimulates excess leverage to fund assets in real estates and housing in which consumers take advantage of cheap money and borrow heavily, while bankers zealously lend out in order to achieve high loan growth targets. As with all levered instruments, this practice generates great profits when the asset value rises.In contrast, it produces great losses when the assets fall in value, forcing lenders to ration credits and to compete aggressively for funds to cover the resultant losses.Retrospectively, the Global Financial Crisis exhibits far reaching implications from the excessive leverage, deregulation and from the spiral effects of globalisation, financial speculation, product innovation, moral hazards, and incentives problems.This paper reflects how similar or different the Global Financial Crisis is from the past crises in terms of its causes and manifestations, how Malaysia was impacted, and what key lessons could be learned from it

Determinants of liquidity risk in dual and fully Islamic banking systems: Evidence from Malaysia and Sudan

The objective of this study is to compare the determinants of liquidity risk of Islamic banks in the two environments of full Islamic banking scheme and dual banking system.The researchers used samples of Islamic banks in Sudan and Malaysia to represent the two banking environment. Data sourced from Islamic Banks Information System (IBIS) provided by Islamic Research and Training Institute(IRTI) for three banks in each of the countries from 2004 and 2015 was used for the study.Using Ordinary Least Regression Analysis (OLS) and panel data analysis techniques, the authors conclude that the different environment the Islamic banks operate determines the significance of liquidity risk determinants.There are conflicting effects of bank’s specific(micro) factors including bank’s size, capital adequacy ratio as well as macroeconomic variables like GDP and Money Supply on liquidity of Islamic banks. However, the study concludes that management efficiency proxied by deployment ratio is a common factor in the two settings. The authors recommend future study on comparison of liquidity risk management policies and structures of Islamic banks in the two environments

Recapitalization Effectiveness and Performance of Banks in Malaysia

Recapitalization through capital injection is one of the strategies for banks to strengthen their banking system from the possibility of bank failures. Banks cannot deny that capital is one of the most important components to run their business. In spite of that, few studies have been conducted to assess the effectiveness of such strategy on Asian banks. This paper investigates the effectiveness of capital injection in the Malaysian banking sector which was adversely hit by the financial crisis. Panel data from 1997 to 2014 was used. The financial data is obtained from annual reports published in Bank Scope and The World Bank database. The data were processed using Panel Least Square and Random effect model. The empirical analysis reveals that, GDP, CAR, previous year capital injection and loan write-off (LWO) explain 89.6 percent of the variance in capital injection effectiveness. CAR and LWO/TA are significant at 5 percent confidence level. The evidence from the results shows that recapitalization is vital for long term survival of the banking sector. The study recommends that in order to improve the profitability of banking sector, the banks should write off bad loans and ensure they have adequate capital either through capital injection, or growth to withstand financial risks

Evaluation Of Performance Of Malaysian Banks In Risk Adjusted Return On Capital (Raroc) And Economic Value Added (Eva) Framework

As Malaysian banks step into Basel-III era, a close look at their performance on risk adjusted basis using RAROC and EVA would throw significant light on their relative strengths and weaknesses. Post restructuring during 1999–2000, the regulatory framework of Bank Negara Malaysia (BNM) throughout 2001–2010 was mainly centered on capitalisation, risk management and governance practices in banks. Financial Sector Blue Print is viewed as the reference framework for growth of banks in the current decade. Though numerous studies have evaluated the performances of Malaysian banks in terms of efficiency and productivity gains before and after the merger and also at various phases during the last decade, no study has so far been reported to evaluate their performances using the above framework. This paper intends to fill up this gap. The period covered is 2001 to 2013. Findings of this paper would be of keen interest to the policy planners, investors and researchers alike

The efficiency of Islamic banks: empirical evidence from the Asian countries’ Islamic banking sectors

Abstract: The paper investigates the efficiency of the Islamic banking sectors in four Asian countries during the period of 2001–2006. The efficiency estimates of individual banks are evaluated using the non-parametric data envelopment analysis (DEA) method. The results suggest that the Asian Islamic banks have exhibited mean technical efficiency highest of 86.5% at 2004 during study period suggesting mean input waste of 13.5%. This implies that the Islamic banks in the Asian countries could have produced the same amount of outputs by only using 86.5% of the amount of inputs they employed. The empirical findings suggest that during the period of study, pure technical inefficiency outweighs scale inefficiency in Asian countries banking sectors. Overall the results imply that during the period of study, although the Asian Islamic banking sectors have been operating at a relatively optimal scale of operations, they were relatively managerially inefficient in controlling their operating costs and utilising their resources to the fullest.Islamic banks; data envelopment analysis; DEA; Asia

Determinants of Sales Force Performance in Banking Sector: A Case of Malaysia

Globalisation, deregulation, technology, competition and new customers’ needs influence the banks to adopt marketing approach in promoting their product and services to generate income. In this aspect, personal selling which focuses on selling skills of banking employees becomes a very important banking function. This study intends to investigate the relationship between the determinants namely teamwork, learning, leadership, communication and, high performance culture and Key Performance Indicators (KPI). Inspite of the importance of KPI in measuring performance of salesforce, there is a lack of published empirical findings to explain the influence of these predictors on KPI achievement in banking sector.This study reported that the model explains 0.21 percent of the variance in KPI achievement. In which teamwork and high performance culture are found to be positive and significantly related. This new finding appears to imply that bank should cultivate and promote teamwork and high performance culture to ensure KPI highly achievable and enhance banks profitability

Key factors influencing credit risk of Islamic bank: A Malaysian case

The rapid and dynamic chaqges in the global financial landscape pose various risks to banking institutions. Operating side by side with conventional banks, lslamic banks are equally vulnerable to risks. The future of lslamic financial institutions will depend to a large extent on how well they manage risks. This ability could be enhanced if the factors affecting these risks are systematically identified. This paper examines the factors affecting credit risk, being the main risk faced by banking institutions and systematically identifies the key factors influencing credit risk formation in lslamic banking operations in Malaysia. A comparison of these factors between lslamic and conventional banking operations is highlighted. Several policy implications are addressed to promote risk management culture in lslamic banking industry