Proceedings of the 11th International Conference on Opportunities and Challenges in Management, Economics and Accounting
Year: 2024
DOI:
[PDF]
Bank Risk, Performance, and the Fintech Advantage: A European Perspective
Dr. Nurbadriyah Bintimokhtar, Dr. Md Ashraful Alam, Dr. Maryam Ayuba Musa
ABSTRACT:
Financial crises on a global scale have underscored the critical importance of effective risk management for businesses, ensuring the support of shareholders and consumers alike. Notable corporate collapses have illuminated the significance of comprehensive risk management in the banking sector. This study investigates the intricate relationship between bank risk and performance, utilising panel data and Partial Least Squares Structural Equation Modelling (PLS-SEM) for 230 commercial banks across 28 European Union (EU) member countries during the period from 2010 to 2019.Our findings reveal a significant negative impact of bank risk on bank performance, confirming that as risk levels rise, bank performance declines, and vice versa. Notably, fintech plays a significant moderating role in this relationship, signifying that fintech interventions contribute to enhanced risk management within banks, thereby bolstering consumer and investor trust and confidence. Moreover, our research identifies that fintech’s most pronounced effect lies in mitigating credit risk. These findings carry substantial implications for innovation policies within the banking sector. Managers may consider reducing risk exposure to enhance overall bank value, and the integration of fintech solutions into bank operations emerges as an effective means to minimise risk while simultaneously improving bank performance.
keywords:Bank Risk, Bank Performance, Fintech, European Union (EU), PLS-SEM