IMPROVING THE CAPITAL MANAGEMENT SYSTEM OF COMMERCIAL BANKS BASED ON CREDIT RISK, ECL, AND CAPITAL BUFFERS
DOI:
https://doi.org/10.5281/zenodo.23586492Abstract
This study proposes an integrated bank capital-management framework linking credit portfolio quality, IFRS 9 expected credit losses (ECL), capital buffers and risk-adjusted return on capital (RAROC). Business Development Bank’s 2024 financial data indicate that ECL allowances represented 7.32% of total assets and 84.28% of equity, reflecting the scale of credit risk relative to the capital base. The proposed ECL–capital buffer–RAROC framework incorporates the author-defined Capital Buffer Pressure Coefficient (KBBK = ΔECLstress/BKB) and a dual-trigger decision matrix based on early-warning zones. It aims to support timely risk identification, efficient capital allocation, risk-based pricing, concentration management and forward-looking ICAAP capital planning.Keywords
bank capital, capital efficiency, IFRS 9, ECL, credit risk, capital buffer, RAROC, ICAAP, stress testing, early warningReferences
Improving capital efficiency in commercial banks involves combining capital strengthening and compliance with
prudential requirements with the integrated management of credit portfolio migration, ECL, capital buffers and riskadjusted
profitability.
For implementation, the EKR framework should first be tested in pilot segments and then gradually integrated into
ICAAP, capital planning, transfer pricing, budgeting and KPI systems.
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