The Role of Human Factors in the Bank Capital Evaluation Framework

The article assesses various versions of «Bank capital» definitions, and the own bank capital definition is suggested by authors. It assumes that bank capital is a monetary value of the bank’s debts and equities. Milestones of managing the bank capital such as formation and application are provided in the paper. Two groups of bank capital users such as external and internal stakeholders are highlighted. The key-note of the paper is defining the role of human capital in evaluating the bank capital. Human capital is suggested to play positive and negative role through the whole bank capital evaluation. Both subjective pros and cons of the human factor are revealed in the paper. Typical errors such as low-skilled staff, non-flexible mind, inconsistent risk policy in decision-making, deficient analytical framework, lack of useful forecasting are defined. Authors also defined a set of advantages of the human factors such as: quality education, professional skills, professional development, and diplomatic, highly analytical and independent mind, stress tolerance, and so on. The paper highlights the concept that entities’ benefits which are in evaluating the bank capital could be structured in importance and effect of the parties concerned. The hierarchical framework of interests completely depends on the person arranging the framework. The paper stresses that interests of the parties concerned should be listed in the bank capital’s evaluation policy. A set of key indicators such as capital profitability rate, adequacy ratio to highlight stakeholders’ interests are defined. Key features of bank capital management are described. Objectives of internal and external stakeholders’ activity are defined. The set of factors indicating the impact of human factors on evaluating the bank capital are discussed.