Fshore Banking Institutions

Fshore Banking Institutions
The offshore banking institution is regulated in three different ways, through agency, subsidiary, and
foreign branches. These kinds of institutions are difficult to regulate because countries cannot
impose reserve requirements on its' own banks' overseas branches (Grittersova, 15). According to
Singer, "regulators enact tighter capital requirements without the explicit intervention of congress.
As banks assumed more and more risk, regulators responded by imposing greater capital
requirements without the explicit intervention of congress" (Singer, 49). This makes it difficult for
the international banking to have restriction on the bank examinations, capital requirements, and
assets. Internationally, the safety net main purpose is to establish an international standard that will
minimize the power of the regulators and protect the consumers that are within the jurisdiction.
Because of the existence of contagion there has been an important institution that has intervened as a
disciplined which is the international lender of last resort (189). Overall The Basel Committee on
Banking Supervision was composed of the G10 central banks and national bank regulators in where
they negotiate international banking standards, according to Fratianni, the G10 is small,
homogenous, and rich in intelligence on financial markets with international financial transaction in
the world. During the 1980's the U.S. largest commercial banks became endangered by the dept.
crisis of Latin
... Get more on HelpWriting.net ...

Financial Globalization and Risk Essay
Introduction:
From the beginning of the 1990s, the global financial system has entered a phase of unprecedented
restructuring, marked by the increasing integration of financial markets and increased economic
interdependence. This process, known under the name of financial globalization allows companies
better access to financing, offers investors a greater possibility of investment and thus increases the
liquidity of the global economy.
However, this financial globalization has enormous risks. Indeed, creating an interconnection
between national financial systems, it facilitates the transmission of shocks, contagion . Thus, a local
imbalance turns immediately into a systemic crisis as shown by the recent financial crisis.
Disruption in ... Show more content on Helpwriting.net ...
The Basel committee was established by the central bank governors 40 years ago and since tried to
strengthen the regulation, supervision and risk management of the banking sector. The Basel 3 is
basically rules built on top of the Basel 2 and 1 framework and contains primarily 5 key
improvements that will be explained in details further down the project. Basel 1 and 2 will shortly
be explained but the main focus will be on the Basel 3.
The bursting of the housing bubble in 2007 and the crisis that ensued highlighted the shortcomings
of the banking regulation and forced the international authorities to consider a new agreement on it.
Thus the Basel Committee decided to force banks to implement this new agreement.
Problem area:
Basel III establishes a set of standards for the implementation of a liquidity ratio for international
banks , a leverage ratio , counter–cyclical measures , a redefinition of equity and a review of the
coverage of certain risks . This set of standards will help to strengthen the resilience of the financial
and banking sector in anticipation of further financial and economic stress , regardless of the source.
All of its new measures that the Basel Committee has developed to strengthen the regulation,
supervision and risk management in the banking sector aims to strengthen transparency and
communication within banks,

The Success Of Canadian Banks Essay
Introduction
Canadian Banks has never attracted that much of attention of the whole world until the subprime
meltdown in 2007/2008. Canada was the only G7 country that did not have a government bank
bailout. Canadian banks remained profitable through the crisis. A World Economic Forum report
ranked Canada first among 134 countries on the soundness of its banks.
This paper aims to analyze persuasive reasons for the remarkable success of Canadian Banks in the
subprime meltdown. Regulations have been set before the crisis. However, different countries'
implementations are different in practice. The main arguments of this paper are related to the
number characters–, leverage ratio and return of equity/asset (R–O–E/R–O–A). Using empirical
data of these ratios in different banks in Canada and America lead the paper to several soundness
conclusions.
Background
In 2008, subprime financial crisis started from the United State of America, soon the whole global
economic are shaken by this crisis. However, Canadian bank industry survived from this crisis
surprisingly.
How could Canadian banks survive the subprime meltdown in 2008? It relates to conservative
policies and strict regulations in Canadian bank system. The Canada Deposit Insurance Corporation
(CDIC) insures each depositor at member institutions up to a loss of $100,000 per account. The
purpose of that is to protect deposited from bank insolvency and ensuring the financial stability. In
addition, Canadian banks are

The Pros And Cons Of The Banking Crisis
Banking crisis has been much more frequent than any of the expectations by research or any of the
banks. The annual probability of a crisis has been judged to be around 4–5% in both the industrial
sector and emerging market countries (Walter, 2010). The banking sector has been effected by many
factors which contributes to its vulnerability. Some of the factors that adds to the vulnerability of the
bank are minimum availability of high–quality capital, lack of high quality liquid assets, and sources
for reliable funding.
After the great economic crisis of 2008 (Subprime crisis), many banks had failed leading to a great
recession. Since the beginning of the financial turbulence which began in the year 2007, globally the
banks have reported a total write downs and losses of more than 888 billion dollars. At the same
time some of them have estimated the overall expected loss of various banks and financial institutes
in the range of 2.2 trillion dollars (Global Financial Report Market Updated, 28 Jan 2009). Banking
crisis are usually associated with significant economic losses. During the crisis many banks had
failed to bring in additional capital which had forced many of them into a ... Show more content on
Helpwriting.net ...
The major problem is with respect to the Ethics in Banking, which was the major cause of all the
crisis and failures. May even a stringent norm come, it will still have some loopholes which the
Banking Wizards will find out. Unless the core of banking which is the "Trust of customer" that is
gained, no bank can ever be successful. If we observe down the lane, we will see that behind all the
failures of the banks was the lack of trust by the customers over banks. And the reason being simple
that the banks had forgone the Ethics for the sake of Profitability. And this is the point where the
main problem starts, for this being the very foundation is

Case Study: Union Bank Of Colombo PLC)
Chapter I
INTRODUCTION
1.1 Case Background
Managing a Bank crisis is one of the most difficult tasks of a regulator. Banks and financial
institutions had to take counter measures in order to survive and remain competitive. Efficient
regulatory framework identifies the benefits of a sustainable financial system. It helps the
organizations to work efficiently, objectively and the country will have transparent markets.
Regulatory system is open minded to the needs of investors when implementing directions to curtail
regulations for certain types investment related products and services. It also maintains
accountability with respect to market participants and policy makers.
Union Bank of Colombo PLC ("UBC or "the Bank") was established in the year 1995 as the eighth
local commercial bank in Sri Lanka. UBC was Sri Lanka's rapid fastest expanding growing banks
within the recent new entrants that offered a wide range of financial solutions with the latest
technology innovations during its initial period. At the inception, the Bank was focusing on a niche
market mainly consisting of a high net worth clientele. UBC continued to increase its accessibility
and reach, through its network expansion and technology driven products, which were innovative
and in most cases was "first" in the industry. (Refer Appendix IV). UBC continues to deliver
convenience and ... Show more content on Helpwriting.net ...
UBC's Initial Public Offering (IPO) was the highest (417 times in the public category)
oversubscribed IPO in Sri Lanka. The IPO brought a Rights Issue and a Private Placement which
attracted remarkable investor interest and showed its' uncommon unique strengths with its potential
for the future. Through IPO, UBC planned to broad base the public ownership of the Bank resulted
in increased visibility and brand image which enabled the Bank to expand its deposit base and
eventually led to growth in business

Solvency Issues : Solvency II
Solvency II is to be implemented on the 1st January 2016. It is a three pillar based system (based on
Basel II) that follows on to try and fill the gaps from Solvency I. Solvency II is a far more risk based
approach than its predecessor and is the greatest regulatory change that insurance firms in the EU
have faced. Inevitably, Solvency II brings its own challenges and difficulties. Whether Solvency II
will lead to positive or negative changes remains a point of contention between stakeholders, but
what is clear is that it will be a much more significant transformation than Solvency I.
Since the 1970s the EU has had solvency requirements in place which require a regulatory capital to
protect against any unforeseen circumstances. EU states agreed in the 1990s that a review should be
put in place to reform and improve standards. Solvency I was the result of this review (Lloyd's, (no
date)).
Following Solvency I's implementation, it became increasingly obvious that it didn't have all of the
significant changes needed. From this Solvency II was crafted, looking to improve from Solvency I.
"It is unacceptable that the common regulatory framework for insurance in Europe in the 21st
century is not risk based and only takes account, very crudely, of one side of the balance sheet."
(Matthew Elderfield, 2013)
Solvency II looks to introduce a new set of aims including risk–sensitive capital requirements, more
sufficient and consistent standards across the EU to further single

Merger
For around 25 shares of Re 1 of CBoP, an investor will get one share of Rs 10 of HDFC Bank. In
last two days, share price of CBoP moved from Rs 49.85 on Wednesday to Rs 56.40 on Friday.
However, it seems, investors of HDFC Bank did not like the development. The share price of HDFC
Bank on Thursday moved up from Rs 1,534.50 to Rs 1,543. But on Friday, it fell sharply to Rs
1,475. Prior to this, in August 2007, CBoP was merged with Lord Krishna Bank.
* 2008 HDFC Bank acquired Centurion Bank of Punjab.
The swap ratio is expected to be around 1:25–30," said a banking source. The merger will make
HDFC Bank the country's seventh largest bank after Bank of India (BoI) and ahead of IDBI Bank,
from the current 10th position. The merger ... Show more content on Helpwriting.net ...
CBoP shareholders will get one share of HDFC Bank for every 29shares held by them.HDFC Bank
and Centurion Bank of Punjab have agreed to the biggest merger inIndian banking history, valued at
about $2.4 billion.
Rana Talwar's Sabre Capital would holdless than 1 per cent stake in the merged entity from 3.48 in
CBoP, while Bank Muscat's holding will decline to less than 4 per cent from over 14 per cent in
CBoP.HDFC shareholding falls to will fall from 23.28 per cent to around 19 per cent in themerged
entity.
The merger has been accounted for as per the pooling of interest method of accounting in
accordance with the scheme of amalgamation. Adjustments have been made to the amalgamation
reserve to harmonize accounting policies of CBoP with that of HDFC Bank principally relating to
provisioning norms on impaired loans and depreciation policies on fixed assets. Merger related
expenses have also been adjusted against the amalgamation reserve.
The amalgamation was accounted for as a business combination under the purchase method of

Key Supervisory Issues And Improvement Of Banking Regulation
The financial instability of the past few years has provided important evidence that can be used for
the detection of dangerous flaws in the international banking system. After the financial crisis of
2008– 2009, the Basel Committee on Banking Supervision made significant steps in improving
understanding the key supervisory issues and improvement of banking regulation worldwide.
Subsequently, new standards were created for banking system regulation, which represents upgraded
capital requirements, liquidity norms, and additional monitoring tools for banking supervision and
regulation. These standards were first established in 2009 by the BCBS though some of the
Committee's proposals remain currently open for discussion.
The resultant ... Show more content on Helpwriting.net ...
This leads to increase from 4% (Basel II) to 8% of the risk–weighted assets in requirements
regarding the Tier 1 Capital (which includes only common shares and undistributed profit). The
second important inclusion of Basel III relates to the size of balance sheets which banks should
strive to reduce: "leverage ratio" puts a limit on a list of activities a bank can develop compared to
its capital. The minimum capital adequacy ratio that is required to be maintained by a bank is 8%
(without the capital conservation buffer), which must reach 10,5% of the total assets. The third basic
element of Basel III relates to liquidity. To provide a bank for equilibrium between loans and
deposits Basel III has developed specific regulation which initiates with risk assessment through the
stress test. Basel III compels banks to have sufficient liquidity available during a period of 30 days
of "stressed" conditions. Under these circumstances only half serves to reimburse the bank and the
bank is expected to inject the other 50% in the economy by granting new loans. Thus, loans with a
maturity of 50% leave the bank once more. For deposits, Basel III states that the first group,
individuals, and SMEs, leave the bank at the rate of 5% to 10% during the stress test. While for bank
deposits, it is 100%. For corporates clients

The Implementation Of Basel IIi
1 On 20 May this year the Amendment to the Banks Act regulations ("Regulations") in terms of
section 90 of the Banks Act, 1990 ("Banks Act") were published in the government gazette and will
come into effect on 1 July 2016. A number of cosmetic changes have been made to the Regulations
but a few material changes will be highlighted in this alert. 2 Subsequent to the implementation of
Basel III in South Africa on 1 January 2013, the Basel Committee on Banking Supervision
("BCBS") issued revised requirements in respect of a wide range of matters which necessitated
amendments to our regulations. The Regulations now cater for the changes to capital disclosure
requirements, changes to the Liquidity Coverage Ratio ("LCR"), requirements related to intraday
liquidity management and public disclosure requirements related to the LCR. 3 Regulation 38(16)
was amended to incorporate South African Reserve Bank ("SARB") Directive 05/2014 which dealt
with obtaining the Registrar of Banks consent before reducing qualifying capital and reserve funds.
Regulation 38(5)(a)(i)(K) which deals with deductions which need to be made from a bank 's
common equity tier 1 capital and reserve funds has been amended to include "investment in a
foreign branch" in order to clarify the treatment of capital invested in foreign branches. 4 Regulation
38(17) dealing with the calculation of a banks LCR has been substituted by a new Regulation 38(15)
which incorporates the latest Basel III framework as well as

Abolition of Universal Banking in Nigeria
BASEL III AND ABOLITION OF UNIVERSAL BANKING MODEL – IMPLICATION FOR
NIGERIAN BANKS Introduction: In the aftermath of the economic recession which pulled down
many global banks and exposed multiple weaknesses in regulation and banking structures, the Basel
Committee on Banking Supervision agreed to new rules on the minimum level (capital ratio) and
composite structure of Banks capital on the 12th of September, 2010. Broadly speaking, the new
rules which are widely referred to as Basel III (and are mainly Basel II plus new regulations based
on lessons from the market crisis), still stipulate a minimum Total Capital Ratio of 8%. However, in
addition to increasing the portion of the 8% requirement that is Core Tier 1 Capital (from 2% to ...
Show more content on Helpwriting.net ...
Nonetheless, it formulates broad supervisory standards and guidelines, and recommends statements
of best practice in the expectation that individual authorities will take steps to implement these
through detailed arrangements – statutory or otherwise – which are best suited to their own national
systems. The Committee comprises 12 European, 8 Asian, 3 South American, 2 American and just
one African Country, South Africa. The Basel rules have become widely accepted as minimum
standards in Banking regulation for capital, Banking supervision and risk management, not just in
the 56 member countries of BIS, but globally. However, while the minimum total capital ratio
stipulated by the Basel Committee is 8%, most African Countries have higher minimum capital ratio
requirements as shown in the table in Table One. Nigeria adopts a 10% floor. As Nigeria still lags in
strict implementation of Basel II requirements, the implementation of Basel III would be even
farther away. In an attempt to strengthen Banks' buffer levels in the aftermath of the economic
recession, the Basel Committee on Banking Supervision agreed to new rules on the minimum level
(capital ratio) and composite structure of what Banks call capital. Broadly speaking, the new rules
which are widely referred to as Basel III and are majorly Basel II plus lessons from the market
crisis, still stipulate a minimum Total Capital Ratio of 8%. However, in addition to increasing the
portion of the

Swot Analysis of Reliance Life Insurance Company
SECTOR OVERVIEW
1
Introduction: Banking sector The Indian Banking industry governed by the Banking Regulation
Act of India, 1949, falling into two broad classifications, non–scheduled banks and scheduled banks.
Within the commercial banks there are nationalized banks, the State Bank of India and its group
banks, regional rural banks and private sector banks (the old/ new domestic and foreign). With the
economic growth picking up pace and the investment cycle on the way to recovery, the banking
sector has witnessed a transformation in its vital role of intermediating between the demand and
supply of funds. The revived credit off take (both from the food and non food segments) and
structural reforms have paved the way for a change in the ... Show more content on Helpwriting.net
...
4
INDIAN BANKING SYSTEM
5
Indian Banking System: For the past three decades India's banking system has several outstanding
achievements to its credit. The government's regular policy for Indian bank since 1969 has paid rich
dividends with the nationalization of 14 major private banks of India. The first bank in India, though
conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System
can be segregated into three distinct phases. They are as mentioned below:
Early phase from 1786 to 1969 of Indian Banks Nationalisation of Indian Banks and up to 1991
prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of
Indian Financial & Banking Sector Reforms after 1991.
Phase I During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline
the functioning and activities of commercial banks, the Government of

6
India came up with The Banking Companies Act, 1949 which was later changed to Banking
Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was
vested with extensive powers for the supervision of banking in India as the Central Banking
Authority. Phase II The following are the steps taken by the Government of India to Regulate
Banking Institutions in the Country:
1949: Enactment of Banking

International Case Study: ABN AMRO
Group operating profit, excluding credit market write–downs and one–off items, impairment losses
on reclassified assets, amortization of purchased intangible assets, write–down of goodwill and other
intangible assets, integration costs, restructuring costs and share of shared assets, was £80 million,
compared with a profit of £10,314 million in 2007. Losses also rose to £7,781 million, compared
with £2,387 million in 2007. The loss before tax of Group recorded of £25,038 million, compared
with a profit before tax of £8,962 million in 2007. Total income also declined to £26,875 million,
while total net interest income rises to £15,939 million, with average loans and advances to
customers up 17% and average customer deposits up 6%. Operating ... Show more content on
Helpwriting.net ...
Before the acquisition, RBS understood that ABN AMRO would receive approval for its IRB
models. But after acquisition ABN AMRO's progress towards IRB approval raised questions about
how RBS, would be able to comply with Basel II at the consolidated level so, ABN AMRO
withdraw its application and did not receive approval. ABN AMRO and DNB agreed that ABN
AMRO would continue to report capital on the basis of Basel I which included minimum ratio of
9% for tier 1 and for total capital it was 12.5%. The risk associated with the fact that ABN AMRO
had not received IRB approval yet. In 2008 there were internal FSA discussions related to RBS's
first quarter reporting approach and the approach finally by the FSA to calculate capital
requirements based on Basel IRWAs with an uplift of 30%, ABN AMRO will continued to operate
on this basis and this approach produced a higher capital figure than the Basel II IRB model–based
approach would have done. And this higher capital requirement additional strain on RBS's capital
resources and contributed to RBS's apparent fall below individual capital guidance as at end March

What Is Return On Assets ( ROA )?
Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
ROA gives an idea as to how efficient management is at using its assets to generate earnings. ROA
is net income divided by average assets and indicates how efficiently you are using the assets at your
disposal. Your assets include current items such as cash and inventory, as well as long–lived items
such as equipment, machinery, buildings and warehouses. Average assets are one–half the sum of
beginning and ending assets for the period. The higher the ratio, the better you are at "milking" your
assets to extract their maximum value.
A company might have a low ROA for several reasons. Overcapacity hurts ROA, because assets are
sitting idle ... Show more content on Helpwriting.net ...
The big missing element in even a well risk–adjusted ROA metric is unexpected loss (UL).
Unexpected loss, along with any unmitigated expected loss, is covered by capital. Additionally,
aside from the economic capital associated with unexpected loss, there are regulatory capital
requirements. This capital is left out of the ROA metric. This is true at the entity level and for any
line–of–business performance measures internally.
Since ROE uses shareholder equity as its divisor, and the equity is risk–based capital, the result is,
more or less, automatically risk–adjusted. In addition to the risk adjustments in its numerator, net
income, ROE can use an economic capital amount. The result is a risk–adjusted return on capital, or
RAROC. RAROC takes ROE to a fully risk–adjusted metric that can be used at the entity level and
that can also be broken down for any and all lines of business within the organization.
Credit decisions in the investment portfolio from the stand point of an investor should be based on a
bank's return on assets to measure its results, and also on its return on equity is closely linked to the
bank's financial leverage. The lower a bank's financial leverage is, the higher is the amount of
money in the bank. As an investor, it is important to know that a bank holds enough money in
reserves to pay interest to its investors. The lower a bank's return on assets,

International Convergence Of Capital Measurement And...
1. Introduction
The 2008 Global Financial Crisis (GFC) and its aftermath had critically damaged the world
economy with a drag in global economic growth. Indubitably, the imprudence in which banks
managed their risks and capital holdings were among reasons that caused the crisis. It raised the
need for industry reform, leading to G20's Basel III proposal in 2010 to strengthen the global capital
framework by imposing stricter rules regarding capital and liquidity requirements, as well as a focus
on transparency, consistency and quality. 2. Regulatory Framework
Table 1 highlights the main differences between Basel I, Basel II and Basel III.
Table 1 Basel 1, Basel II and Basel III Basel I Basel II Basel III
Framework One size fits all International Convergence of Capital Measurement and Capital
Standards Firm specific and risk based
Minimum Capital Requirements 8% Total Capital Adequacy Ratio (CAR)
4% Tier 1 8% Total CAR
4% Tier 1
4% Core Tier 1 10.5% Total CAR
6% Tier 1
4.5% Core Tier 1
Measure of Credit Risk Standardized Approach Standardized Approach
Internal Ratings Based (IRB) Approach Standardized Approach
Internal Ratings Based (IRB) Approach
Measure of Operational Risk N.A. Basic Indicator Approach (BIA)
Standardized Approach
Advanced Measurement Approach (AMA) Basic Indicator Approach (BIA)
Standardized Approach
Advanced Measurement Approach (AMA)
Measure of Market Risk N.A. Standardized Approach
Internal VaR

Economic Capital
EconomicThis document has been made available on www.actuaries.org.uk with the permission of
the Society of Actuaries, Schaumburg, Illinois. Copyright 2008.
Specialty Guide on Economic Capital
Version 1.5 March 2004
Section
I. II.
Page
FOREWORD...................................................................................................................1
INTRODUCTION AND OVERVIEW ...............................................................................2
III. EXECUTIVE SUMMARY ................................................................................................3 IV.
HOW DO WE DEFINE ECONOMIC CAPITAL? ............................................................5 ... Show
more content on Helpwriting.net ...
Please refer to this website for any recent developments by this subgroup.
3
III. Executive Summary
Economic Capital ("EC") has become a topic discussed at various industry conferences, received
attention by regulators and rating agencies, and has shown up over the years in various other
disciplines, in particular in the banking industry. While the topic is becoming more mainstream, a
standard definition of EC is not readily available, as shown by the wide variety of responses to our
Economic Capital Survey. While specific definitions vary, some common threads tie the various
descriptions together: Sufficient surplus to cover adverse outcomes, A given level of risk tolerance,
and A specified time horizon. An assortment of risks and various tolerance levels utilized by
companies are listed in this document, based on the survey results. Although virtually all types of

risks are mentioned, development work to date has been more focused on financial risks, and
therefore the document primarily explores these in more detail. While Regulatory and Rating
Agency Capital have fairly well defined uses (i.e., determining solvency and creditworthiness of an
organization), Economic Capital impacts many company business management and decision–
making processes. EC can also have quite a few macro applications within a company. For example,
a company can be

Deutsche Bank Case
Deutsche Bank and the Road to Basel III
Deutsche Bank made its entrance into the world in 1870 and it was one of the first banks to adopt
universal banking as it promoted and facilitated trade relations between Germany and other overseas
markets. Deutsche Bank acquired smaller banks in Germany in order to be the most prominent bank
in their home base in addition to having a global reach. Following World War I, inflation took over
Germany causing many borrowers to default on their loans forcing the bank to sell most of its assets
in order to stay alive (however that diminished their global presence). The bank's involvement
during World War II with the transferring of the Jewish customers holdings to the German
Government led to the Allied ... Show more content on Helpwriting.net ...
In the prior ten years, the bank significantly increased their investment banking assets from EUR640
billion to EUR1,860 billion. In order to fund the increasing asset growth between 2002–2007
Deutsche Bank increased their leverage by a significant amount. In 2002 they had the highest
leverage among their industry peers with 33.3x, while BNP Paribas followed close behind with
30.9x. In 2007 Deutsche Bank increased their leverage to 71.3x blowing their peers out of the water
with the closest being Barclays with 45.9x. After the financial crisis hit, Deutsche bank had to
decrease their leverage to 44.1x but still higher than any other peer. From 2002 to 2007 the bank had
an 83% annual growth rate, but those increased profits did not come from productive assets, but
simply just a result of increased leverage as seen when comparing Deutsche Bank's ROA v. ROE.
The bank consistently had an exponentially high ROE when the economy was doing well and led to
a significant loss when the economy was in a recession in 2008. ROA stayed below .5% and above
–.18% during those 10 years even when ROE reached a high of 26.72% and a low of –12.91%. ROA
did not rise the way ROE did because increased debt has the potential to lower revenues as more
money is spent servicing that enormous debt and if net income falls due to increased expense ROA
declines but ROE can still rise as it does not effect shareholder equity. The leverage did allow for
large financial gains but did cause

Essay on Case 75: Federal Bank Solution
Case: 75 Federal Finance Bank – Instructor's Solution
INPUT DATA: Amount Needed to Raise Flotation Costs Stock Offer Price Market Value/Book
Value Ratio (Dollars in thousands) Assets Cash U.S. Treasuries Mortgage–backed Securities
Municipal Bonds Government Agency Securities Total Cash & Securities Residential Mortgage
Loans Consumer Loans Business Loans Total Loans Fixed Assets Total Assets Liabilities Passbook
Savings Non–interest Checking N.O.W. Accounts Money Market Accounts Certificate of Deposits
Total Savings Borrowed Money Other Liabilities Total Liabilities Capital Stock ($100 par value)
Retained Earnings Total Equity Total Claims Loan Loss Reserve Allowable Risk Adjustment
Weights: No default risk Low default risk Res. loans & ... Show more content on Helpwriting.net ...
Total Number of Shares Outstanding = capital stock/par value per share = $12,155,000/$100 =
121,550 Book Value per Share = total equity/number of shares outstanding = $26,490,000/121,550
=$217.94 2. Using the data in Table 3, calculate Federal Finance's 2000 ROA and average annual
growth rate in assets from 1995 to 2000. (Hint: In your calculations, use only the data for 1995 and
2000.) ROA = Net Profit/ Total Assets = $7,863/$525,826 = 1.50% The compounded annual growth
rate in assets can be found as follows: Assets1995 (1+g)5 = Assets2000 $273,617 (1+g)5 =
$525,826 (1+g)5 = $525,826/273,617 = 1.92 (1+g) = 1.921/5 = 1.1396 g = 0.1396 = 13.96%. 3. For
the four Bank's listed in Table 4, calculate the following: a. The Capital Asset Ratio for 2000. b.
Compound annual growth rates in assets for the five–year period 1995–2000. c. The ROA ratios in
2000. d. The market value/book value ratios for 2000. e. How does Federal Finance compare with
the Capital Asset Ratios and growth rates of these institutions? a. Capital Asset Ratio =
Shareholders' equity/total assets Maryland Financial = $11,800/$220,000 = 5.36% Great Northern
Bank = $23,700/$476,000 = 4.98% First Bank of California = $15,400/$305,000 = 5.05% Omaha
Federal = $12,900/$238,000 = 5.42%
Case: 75 Federal Finance Bank – Instructor's Solution
b. Assets Growth Rate = Assets1995(1+g)5=Assets2000

The Pros And Cons Of The Basel Accords
BAFI 1029
RISK MANAGEMENT ASSIGNMENT
S.VIGKNESH
S3532231
TOPIC 1
introduction
The Basel Accords is a set of regulations adhered by banks. The main goal was to help banks
maintain a minimum capital to sustain losses during a bad economy period. Also, to aid financial
institutions reduce risk while they grow and operate.
introduced in 2004, Basel II had an improved and stricter framework compared Basel I, yet during
the financial crisis it failed. The failure of Basel II regulations caused Basel III to be created. Its
purpose was to work along with Basel I and Basel III framework and regulation and concurrently
provide extra protection to banks during harsh periods by being more conservative.
subsequently, ... Show more content on Helpwriting.net ...
Therefore, to keep the minimum liquidity, banks will reduce its lending services to its customers.
Both consumption and investment in the economy will be affected. GDP is the summation of
government expenditure, consumption, investment, and the difference between export and import. If
both consumption and investment are reduced, the GDP growth of an economy will be negatively
affected. In fact, a study in 2011 shows that the GDP growth would be decreased by 0.05% to 0.15%
on a medium–term basis.
Conclusion
In my opinion there will always be pros and cons in regulations as there is no perfect regulation. In
order to achieve higher security, growth must be sacrificed, vice versa. This is evident in the change
from Basel II to Basel III. Basel III too has its own flaws such as relying too much on credit rating
agencies. Credit rating agencies, as proven by the subprime crisis can cause errors in their
predictions. As times goes, there will be a significant change to the current regulation to improve the
flaws.

A good regulation should be able to be flexible. For instance, when the economy is safe and
flourishing, the regulation should be more relaxed and have decreased barriers for banks in terms of
the minimum requirement for capital reserves. And when the economy is floundering, a stricter
approach should be used. For example, the minimum requirements for requirement for capital
reserves should be increased.

Implications For International Banking Of Adopting The...
What are the implications for international banking of adopting the proposed Basle 3 regulations?
Overall impacts Focus on Capital requirement Positive： Improve the standard of capital ratio:
According to Basel 3, Capital requirement includes 4 different ratios: Common equity Tier 1 capital
ratio =(Common equity Tier 1 capital)/( risk–weighted assets) Tier 1 capital ratio =(Total Tier 1
capital)/( risk–weighted assets) Total capital ratio =( Tier 1 capital+ Tier 2 capital)/( risk–weighted
assets) Capital conservation buffer
Comparing to Basel 2 , the Basel 3 requirement of common equity Tier 1 capital ratio has risen up to
4.5%, which is 2.5% larger than before. Also , Tier 1 capital ratio increased to 6% under Basel 3
regulation ... Show more content on Helpwriting.net ...
[1] Redesign the definition of capital
Bank regulation has made a more specific definition of Core Tier 1 Capital , which includes general
risk preparation , Capital reserve , paid–in capital and so on . Second , To avoid default , using the
gone–concern capital to ensure the repayment of funding and debt . The Core Tier 1 Capital should
include a part of shareholders' funds and premium from other partners . The Core Tier 2 Capital
should include loan loss provision that has overdrawn and core 2 capital and its premium .
Negative :
The risk–weighted assets will increase sharply since Basel 3 has increased the capital adequacy ratio
of the banks to defend against the operational crisis in the future . Also , Basel 3 updated the
standard of the main factor of Tier 1 as well as Tier two capital whose baseline has raised from 4%
to 6% . Although transition period of carrying out Basel 3 regulation is long , the banks with lower
capital adequacy ratio might suffer from the huge pressure of supplying sufficient capital .
Recent years , in order to reach the baseline , banks have to finance billions of dollars . A bank
should finance 30 billion dollars with 5% capital adequacy ratio , but if the ratio raised up to 7% , it
might need finance 57 billion dollars .[2] Due to accounting data from United bank of Switzerland
in 2010 , Basel 3 regulation required 400 billion CHF risk–weighted asset of United bank of
Switzerland twice than it was under Basel 2 ,

Foreign Banking in the United States
There are several basic organizations through which a foreign banking organization such as D.
Beers' Bank of South Africa may engage in banking activities or business to varying degrees in the
United States under federal law. Options for entity formation include: representative offices,
agencies, branches, Edge Act and Agreement international banking corporations, commercial
lending companies, and subsidiaries of bank or financial holding companies. Under California law
the offices of foreign banks are divided into classes and ranked roughly according to the activities
that each class may engage in. These categories are: representative offices, non–depository agencies,
depository agencies, limited branch offices, wholesale branch offices, and retail branch offices. D.
Beers has narrowed down that he wants a branch or subsidiary, but within those types of bank
charters there are further distinctions
A branch is a legal and operational extension of its parent foreign bank. A branch may engage in a
wide range of bank activities such as: trading and investment activities, accepting wholesale and
foreign deposits, granting credit and acting as a fiduciary. A branch may not engage in retail
deposit–taking activities. A branch is cheaper to establish than a separately chartered bank
subsidiary because a separate capital investment is not required, and the legal and accounting costs
of maintaining a separate corporation can be avoided. In addition, a branch may make larger loans

Essay about Role of Apra
APRA was established following the Wallis Committee's recommendation in 1 July 1998 under
Australian Prudential Regulation Authority Act. In the amended Banking Act 1959(Cth),
responsibility for the conduct of prudential supervision and depositor protection moves from the
Reserve Bank to APRA. Its intention is to provide for a 'more consistent, competitively neutral and
efficient approach to the regulation of financial institutions, while enhancing overall depositor
protection and financial system stability'1. This paper will thus find out about ARPA's
responsibilities related to banking in traditional sense of the term.
First of all, a quick glance at 'what is a bank' should be made and it can come to surprise to find that
the old ... Show more content on Helpwriting.net ...
APS 110 sets out detailed capital requirements which apply on a stand–alone as well as consolidated
group basic except foreign ADIs. APRA appraises the ADI's financial strength at three levels to
ensure that the ADI is adequately capitalised. These are level 1 comprising ADI itself or the ELE,
level 2–consolidated banking group and level 3–the conglomerate group4. Furthermore, consistent
with Basel Capital Accord, the approach used by APRA for assessing an ADI's capital adequacy
focuses on three main elements. The definition of 'capital base' and eligible components are set out
in APS 111–capital adequacy. A bank's risk weighted exposures are determined in accordance with
requirements and procedures in APS 112 –credit risk and APS 113– market risk5.
Banks are required, unless APRA set higher levels, to maintain at level 1 and 2 as a minimum risk–
weighted capital ratio of 4 % in Tier 1 and 8% for total capital at all times. APRA assess and takes
into account the general risks and other circumstances relevant for the individual ADI. A 'capital
buffer' could be added by ADI if the ADI is judged as being vulnerable more than normal volatility
in its revenues and risks. In considering the required capital ratio, APRA considers all material risks,
both on and off–balance sheet. Credit risks are placed into four

The Impact Of Financial Crisis On The Uk Economy
Executive summary
The financial crisis 2007/08 led to the fact that some large financial institutions were under threat to
collapse and had to be bailed out by the government to avoid a total meltdown of the financial
system. The financial crisis was triggered by a combination of factors; some of them were the lack
of regulations and supervision, excessive leverage practice, insufficient liquidity provision and a
lack of adequate capital holdings by the banks. This report will focus on two different concepts
bank's capital and liquidity, explaining the importance of both for banks, how they link and interact
with each other, and the risks banks could face in case of any potential shortfalls in these key areas.
A shortfall in one of these ... Show more content on Helpwriting.net ...
The Basel III proposals by Basel Committee on Banking Supervision (BCBS) specified minimum
capital and liquidity requirements that should reduce chances of banking crises in the future.
However, meeting these standard requirements can reduce banks' profitability and entail additional
costs.
Capital and liquidity
A bank 's capital can be defined as shareholder equity, retained earnings and reserves, or bank 's own
funds, and together with bank 's liabilities, or borrowed funds they provide funding for bank 's
assets. This includes financial, tangible and intangible assets. Due to the nature of business most of
bank 's assets are secured and unsecured loans to individuals and businesses and lending in the
wholesale market. Whether it is a secured or unsecured loan, there is always a risk, known as the
credit risk that the borrower will not be able to repay the amount borrowed, which can cause losses
to the bank. The main characteristic of capital is the ability to

Adequate Capital Requirements And It 's Role Of The...
Claudia Trost Professor Fligstein/GSI: Jessica Schirmer Sociology 120 1 December 2016 Adequate
Capital Requirements and It's Role in the Financial Crisis of 2008 INTRODUCTION The financial
crisis of 2007–2009 sent shock waves around the world, affecting some of the world's largest
financial institutions, along with negatively impacting millions of American citizens. Who is to
blame for such a crisis and how do we try to prevent another? Well, the cause of this crisis is not
merely that simple. This crisis was caused by a complex series of events with all actors within the
financial market to blame. However, I wanted to understand how these various actors and causes all
occurred while under the supposed watchful eye of regulators, whose role within the market is based
upon the regulation of these financial institutions to prevent crisis from occurring in the first place.
Regulators are responsible for overseeing various components within the banking industry;
however, one component that I was most interested in was capital adequacy requirements. I wanted
to understand why capital requirements were created in the first place, how they had evolved over
time and what role they played in the crisis. Lastly, I believe that capital requirements are a self–
evident prevention method in inhibiting the collapse of banks due to risky lending. Therefore, with
the creation of adequate capital requirements going forward, we could have one solution for a very
complex problem. BANKING

Process Controls And Technology Controls
Process Controls & Technology Controls Process Controls IT and Security Strategic Management,
Policy and Architecture – Architectures, policies and strategies defined to run IT services
Organizational Structure, Roles and Responsibilities and Standards for interactions between groups;
authority for security and external security related Communications  Training and Awareness –
Processes to increase visibility and knowledge of security risks Assessment and Auditing and
Processes to assess the environment, controls, policies and processes used to implement strategy
Authentication, Authorization and  Access Management – Processes and technology to verify
users' identities and control access to resources Operational Design,  Workflows and Automation –
Design and implementation of automated solutions; workflow and resource management Asset
Inventory,  Classification and Management – Processes to identify and classify assets, supporting
execution of asset class based policies Incident Readiness and Response and standards for
preparation for and response to incidents. Technology Controls  Application Design, Development
and Testing – Processes, procedures, and methodologies to ensure that new and updated applications
are appropriate, efficient and secure Systems Build and  Deployment – Systems and technologies
to assure effective, secure deployment of new and updated systems  Data Life Cycle Management
– Technology to move, Replicate and protect data Configuration

Regulating Systemically Important Financial Institutions
Introduction The recent global financial crisis of 2007–2009 has brought people's attention to the
threat presented by a certain type of financial institutions which are imperative to the functioning of
the financial system to the extent that the failure or insolvency of such institutions can destabilise
the financial system, and subsequently impose serious negative effects on the real economy (Freixas,
& Rochet, 2013; Ueda & Weder di Mauro, 2013; Bongini & Nieri, 2014; Elliott & Litan, 2011).
These "systemically important financial institutions" (SIFIs) consequently become the main focus of
policymakers and regulatory authorities in order to control the systemic risk posed by these entities
(Barth et al., 2013). Therefore, this essay aims ... Show more content on Helpwriting.net ...
In addition, different countries use different accounting systems in calculating total assets which can
produce divergent and more importantly incomparable figures, making measuring systemic
importance solely by "size" more problematic (Barth et al., 2013). Policymakers and scholars have
hence started to realise the difference between the size and the systemic importance of a financial
institution (Zhou, 2010). For example, after Group of Twenty (G–20) quickly established the
Financial Stability Board (FSB) at the 2009 London Summit for the purpose of developing and
implementing reform agenda to ensure the stability of the financial system, FSB was assigned by G–
20 during 2010 Seoul summit to identify global systemically important financial institutions (G–
SIFIs) which pose systemic risk to both national and international financial systems (Barth et al.,
2013). A year before that, FSB has recognised three important indicators of systemic importance,
namely the size, interconnectedness and substitutability of a financial institution (Bongini & Nieri,
2014). In July 2011, the Basel Committee on Bank Supervision (BCBS) (2013) publicised a
document which provides a detailed methodology for assessing systemic importance of G–SIBs
(globally systemically important banks) , further including the measures of complexity and cross–
jurisdictional activity on top of the three submitted by FSB. This methodology therefore identifies
five equally–weighted (20%)

Banking Regulation Basel II
Procyclicality in minimum regulatory capital charges for credit risk
There is a vast amount of literature available on the additional procyclicality of regulatory capital
charges in Pillar 1 of Basel II. In this section, we shall briefly visit this literature and see if any
conclusions can be drawn from this, before proceeding to the conclusion and mitigation of these
procyclical effects. The majority of the literature, as expected, focuses primarily on the IRB
approach, as this aspect of Basel II has drawn the most criticism from financial practitioners and
academics alike. The greater part of this literature has found that there is an overwhelmingly
substantial rise in procyclicality of minimum regulatory capital charges originating ... Show more
content on Helpwriting.net ...
This is the biggest problem, and has to be addressed correctly once economic conditions are
conducive to do so. Within the specified Tier 1 requirement, common shares and retained earnings
should be a priority and form the predominant form of capital. To ensure the quality of this capital,
the Basel Committee should harmonize capital deductions and prudential filters (FSF & BCBS,
2009). The committee should also enhance the disclosure of the components of regulatory capital in
order to increase transparency within the system and avoid confusion in terms of the quality of
capital required.
(2) The Basel Committee should make adjustments to their framework to inhibit excessive
cyclicality of the minimum capital requirements
The Basel Committee has made a reasonable effort to mitigate this cyclicality already, by
monitoring the impact of cyclicality through data collection (via their Capital Monitoring Group).
This data is available every 6 months, and helps the committee monitor the extent to which the
capital regime reveals excessively high levels of capital cyclicality. In correspondence with this data
monitoring, the Basel Committee must review the ways in which cyclicality, arising from the Pillar
1 capital requirement calculation, can be abated. They must try and maintain the risk sensitivity of
the inputs, but also create an emphasis on dampening the effects of cyclicality on the outputs. This
way the

The And Soundness And Stability Of The International...
A.
Basel I contained two primary objectives, the first is to help to strengthen the soundness and
stability of the international banking system, the second is to alleviate competitive inequalities.
Basel I not only increases sensitivity of regulatory capital differences in risk profiles, in addition, it
considers about balance sheet exposures when assessments of capital adequacy are undertaken(Ojo,
Marianne 2011). However, the framework also discourages banks to keep liquid and low risk assets,
and it is hard to evaluate whether the minimum capital requirements for banks do harm to their
competitivesness or not and whether this framework increase competitives inequalities amongst
banks or not.
Basel I focus more on credit risks instead of the operation risk, which bank face day–to–day
problems in their business. In order to deal with this problem, Basel II creats an international
standard about the quantity of capital provisions the bank should to guard against financial and
operational risks they face. Basel II was established to achieve three committee objectives, first is to
increase the quality and the stability of the international banking system, second is to create and
maintain a level playing field for internationally active banks, the last one is to promote the adoption
of more stringent practices in the risk management (Saidenberg et al., 2003). First two goals are
important part of 1988 Accord while the third one is new regulatiton to the systems. The need for

Issues Identification- Credit Risks
Issues identification
Credit Risk
The issues identification the type of risk involved both financial institution that related to the credit
risk that is credit is the risk of losses owing to the fact that counterparties may be unwilling or
unable to fulfil their contractual obligations. Its effect is measured by the cost of replacing cash
flows if the other party defaults. This loss encompasses the exposure ,or amount at risk, and the
recovery rate, which is the proportion paid back to the lender, usually measured in terms of 'cents on
the dollar'. Losses owing to credit risk, however , can occur before the actual default. More
generally , credit risk should be defined as the potential loss in mark–to–market value that may be
incurred owing to the occurrence of a credit event. A credit event occurs when there is a charge in
the counterparty's ability to perform its obligations. Thus changes in market's perception of default
also can be viewed as credit risk, credit risk, creating some overlap between credit risk and market
risk. Credit risk also includes sovereign risk. This occurs, for instance, when countries impose
foreign–exchange controls that make it impossible for counterparties to honour their obligations.
Beside that, credit risk of financial loss owing to counterparty failure to perform its contractual
obligations. The credit risk is far more important than market risk. Time and again, lack of
diversification of credit risk has been primary

Basel Norms
Evolution of Basel Norms and their contribution to the Subprime Crisis
The article highlights the emergence of the Basel Accord in 1998 and how it has evolved over the
course of the last 23 years. Contrary to the popular belief capital regulations have been considered
the biggest underlying factor of the subprime crisis owing to securitization, the shadow banking
system and the flexibility given to banks in risk assessment. The recent Basel III norms though aim
to mitigate the already caused damage, the results are still left to be witnessed.
Evolution of Basel Norms and their contribution to the Subprime Crisis
The article highlights the emergence of the Basel Accord in 1998 and how it has evolved over the
course of the last 23 ... Show more content on Helpwriting.net ...
The Basel Capital Accord (Basel I) was adopted in 1988, and had two main objectives; * Strengthen
the soundness and the stability of the international banking system – minimum capital adequacy
ratio by assessing the credit risk of the banks * Create a level playing field among international
banks – Banks from different countries competing for the same loans would have to set aside
roughly the same amount of capital on the loans
Fallout of Basel I and emergence of Basel II
Basel I set the platform for maintaining the adequate capital cushion required by the banks in the
event of a default or grim situations. However the adequate capital (Tier I & Tier II) to be
maintained was solely based on the credit risk (on–balance sheet, trading off–balance sheet, non
trading balance sheet) assessment which was divided into 4 categories of Government Exposures
with OECD countries – 0%, OECD banks and non – OECD governments – 20%, Mortgages – 50%,
Other Exposures, retail and wholesale(SMEs) – 100%
Though the main aim of formulating the Basel Norms was to ensure the optimal capital cushion to
be maintained required in the event of a crisis, the very introduction of Basel Accord, increased the
gap between economical and risk–based capital and gave rise to regulatory capital arbitrage (RCB).
The drawback that a loan to a safe industrial country and that to a volatile developing country

The Financial System Inquiry ( Fsi )
The Financial System Inquiry (FSI) acts as a model for achieving a resilient and efficient financial
system, contributing to Australia's economic growth. The Capital requirements implemented
according to the FSI has potential impacts on Australian banking system:
1. Increase in borrowing cost/ interest rate
The recommendation that banks in Australia are required to hold additional capital would lead to an
increase in the borrowing costs. Furthermore, the requirement of capital held in banks must be of a
higher quality makes capital more expensive (FSI 2013). A 1% point increase in capital
requirements is estimated to raise average interest on loan by less than 10 basis points, assuming
that full cost is passed on to consumers (Mitchell 2013). In relation to that, Australia banks have to
come up with repricing strategies to pass on the cost to consumers. However, the actual change in
lending interest rates would be lower in a competitive market because RBA has can lower the cash
rates in critical conditions. An increase in interest rate would lower real GDP by less than 0.1%
points (Mitchell 2013).
2. Foregone opportunity cost
The higher capital requirements would imply that banks need to use more capital funding and place
larger constraints on banks' sources and usage of funding (The banking system 2013). This would
limit or forego banks opportunity to finance new projects (FSI 2013).
3. Reduced risk premium
On the bright side, the tighter capital regulations would reduce

The Regulatory Capital Is The Minimum Amount Of Capital
Q1
(a)
The regulatory capital is the minimum amount of capital that the financial regulator required the
banks or the financial institutions to hold (Elizalde & Repullo, n.d.). It is used to help to avoid to
risk and reduce the losses that we may have but can't forecast. ("Bank Regulatory Capital – Quick
Reference", 2016). The figure of the financial capital is directly set by the financial regulators. The
balance sheet capital is the equity part that we recorded on the balance sheet. The regulatory capital
is like a standard that all the financial institutions have to achieve. The financial institutions must
maintain their capital amount over the minimum amount that the financial regulator required
(Elizalde & Repullo, n.d.). However, the ... Show more content on Helpwriting.net ...
In 1988, the Basel I was published by the BCBS. It is a new method to the measure the capital and
also it focused on the credit risk and appropriate risk–weighting of assets (International convergence
of capital measurement and capital standards, 1988). Under the concept of the risk–weighted asset,
the regulators can include the riskiness of the bank's activities into the calculations of the capital
adequacy (Lange, Saunders & Millon Cornett, 2015).
"The core requirement of the Basel I were 2 capital ratios: a minimum 4% for the tier 1 capital ratio
and the Total capital ratio for 8% (Lange, Saunders & Millon Cornett, 2015)." The tier 1 capital
Ratio can be calculated by the (common equity– goodwill) / Risk–weighted assets (RWA) and the
Total capital ratio can be calculated by Total regulatory capital / Total risk adjusted assets.
Basel II
In Basel II, it improved the measurement of the risk–weighted assets. It includes the market risk, the
operational issues and the risks caused by the emergencies like the terrorisms or natural disasters
(Lange, Saunders & Millon Cornett, 2015). The Basel II is more detailed than the Basel I. In the
Basel II, it creates a new frame, the Three–pillar frame. The pillar 1 is the Minimum Capital
Requirements. It is to maintain the regulatory capital of the FI by calculating the 3 main risks, the
credit risk, market

Basel 2 is the second Basel after Basel Accords known as...
Basel 2 is the second Basel after Basel Accords known as Basel 1. By using Basel 2 in Australia,
APRA (Australian Prudential Regulation Authority) aims to arrange Australian Prudential standards
with worldwide guidelines. The purpose of Basel 2 is to make better arrange regulatory capital with
the single risk profiles of financial institutions, a bank with greater exposure to the risk of peers who
will hold more capital, while the less exposed to the risk that will hold less capital. Picture 1.1
Picture 1.1 shows that Basel 1 (Accord) has a risk–weighted at one hundred percent with $100 loan
to the corporate entity and a total capital charge of $8. Beside that, through a standardized approach
of Basel II, the corporate entity is rating ... Show more content on Helpwriting.net ...
As banks become more innovative in their statistic techniques and methods, they are encouraged to
look at the more risk a sensitive approach that is related (capital reduction) incentives. Third, credit
risk means financial institutions are allowed to choose from one of Standardization approach that
uses risk weighting standards and external assessment if available, or the Internal Ratings–Based
(IRB) approach that uses data from internal risk management systems. A securitization framework
should be use for banks to involve in traditional and synthetic securitizations or similar structures.
Fourth, market risk details the risk engaged in trading book roles and treatment of counterparty
credit risk so as to effectively catch event and standard risk for trade–debt and equity equipment.
Fifth, operational risk defined as " the risk of direct or indirect loss comes from the inability or
failure of internal processes, people and techniques or from exterior events ". 14 Banking
organizations are offered three methods for determining operational risk capital expenses including
the Basic Signal Approach, the Standard Approach, and the Advanced Measurement Approach
(AMA). The supervisory review process (Pillar 2) is generally known as the 'supervisory review
process' but it enforces responsibilities on both managers and banks. It needs banks to have a
process and strategy for evaluating and keeping their overall capital adequacy in regards to their risk

Variables Of The Working Capital Requirements Essay
Dependent variables
1– working capital requirement ( WCR )
The study observes the determinants of the working capital requirements of an enterprise. Working
Capital Requirements (WCR_TA) were included as a dependent variable, as used by Shulman and
Cox (1985), as a measure of working capital management (cash and equivalents + marketable
securities + inventories + accounts receivables) – (accounts payables + other payables). Working
capital requirements are deflated by total assets to control the size effect
2– Cash Conversion Cycle (CCC)
Cash Conversion Cycle (CCC) as a measure of working capital management, where a shorter CCC
represents the aggressiveness of working capital management measured by the following Cash
Conversion Cycle = Inventory days + Accounts Receivables days – Accounts Payable day
Independent Variable Measures:
1– Operating cash flows deflated by total assets (OCF_TA) the cash flows generated from the
routine operations of the enterprise and obtained directly from the cash flow statement as well as
deflated by total assets. The high value of this ratio shows that the enterprise main operation
generating enough cash this also decreasing operation risk.
2– Size
The Size ratios generally measure the enterprise dimensions about the age i.e. for how many years'
enterprise start business also measuring enterprise size and annual growth this dimensions are very
important because it is affecting the decision related to policy of managing

Credit Risk Management and Profitability in Commercial...
Credit Risk Management and Profitability in Commercial Banks in Sweden Ara Hosna, Bakaeva
Manzura and Sun Juanjuan Graduate School Master of Science in Accounting Master Degree
Project No. 2009:36 Supervisor: Inga–Lill Johansson Acknowledgements After several months of
hard work our thesis has been finished. Now it is time to thank everyone warmly who provided their
kind assistance to us. First of all, we would like to thank our supervisor Inga–Lill Johansson,
Associate Professor of our University, for her guidance all through our work. We would like to thank
Andreas Hagberg, PhD Candidate, as well for giving us his constructive suggestions. We are
grateful to Johan Sjömark, Credit Risk Control Department officer in ... Show more content on
Helpwriting.net ...
R2 BCBS CAR CCF Coef. CRD FIRB FSA ICAAP IFRS IRB LGD N NI NPL NPLR PD P–value
R2 ROA ROE RORAC RWA SFSA Signif. TL TSE Adjusted R–squared Basel Committee on
Banking Supervision Capital Adequacy Ratio Credit Conversion Factors Coefficient Capital
Requirements Directives Foundation Internal Rating–based Financial Supervisory Authority Internal
Capital Adequacy Assessment Process International Financial Reporting Standards Internal Rating–
based Loss Given Default Number (of Observations) Net Income Non–performing Loan Non–
performing Loan Ratio Probability of Default Probability Value R–squared Return on Assets Return
on Equity Return on Risk Adjusted Capital Risk Weighted Asset Swedish Financial Supervisory
Authority Significance Total Loan Total Shareholders' Equity iv Table of Contents 1. Introduction
.............................................................................................................................. 1 1.1 1.2 Problem
Discussion ......................................................................................................................... 3 1.3
Research question ............................................................................................................................ 4
1.4 Purpose

The Risks Of The Wholesale And The Smes.credit Risk
In the recent past, there have been concerns in the companies and businesses such that they have to
show their credit worthiness before they are given a loan. The UK has been fluctuating due to global
inflation rates and therefore this has caused uncertainty of the business. This has made the lending
institutions to be strict in evaluating the credit risks of the wholesale and the SMEs.Credit risk will
measure the probability of a business getting a loss due to a business failure of settling loans. This
convectional credit risks results from the the possibilities of defaulting of the debts, an investment or
invoice. The defaulting of the loans is the major cause of the wholesale credit risk. Individuals or
businesses will always default because of lack of collateral or guarantors to settle the debts.
There are various methods that the banks will use to mitigate the wholesale credit risk. The bank is
required to carry out operational and risks management processes to ensure that all the documents
that have been used to guarantee a particular transaction is legal, binding and valid. There is
therefore the need for the bank to carry out sufficient legal appraisal before a conclusion is made by
the bank so as to recognize the credit risks. The CRM techniques will reduce the wholesale credit
risks significantly. Although this technique reduces credit risk, it consecutively increases other risks
such as market, liquidity and operational risks. It is imperative that the bank

Capital vs Liquidity
Liquidity, liquidity, liquidity.....
In the context of the events of the last few years just how important is liquidity to the survival and
well–being of Financial Institutions? Some believe it has a greater influence on events than Capital!
Discuss. (In this assignment you need to outline the role of liquidity, issues arising when liquidity is
scarce and compare the role of liquidity to that of Capital but most importantly give your own view
on these matters)
Role of Liquidity
Liquidity can be defined as 1) the ability of a business to meet obligations without disposing of its
fixed assets or 2) the degree to which assets of a company can be easily converted into cash.
The evolution of banking has seen their balance sheet ... Show more content on Helpwriting.net ...
Typical assets that can be sold this way are mortgages, credit card debt, car loans or student debt.
This model was used by Northern Rock (NR) in the UK where they originated mortgages that were
then securitised. This enabled them to "churn" their balance sheet and issue more mortgages. There
was an inherent liquidity risk run by NR with this model as their funding was not diversified
sufficiently aligned with a failure to realise that market conditions for mortgage backed securities
(MBS) would deteriorate in stressed markets. Between issuing a mortgage and securitising it, there
will always be a time lag and to cover that NR relied on wholesale interbank funding in the short
dates (up to 3 months). This source quickly disappeared as banks pulled any limits. The building
society had then to go to their lender of last resort, the Bank of England, and with that news hitting
the headlines, ordinary depositors queued up outside branches to get their own money out. This was
the first run on a UK bank in 150 years. Eventually NR was taken over by the state. In the context of
this case it's interesting to note that the run was caused by what I would consider "over–
transparency". The Bank of England had a rule that obliged them to publish the names of institutions
that used its liquidity support facility and allied with a lack of satisfactory deposit insurance their
depositors took their money and ran. Maybe the rule is not so suitable in

Management Regulations : Basel II
Ch. 2.2 Risk Management Regulations
Basel II Carrying out Framework which is a set of integrated services that enable banks toward
advanced risk management approaches. The framework includes a methodologies, set of tools,
industry's best practices and ready to deploy assets that shorten the implementation time and
suggestively reduce risks rising from noncompliance, poor quality administration, and budget and
time over runs.
The Basel Committee on Banking Supervision is an institution made by the central bank Governors
of the Group of 10 nations – G10 (Belgium, Canada, France, Italy, Japan, the Netherlands, the
United Kingdom, the United States, Germany and Sweden). The Basel Committee frames broad
supervisory standards and guidelines and ... Show more content on Helpwriting.net ...
Basel II sets up rigorous risk and capital management requirements designed to ensure that a bank
holds capital reserves appropriate to the risk the bank exposes itself to through its lending and
investment practices.
Basel II uses a three pillars concept
1 Minimum capital requirements (addressing risk)
2 Supervisory review
3 Market discipline – in order to promote greater stability in the financial system.
The second pillar deals with the regulatory response to the first pillar. It also delivers a framework
for dealing with all the other risks a bank may look, like systemic risk, pension risk, concentration
risk, strategic risk, reputation risk, liquidity risk and legal risk, which the accord pools under the title
of residual risk. It gives banks a power to review their risk management system (van Greuning,
Brajovic Bratanovic, 2009) (Tarullo, DK, 2008)).
To address deficiencies in the financial regulations revealed by the financial crisis affecting the
world since 2008 it was developed a new Basel Accord, – BASEL III. BASEL III is a global
regulatory standard on bank capital tolerability, stress testing and market liquidity risk agreed upon
by the members of the Basel Committee on Banking Supervision in 2010–11. Basel III strengthens
bank capital requirements and introduces new regulatory requirements on bank liquidity and bank
leverage. (Tarullo, DK, 2008)
Some of the measures announced in the new Basel III framework will need banks to hold 4.5% of
common

Capital Requirements And Risk Management
On September 12th, the 27 central banks in Switzerland finally unanimously adopted new banking
regulatory agreement – the "Basel III", this agreement greatly enhance the regulatory industry to a
minimum proportion of bank core capital requirements, this is a agreement after the financial crisis,
the largest global regulatory reform achievements made by the banking sector.
Compared to more emphasis on banks ' own internal control and management, regulatory review
process and market discipline, the introduction of IRB credit risk assessment, and the first
introduction of operational risks associated with the capital requirements. Basel III is clearly newly
adopted more concerned about the quality of capital and the ability of the bank 's ... Show more
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Capital adequacy ratio will remain an important role in international banking supervision. Basel 3
agreements further clarified the importance of capital, known as the first pillar. The Basel
Committee define that "the overriding objective is to promote international security and stability of
the financial system", and adequate capital levels are considered a central element of this goal.
Basel III pillar 1 significantly enhance the core capital adequacy ratio required level for the banking
sector, the new standard requires banks within eight years, in phases to constitute a capital
requirement of ordinary shares increased to 7%, the capital adequacy level standard rates are need to
set at 6%, which the banks are required to reserve not less than 2.5% of the bank 's risk capital
buffer funds, if the bank failed to meet the requirements, the bank dividends, share buybacks and
bonuses and other acts will be subject to have strict restrictions. At the same time, the agreement
also requires banks to maintain 0–2.5% of the counter–cyclical regulatory capital, in order to
effectively prevent hidden risk of bad debts cause by excessive lending during the boom years, and
to help banks when economic downturn. Next, total assets core capital is called leverage ratio,
leverage ratio of capital adequacy ratio is an important indicator of regulatory

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