Discusses briefly shadow banks, their role in the subprime crisis, their activities in China, and the regulations and measures taken to control or reduce the negative effects of those financial institutions on the world economy.
My Master's Thesis with the title "The Elephant in the Regulator's Room: Estimating the Size of the Global Shadow Banking System" compares different approaches to measuring the true size of shadow banking, for which crucial data is still missing. In addition to official statistics, I propose two further methods of empirically estimating assets in this amorphous system following a recent paper. The findings suggest that the system is larger than assumed and accumulated $96 trillion in 2015.
Shadow Banking and the Global Financial Crisis: The Regulatory Response (Oxfo...J.P. Reimann
This paper studies the shadow banking system and its regulation since the global financial crisis of 2008. The shadow banking system is a newly coined term, that is not yet (or only very scarcely) regulated or defined. It has been remarked that the shadow banking sector played a major part in the leading up to the crisis. While regulators have been quick to introduce stricter rules for banks and insurance companies, the shadow banks have been left largely untouched by new regulations.
Discusses briefly shadow banks, their role in the subprime crisis, their activities in China, and the regulations and measures taken to control or reduce the negative effects of those financial institutions on the world economy.
My Master's Thesis with the title "The Elephant in the Regulator's Room: Estimating the Size of the Global Shadow Banking System" compares different approaches to measuring the true size of shadow banking, for which crucial data is still missing. In addition to official statistics, I propose two further methods of empirically estimating assets in this amorphous system following a recent paper. The findings suggest that the system is larger than assumed and accumulated $96 trillion in 2015.
Shadow Banking and the Global Financial Crisis: The Regulatory Response (Oxfo...J.P. Reimann
This paper studies the shadow banking system and its regulation since the global financial crisis of 2008. The shadow banking system is a newly coined term, that is not yet (or only very scarcely) regulated or defined. It has been remarked that the shadow banking sector played a major part in the leading up to the crisis. While regulators have been quick to introduce stricter rules for banks and insurance companies, the shadow banks have been left largely untouched by new regulations.
This study investigated loans default (problems loans) and returns on assets in Nigeria banks, employing the data of five banks for a period of five years (2010-2014), using the ordinary least squares (OLS) regression techniques to check the relationship between problem loans and returns on assets (ROA). The findings shows that a positive and significant relationship at 5% level of significance exist between problem loans and returns on assets, and a negative and significant relationship at 10% level of significance exists between loans and advances and returns on assets in Nigerian banks. A major suggestion is that banks in Nigeria should enhance their capacity in credit analysis and loan administration, while the regulatory authority should pay more attention to banks’ compliance to relevant provisions of Bank and other Financial Institutions Act (1991) and prudential guidelines.
GBRW Consulting has been analysing the major Multilateral Development Banks - International Bank for Reconstruction & Development, or World Bank; International Finance Corporation; Inter-American Development Bank; African Development Bank; Asian Development Bank and European Bank for Reconstruction and Development- since the late 1990s.
This is the second of two presentations available on SlideShare. It illustrates some of the main characteristics of the financial statements of this very specialised group of institutions, which we refer to as MDBs.
Effect of Liquidity Risk on Performance of Deposit Money Banks in Nigeriaijtsrd
This study examines the effect of the credit risk ratio on the financial performance of deposit money banks in Nigeria. Ex Post Facto research design was employed for the study. Sample sizes of five banks were selected from twenty banks quoted on the Nigerian Stock Exchange. Data were extracted from annual reports and accounts of the selected banks from 2010 to 2019. Using E view statistical tool to test the hypothesis, the study found that credit risk ratio significantly influences the financial performance of quoted deposit money banks in Nigeria It was recommended that bank managers should constantly engage in rigorous credit analysis, checking, default rate, the proportion of non performing loans, regularly or at least quarterly to enable them to maintain high asset quality to enhance the financial performance. Oraka, Azubike O | Ebubechukwu, Jacinta O "Effect of Liquidity Risk on Performance of Deposit Money Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-4 , June 2021, URL: https://www.ijtsrd.compapers/ijtsrd42388.pdf Paper URL: https://www.ijtsrd.commanagement/other/42388/effect-of-liquidity-risk-on-performance-of-deposit-money-banks-in-nigeria/oraka-azubike-o
The study examined credit risk and management in Nigeria Commercial Banks. From the findings it
is concluded that banks profitability is inversely influenced by the levels of loans and advances, non-performing
loans and deposits thereby exposing them to great risk of illiquidity and distress. Therefore, management need
to be cautious in setting up a credit policy that will not negatively affects profitability and also they need to
know how credit policy affects the operation of their banks to ensure judicious utilization of deposits and
maximization of profit. Improper credit risk management reduce the bank profitability, affects the quality of its
assets and increase loan losses and non-performing loan which may eventually lead to financial distress. CBN
for policy purposes should regularly assess the lending attitudes of commercial banks. One direct way is to
assess the degree of credit crunch by isolating the impact of supply side of loan from the demand side taking
into account the opinion of the firms about banks’ lending attitude.
Updated JSC Liberty Finance Factsheet - June 2015 Monthly Performance: 0.99% in GEL and 3.71% in US$. Cumulative performance for 2015: 40.04% in GEL and 11.79% in US$
Writekraft Research and Publications LLP was initially formed, informally, in 2006 by a group of scholars to help fellow students. Gradually, with several dissertations, thesis and assignments receiving acclaim and a good grade, Writekraft was officially founded in 2011 . Since its establishment, Writekraft Research & Publications LLP is Guiding and Mentoring PhD Scholars.
Our Mission
“To provide breakthrough research works to our clients through Perseverant efforts towards creativity and innovation”.
Vision
Writekraft endeavours to be the leading global research and publications company that will fulfil all research needs of our clients. We will achieve this vision through:
Analyzing every customer’s aims, objectives and purpose of research
Using advanced and latest tools and technique of research and analysis
Coordinating and including their own ideas and knowledge
Providing the desired inferences and results of the research
In the past decade, we have successfully assisted students from various universities in India and globally. We at Writekraft Research & Publications LLP head office in Kanpur, India are most trusted and professional Research, Writing, Guidance and Publication Service Provider for PhD. Our services meet all your PhD Admissions, Thesis Preparation and Research Paper Publication needs with highest regards for the quality you prefer.
Are Collateralized Loan Obligations the ticking time bomb that could trigger ...Kaan Sapanatan, CFA, CAIA
After my recent trip to New York, where I met with investment advisors from various Investment Banks and Large Alternative Investment Shops, 3 letters really resonated in my ears on my flight back home.
And those 3 letters were C… L… O…
As I got back home I started digging more into it.
One thing that really stood out for me was that; the Investment Banks never mentioned a word on Collateralized Loan Obligations, whereas without an exception every Alternative Investment shop talked about CLOs with great passion, and would elaborate “How much value they see in them and how great the returns are”
Coincidently recently there have been some concerns raised on “Leverage Loans and CLOs” by some powerful voices such as; former Federal Reserve Chair Janet Yellen, IMF, Moody’s and so on.
In fact, I had read some of the comments as part of my daily news screening, but at the time it didn’t catch my attention enough to further look into it.
The more research I did, the more clear it became that “Ten years after the global financial crisis, investors are once again showing increasingly risky behavior as they search for sources of high yield in response to a decade of low-interest rates”.
Please find my research in the presentation. I would be very happy to discuss and share some thought regarding the topic.
Kaan Sapanatan
How Excessive Compliance, Complex Sanctions, and prohibitive penalties have driven banks to De-Bank so many clients just to spare themselves the hassle of enhanced due diligence.
This study investigated loans default (problems loans) and returns on assets in Nigeria banks, employing the data of five banks for a period of five years (2010-2014), using the ordinary least squares (OLS) regression techniques to check the relationship between problem loans and returns on assets (ROA). The findings shows that a positive and significant relationship at 5% level of significance exist between problem loans and returns on assets, and a negative and significant relationship at 10% level of significance exists between loans and advances and returns on assets in Nigerian banks. A major suggestion is that banks in Nigeria should enhance their capacity in credit analysis and loan administration, while the regulatory authority should pay more attention to banks’ compliance to relevant provisions of Bank and other Financial Institutions Act (1991) and prudential guidelines.
GBRW Consulting has been analysing the major Multilateral Development Banks - International Bank for Reconstruction & Development, or World Bank; International Finance Corporation; Inter-American Development Bank; African Development Bank; Asian Development Bank and European Bank for Reconstruction and Development- since the late 1990s.
This is the second of two presentations available on SlideShare. It illustrates some of the main characteristics of the financial statements of this very specialised group of institutions, which we refer to as MDBs.
Effect of Liquidity Risk on Performance of Deposit Money Banks in Nigeriaijtsrd
This study examines the effect of the credit risk ratio on the financial performance of deposit money banks in Nigeria. Ex Post Facto research design was employed for the study. Sample sizes of five banks were selected from twenty banks quoted on the Nigerian Stock Exchange. Data were extracted from annual reports and accounts of the selected banks from 2010 to 2019. Using E view statistical tool to test the hypothesis, the study found that credit risk ratio significantly influences the financial performance of quoted deposit money banks in Nigeria It was recommended that bank managers should constantly engage in rigorous credit analysis, checking, default rate, the proportion of non performing loans, regularly or at least quarterly to enable them to maintain high asset quality to enhance the financial performance. Oraka, Azubike O | Ebubechukwu, Jacinta O "Effect of Liquidity Risk on Performance of Deposit Money Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-4 , June 2021, URL: https://www.ijtsrd.compapers/ijtsrd42388.pdf Paper URL: https://www.ijtsrd.commanagement/other/42388/effect-of-liquidity-risk-on-performance-of-deposit-money-banks-in-nigeria/oraka-azubike-o
The study examined credit risk and management in Nigeria Commercial Banks. From the findings it
is concluded that banks profitability is inversely influenced by the levels of loans and advances, non-performing
loans and deposits thereby exposing them to great risk of illiquidity and distress. Therefore, management need
to be cautious in setting up a credit policy that will not negatively affects profitability and also they need to
know how credit policy affects the operation of their banks to ensure judicious utilization of deposits and
maximization of profit. Improper credit risk management reduce the bank profitability, affects the quality of its
assets and increase loan losses and non-performing loan which may eventually lead to financial distress. CBN
for policy purposes should regularly assess the lending attitudes of commercial banks. One direct way is to
assess the degree of credit crunch by isolating the impact of supply side of loan from the demand side taking
into account the opinion of the firms about banks’ lending attitude.
Updated JSC Liberty Finance Factsheet - June 2015 Monthly Performance: 0.99% in GEL and 3.71% in US$. Cumulative performance for 2015: 40.04% in GEL and 11.79% in US$
Writekraft Research and Publications LLP was initially formed, informally, in 2006 by a group of scholars to help fellow students. Gradually, with several dissertations, thesis and assignments receiving acclaim and a good grade, Writekraft was officially founded in 2011 . Since its establishment, Writekraft Research & Publications LLP is Guiding and Mentoring PhD Scholars.
Our Mission
“To provide breakthrough research works to our clients through Perseverant efforts towards creativity and innovation”.
Vision
Writekraft endeavours to be the leading global research and publications company that will fulfil all research needs of our clients. We will achieve this vision through:
Analyzing every customer’s aims, objectives and purpose of research
Using advanced and latest tools and technique of research and analysis
Coordinating and including their own ideas and knowledge
Providing the desired inferences and results of the research
In the past decade, we have successfully assisted students from various universities in India and globally. We at Writekraft Research & Publications LLP head office in Kanpur, India are most trusted and professional Research, Writing, Guidance and Publication Service Provider for PhD. Our services meet all your PhD Admissions, Thesis Preparation and Research Paper Publication needs with highest regards for the quality you prefer.
Are Collateralized Loan Obligations the ticking time bomb that could trigger ...Kaan Sapanatan, CFA, CAIA
After my recent trip to New York, where I met with investment advisors from various Investment Banks and Large Alternative Investment Shops, 3 letters really resonated in my ears on my flight back home.
And those 3 letters were C… L… O…
As I got back home I started digging more into it.
One thing that really stood out for me was that; the Investment Banks never mentioned a word on Collateralized Loan Obligations, whereas without an exception every Alternative Investment shop talked about CLOs with great passion, and would elaborate “How much value they see in them and how great the returns are”
Coincidently recently there have been some concerns raised on “Leverage Loans and CLOs” by some powerful voices such as; former Federal Reserve Chair Janet Yellen, IMF, Moody’s and so on.
In fact, I had read some of the comments as part of my daily news screening, but at the time it didn’t catch my attention enough to further look into it.
The more research I did, the more clear it became that “Ten years after the global financial crisis, investors are once again showing increasingly risky behavior as they search for sources of high yield in response to a decade of low-interest rates”.
Please find my research in the presentation. I would be very happy to discuss and share some thought regarding the topic.
Kaan Sapanatan
How Excessive Compliance, Complex Sanctions, and prohibitive penalties have driven banks to De-Bank so many clients just to spare themselves the hassle of enhanced due diligence.
Pay attention to what matters in Retail Banking: Invasion of Technology; Risk Identification, Measurement, and Management. The Customer wins, The Bank Wins, The Employee Wins.
Active Management of the Debt Portfolio - 2013 NACUBO ConferenceRemy Hathaway
Presentation from 2013 NACUBO in Indianapolis with a focus on risk management. Co-presented with Thomas Richards (University of Missouri System) and Sherry Mondou (University of Puget Sound). My slides are pp3-12.
I argue that much of what is proposed in the IFRS 9 document could have been accomplished through Pillar 2 of the Basel Accord in its 2006 release.
Pillar 2 was introduced to put to test Management Capabilities, and Regulatory Credibility. I argue that both failed that test which made the introduction of IFRS 9 a necessity.
Compliance is about identifying the risks that the financial institution could encounter as a result of “Failing To Comply”.
Conduct & document comprehensive Risks Assessment; and the planned remedial measures in a manner appropriate to the requirements of the compliance rule!
This is my message.
A Summary of My Professional Qualifications. It is in Power Point Presentation format for easy and convenient access. Browse through it in "Slide Show Mode" and click on what you want to see.
a qualitative insider's look at the challenges confronted by members of Board of Directors in Governing as Technological Innovations fast forward and invaded the Banking/Financial Landscape; and as Compliance competes with Governance in Oversight.
the article provide a snap shot about CRS but raises concerns about the OECD Tax Authorities intruding into the Financial Sector which is disturbing the peace!
It is a reader friendly, practical and easy to follow presentation on the challenges that Financial Institutions have to cope with for a healthy and sustainable growth.
A soft & a qualitative approach to identifying, assessing and dealing with the risk of automating Processes. The focus is on the Person behind the Technology instead of the Technology itself.
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad, Mandi Bah...Amil Baba Dawood bangali
Contact with Dawood Bhai Just call on +92322-6382012 and we'll help you. We'll solve all your problems within 12 to 24 hours and with 101% guarantee and with astrology systematic. If you want to take any personal or professional advice then also you can call us on +92322-6382012 , ONLINE LOVE PROBLEM & Other all types of Daily Life Problem's.Then CALL or WHATSAPP us on +92322-6382012 and Get all these problems solutions here by Amil Baba DAWOOD BANGALI
#vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore#blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #blackmagicforlove #blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #Amilbabainuk #amilbabainspain #amilbabaindubai #Amilbabainnorway #amilbabainkrachi #amilbabainlahore #amilbabaingujranwalan #amilbabainislamabad
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
NO1 Uk Divorce problem uk all amil baba in karachi,lahore,pakistan talaq ka m...Amil Baba Dawood bangali
Contact with Dawood Bhai Just call on +92322-6382012 and we'll help you. We'll solve all your problems within 12 to 24 hours and with 101% guarantee and with astrology systematic. If you want to take any personal or professional advice then also you can call us on +92322-6382012 , ONLINE LOVE PROBLEM & Other all types of Daily Life Problem's.Then CALL or WHATSAPP us on +92322-6382012 and Get all these problems solutions here by Amil Baba DAWOOD BANGALI
#vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore#blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #blackmagicforlove #blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #Amilbabainuk #amilbabainspain #amilbabaindubai #Amilbabainnorway #amilbabainkrachi #amilbabainlahore #amilbabaingujranwalan #amilbabainislamabad
Resume
• Real GDP growth slowed down due to problems with access to electricity caused by the destruction of manoeuvrable electricity generation by Russian drones and missiles.
• Exports and imports continued growing due to better logistics through the Ukrainian sea corridor and road. Polish farmers and drivers stopped blocking borders at the end of April.
• In April, both the Tax and Customs Services over-executed the revenue plan. Moreover, the NBU transferred twice the planned profit to the budget.
• The European side approved the Ukraine Plan, which the government adopted to determine indicators for the Ukraine Facility. That approval will allow Ukraine to receive a EUR 1.9 bn loan from the EU in May. At the same time, the EU provided Ukraine with a EUR 1.5 bn loan in April, as the government fulfilled five indicators under the Ukraine Plan.
• The USA has finally approved an aid package for Ukraine, which includes USD 7.8 bn of budget support; however, the conditions and timing of the assistance are still unknown.
• As in March, annual consumer inflation amounted to 3.2% yoy in April.
• At the April monetary policy meeting, the NBU again reduced the key policy rate from 14.5% to 13.5% per annum.
• Over the past four weeks, the hryvnia exchange rate has stabilized in the UAH 39-40 per USD range.
1. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
The Economics of [The Unregulated]
Shadow Banking, & its Inherent
Risks.
Mohammad Fheili / AGM ‐ Jammal Trust Bank
In
collaboration
with
The Anti‐Money Laundering Forum Legal
Requirements & Audit Procedures
May 4, 5 of 2015 / BIEL – Pavillon Royal
2. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Mohammad Fheili
“Over 30 years of Experience in Banking. Contact Details: mifheili@gmail.com (961) 3 337175
Mohammad has successfully delivered over 1,500 hours of training to
professional bankers.
He served as an Economist at ABL, and Senior Manager at BankMed
and Fransabank: and he currently serves in the capacity of an
Executive at JTB Bank in Lebanon.
In addition, He worked as an Advisor to the Union of Arab Banks.
Mohammad also served as Basel II Project Implementation Advisor to
CAB and HBTF Banks in Jordan.
Mohammad received his college education (undergraduate & graduate)
at Louisiana State University (LSU), and has been teaching Economics
and Finance for over 25 continuous years at reputable universities in
the USA (LSU) and Lebanon (LAU).
Finally, Mohammad published over 25 articles, of those many are in
refereed Journals (e.g., Journal of Money Laundering & Control;
Journal of Operational Risk; Journal of Law & Economics; etc.) and
Bulletins.”
3. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Financial Markets
are prone to panics
and runs;
Banking crisis have
become all‐too‐regular
occurrences in market
economies.
Complexity(=Shadow Banking) has been responsible for
Financial markets Panics and Banking Crisis!
17171414
4. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
How Big Is The Shadow Banking System?
The Economics Of Channeling & Intermediation
The Collateralized Debt Obligations ‐ CDOs
The Rating Agencies’ Pitfalls
The Regulator & Regulations: Blessing or Curse?
Closing Remarks
1
2
3
4
5
6
End
Outline
5. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
The Interconnectivity and Complexity which Characterizes Shadow Banking Makes It Near Impossible to effectively
size the problem. … but here is what’s available.
How Big is the
Shadow Banking
System?
1
7. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
World Reserve Currency is no longer
pegged to Gold
• Unregulated, Offshore, Off‐Balance Sheet, OTC
Securitization and Swaps Explodes.
• Shadow Banking fully emerges with protracted,
historically low interest rates.
• Interest Rate and Currency Swaps grow by
Trillions monthly.
Volatile Changes in Industrial Production!Steady Growth in Money
8. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.comRisk
The Economics
of Channeling
&
Intermediation
2
9. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Lenders
Surplus Spending
Units ‐SSUs
• Individuals (Current
Income is GREATER than
Current Expenditures)
• Firms (Earnings in excess of
what the firm needs currently)
• Government (Current
Revenues are in excess of
planned Expenditures)
• Financial
Intermediaries (Funding
is currently GREATER than
investment)
Where to Warehouse
the Surplus of Fund?
Where to Warehouse
the Surplus of Fund?
Borrowers
Deficit Spending
Units ‐DSUs
• Individuals (Current
Income is LESS than Current
Expenditures)
• Firms (Earnings falls short of
what the firm needs currently)
• Government (Current
Revenues fall short of planned
Expenditures)
• Financial
Intermediaries (Funding
is currently LESS than
investment)
Where to Go
to Fund My
Ideas?
Where to Go
to Fund My
Ideas?
Tapping into International Market for Loanable
Funds
Local Pool of
Loanable
Funds
Decision is a
function of:
• Motive
• Risk Aversion
Firms,
Governments,
Fin. Institutions,
Households
Channeling …
10. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Lenders
Surplus Spending
Units ‐SSUs
• Individuals (Current
Income is GREATER than
Current Expenditures)
• Firms (Earnings in excess of
what the firm needs currently)
• Government (Current
Revenues are in excess of
planned Expenditures)
• Financial
Intermediaries (Funding
is currently GREATER than
investment)
Borrowers
Deficit Spending
Units ‐DSUs
• Individuals (Current
Income is LESS than Current
Expenditures)
• Firms (Earnings falls short of
what the firm needs currently)
• Government (Current
Revenues fall short of planned
Expenditures)
• Financial
Intermediaries (Funding
is currently LESS than
investment)
The Channeling of Funds Feeds and Fuels:
Household Consumption
Gross Private Domestic Investments
Government Expenditures
Exports and Imports.
it Benefits the REAL ECONOMY (Real GDP).
Debt, Equity,
etc. Instruments
Deposit &
Loans
MMMF, CP, ABCP,
Repos, etc.
The Economics …
11. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Lenders
Surplus Spending
Units ‐SSUs
• Individuals (Current
Income is GREATER than
Current Expenditures)
• Firms (Earnings in excess of
what the firm needs currently)
• Government (Current
Revenues are in excess of
planned Expenditures)
• Financial
Intermediaries (Funding
is currently GREATER than
investment)
Borrowers
Deficit Spending
Units ‐DSUs
• Individuals (Current
Income is LESS than Current
Expenditures)
• Firms (Earnings falls short of
what the firm needs currently)
• Government (Current
Revenues fall short of planned
Expenditures)
• Financial
Intermediaries (Funding
is currently LESS than
investment)
Regulated
but not like
Banks
Heavily
Regulated
Not
Regulated
Regulation in this context indicate to: Presence of Lender of Last Resort; Legal Reserve; Deposit
Insurance; Capital Adequacy; etc.
Debt, Equity,
etc. Instruments
Deposit &
Loans
MMMF, CP, ABCP,
Repos, etc.
Regulated or Not …
Very Inter‐Connected
12. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Lenders
Surplus Spending
Units ‐SSUs
• Individuals (Current
Income is GREATER than
Current Expenditures)
• Firms (Earnings in excess of
what the firm needs currently)
• Government (Current
Revenues are in excess of
planned Expenditures)
• Financial
Intermediaries (Funding
is currently GREATER than
investment)
Borrowers
Deficit Spending
Units ‐DSUs
• Individuals (Current
Income is LESS than Current
Expenditures)
• Firms (Earnings falls short of
what the firm needs currently)
• Government (Current
Revenues fall short of planned
Expenditures)
• Financial
Intermediaries (Funding
is currently LESS than
investment)
With intermediation in Both
Without
Intermediation
Intermediation or Not?
Shadow Banking
Replicates
“Intermediation” in
the Banking Model
But . . .
13. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
• Maturity Transformation.
The use of short‐term
sources of funds (e.g.,
Deposits) to fund long‐term
loans. Traditional deposits
are a bank’s liabilities,
collected in the form of
savings and checking
accounts (pooled or
decomposed) and
redistributed as loans to
consumers and businesses
(i.e., part of assets). . . .
The risk associated with
this Maturity
Transformation is totally
assumed by the Bank.
Three Critical Intermediations Activities Are Undertaken.
• Liquidity Transformation. A
Bank’s assets are less liquid
than its liabilities – The
liabilities (i.e., Depositors’
Money) that fund the long‐
term assets are available on
demand at any time.
However, Banks extends
loans in the amount in
excess of what is required
under the Legal Reserve
System – i.e., Creating
Money. … In the case of
massive withdrawals by
depositors, the Bank runs
the risk of insolvency.
• Credit Transformation. While any individual
loan carries risk specific to that transaction,
a bank diffuses its overall risk exposure by
lending to a large number of borrowers.
Despite this diversification, the riskiness of
a Bank’s assets usually exceeds that of its
liabilities. Taking on this Credit Risk is
typically how banks earn a return above
the cost of their liabilities, a concept know
as Net Interest Margin.
In the Regulated Banking Landscape, …..
“Deposit Insurance” mitigated Credit Risk of
bank depositors, and the “Lender of Last
Resort” addressed liquidity needs that can
arise from bank loans that have longer
maturity and less liquidity relative to
liabilities.
14. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Channels of Financial Intermediations
Credit Intermediation
Credit Intermediation has become more market‐based, and No Longer Institution‐Based
Sources of
Funds
Uses of
Funds
Individuals
(With Money to
warehouse)
Households/
Business
Borrowings
Financial Markets
Financial Markets: No Intermediation
Households /
Corporations
(With Money to safe
keep)
Households/
Business
Borrowings
Traditional Banking: “Originate and Hold Loans” Till Maturity.
Institution‐Based Intermediation.
Traditional Banking
Households /
Corporations /
Institutions /
Securities
Lenders / Pension
Funds
(With Money to Invest)
Household /
Business
Borrowings
Shadow Banking
Shadow Banking: “Originate‐To‐Sell”
Multiple, Market‐Based, and Layered Intermediation
15. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Channels of Financial Intermediations
Credit Intermediation
Credit Intermediation has become more market‐based, and No Longer Institution‐Based
Sources of
Funds
Uses of
Funds
Individuals
(With Money to
warehouse)
Households/
Business
Borrowings
Non‐Intermediated
Direct Funding (No Intermediaries)
Households /
Corporations
(With Money to safe
keep)
Households/
Business
Borrowings
Banks “Originate and Hold Loans” Till Maturity.
Traditional Banking (Institution‐Based Intermediation)
Households /
Corporations /
Institutions /
Securities
Lenders / Pension
Funds
(With Money to Invest)
MMMF
Purchases
CP
ABCP
Repos, Etc.
ABS
Intermediation
ABS
Issuance
Loan
Warehousing
Loan
Origination
Household /
Business
Borrowings
Shadow Banking (Multiple and Market‐Based, and Layered Intermediations)
Note: MMF is Money Market Mutual Fund, CP is Commercial Papers, ABCP is Asset‐Backed CP, Repos is Repurchase Agreements, and ABS is Asset‐Backed Securities.
rapid balance sheet growth,
a market rise in leverage, and
a proliferation of complex and difficult‐to‐value financial products.
16. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
The Potential For Excess Leverage through Securities
Financing Transactions (SFT):
• The temporary transfer of securities by a lender to
a borrower on a collateralized basis……
• Then these securities can be used to raise more
fund…..
• Then funds can, in turn, be used to buy more
securities……
• Where these securities can be used as a collateral
to raise more funds … The higher the value of the
collateral gets, the more fund can be raised (i.e.,
Pro Cyclicality)
• Etc…..
The Stock of Collateral and its velocity (the intensity
with which it is re‐used) are both fundamental to
understanding the financial plumbing in the Shadow
Banking World.
Just Like Money Creation… Collateral Intermediation Function.
The Velocity of Collateral
The better is the economic outlook, the more fund can
be raised, the higher the velocity of collateral, …
17. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Intermediation is expanding into Un‐Regulated Territories!
• The Shadow Banking System De‐Constructs the familiar Credit Intermediation process of
Deposit‐Funded, Hold‐To‐Maturity lending by traditional banks into a more Complex,
Wholesale‐Funded, Securitization‐Based Intermediation Chain.
• Shadow Banking functionally is similar to traditional banking maturity, liquidity, and credit
transformation – BUT the financial flows occur in an Un‐Regulated Landscape, and in Multiple
steps rather than within one institution’s balance sheet.
At each step in the process of “Shadow Intermediation,”
• The true quality of the underlying collateral is further obscured.
• As more links are added to the chain, more loans are included (i.e., layered intermediation).
• The end buyer holds a very “small slice” of a very large number of loans. In theory, this
diversifies risk because any single loan going bad will have little effect on the total pool’s
value.
• However, this also complicates the evaluation of the quality of individual pieces, leaving
investors to rely on aggregate data to assess the riskiness of assets.
• This Complexity leads to a decline in underwriting standards because the loan originator has
little stake in the long‐term performance of a loan that is quickly sold to be wholesaled,
warehoused, and Repackaged in a Pool (e.g., Originate‐To‐Sell)
18. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Shows the Flow of Funds from LENDERS to BORROWERS; not the reverse
Simple & Clear Traditional
Banking
Lenders
Surplus Spending
Units ‐SSUs
• Individuals (Current
Income is GREATER than
Current Expenditures)
• Firms (Earnings in excess of
what the firm needs currently)
• Government (Current
Revenues are in excess of
planned Expenditures)
• Financial
Intermediaries (Funding
is currently GREATER than
investment)
Borrowers
Deficit Spending
Units ‐DSUs
• Individuals (Current
Income is LESS than Current
Expenditures)
• Firms (Earnings falls short of
what the firm needs currently)
• Government (Current
Revenues fall short of planned
Expenditures)
• Financial
Intermediaries (Funding
is currently LESS than
investment)
Banks
A Flavor of Complexity
19. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Lenders
Surplus Spending
Units ‐SSUs
• Individuals (Current
Income is GREATER than
Current Expenditures)
• Firms (Earnings in excess of
what the firm needs currently)
• Government (Current
Revenues are in excess of
planned Expenditures)
• Financial
Intermediaries (Funding
is currently GREATER than
investment)
Borrowers
Deficit Spending
Units ‐DSUs
• Individuals (Current
Income is LESS than Current
Expenditures)
• Firms (Earnings falls short of
what the firm needs currently)
• Government (Current
Revenues fall short of planned
Expenditures)
• Financial
Intermediaries (Funding
is currently LESS than
investment)
Banks
Dealers
Securitization
Money Market Mutual
Funds
Hedge Funds
Finance Companies and Other Non‐Bank Lenders
Money Money
Money
Money
Securities
Loans
Money
Money
Loans
Money
Loans
Money
Securities
Money
Securities
SecuritiesSecurities
Money
Securities
Money
Securities
Shows the Flow of Funds from LENDERS to BORROWERS; not the reverse
Shadow Banking: Decompose & RedistributeA Flavor of Complexity
20. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
A Long Term Corporate Bond could actually be sold to three separate ‘Market
Participants’, of varying degrees of Risk Aversion, and using three distinct financial
instruments:
• One would supply the money for the bond
• One would bear the interest rate risk
• One would bear the risk of default
These two would not have to put up any capital for
the bond, though they might have to post some sort
of collateral
Interest Rate
Swaps which is sold
separately
Credit Default
Swaps which is sold
separately
By doing so, they’re
lowering the price of
Corporate Credit
Decompose & Redistribute: The Structure of a Simple Transaction has been Decomposed and the
Risks has been Redistributed in a Complex, hard to assess manner.
Another Flavor of Complexity
22. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
1. The Collateralized Debt Obligations ‐ CDOs
• CDOs are a special type of derivatives. Like its name implies, a derivative are any
kind of financial product that derives its value from another underlying asset
(Housing Loan, Car Loan, Credit Card, …)
• CDOs turn individual loans into a portfolio in which a default by any single
borrower is unlikely to have an enormous impact on the portfolio as a whole.
• By aggregating many different mortgages together into a CDO, investors can own a
small percentage of many different mortgages, and therefore the CDOs losses as a
result of borrowers defaulting on their obligations usually represent the statistical
averages in the market as a whole.
• Typically, a pool of debt is divided into three tranches, each of which is a separate
CDO. Each Tranche will have different maturity, interest rates and default risk. This
allows the CDO creator to sell to multiple investors with different degrees of risk
preference.
• This time of growth in CDOs is the era of “Quant Jocks”: Statistical experts whose
job is to write computer programs that would model the value of the bundle of
loans that made up a CDO.
23. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Banks sold CDOs to investors
for three distinct reasons:
• The funds banks received
gave them more cash to
make new loans.
• It moved the loan’s risk of
defaulting from the Bank to
the Investor.
• CDOs gave banks new and
more profitable product to
sell, which boosted share
prices and Managers’
Bonuses.
2. The Collateralized Debt Obligations ‐ CDOs
More Liquidity to fund
more loans
Freed Up Capital
Economic Booster
+
‐
+
‐
24. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Collateralized Debt Obligations (CDOs) Pooling, Decomposing, and Distributing Risks!
AAA
Super
Senior
Tranche
AA
A
BBB
BB
B
Equity
Pool Of
Mortgage
Loans
Investment
Grade
Lower Risk
Lower Yield
Higher Risk
Higher Yield
Last Loss
First
Loss
Non‐Investment
Junk Grade
Mortgage‐Backed Securities
MBS
Loan1
Loan2
Loan3
Loan3
Unrated
25. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
AAA
Super
Senior
Tranche
AA
A
BBB
BB
Unrated
AAA
Super
Senior
Tranche
AA
A
BBB
BB
Unrated
B B
AAA
Super
Senior
Tranche
AA
A
BBB
BB
Unrated
AAA
Super
Senior
Tranche
AA
A
BBB
BB
Unrated
B B
AAA
Super
Senior
Tranche
AA
A
BBB
BB
Unrated
B
MBS MBS MBS MBS
Re‐Distribute Risk!
Collateralized Mortgage Obligations
CMO
This process can be repeated to create more structured
credit products.
This depicts the process by
which MBS pieces with
lower credit quality
(including some non‐
investment‐grade tranches)
are “Recycled” to create a
CMO, . . .
a significant
portion of
which
garners an
investment‐
grade
rating.
Investment
Grade
Debt
Or CDOs
26. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
AAA
Super
Senior
Tranche
AA
A
BBB
BB
Unrated
AAA
Super
Senior
Tranche
AA
A
BBB
BB
Unrated
B B
AAA
Super
Senior
Tranche
AA
A
BBB
BB
Unrated
AAA
Super
Senior
Tranche
AA
A
BBB
BB
Unrated
B B
AAA
Super
Senior
Tranche
AA
A
BBB
BB
Unrated
B
CMO1 CMO2 CMO…
CMO
CMOn
Re‐Re‐Distribute Risk!
2
……..
This depicts the process
by which CMO pieces
with lower credit quality
(including some non‐
investment‐grade
tranches) are “Recycled”
to create a . . .
Significant
portion of
which
garners an
investment
‐grade
rating.
Investment
Grade
Yet another layer whereby the “True
Risk” is being camouflaged …
This process can be repeated to create more structured credit
products.
Or CDOs
27. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
CDOs Camouflaged Risk
About the Underlying Asset.
• Housing prices became unrelated to their actual value.
• People bought homes simply to sell them.
• The easy availability of debt meant people charged too much for the asset.
About the Banks.
• CDOs allowed banks to avoid having to collect on them when they become due, since the
loans are now owned by other investors.
• Less discipline in adhering to strict lending standards, so that many loans were made to
borrowers who weren’t credit worthy (ensuring disaster)
About the CDOs.
• CDOs became so complex that the buyers didn’t really know the value of what they were
buying.
• The sophisticated computer models based the CDOs value on the assumption that housing
prices would continue to go up. When prices went down, the computers couldn’t price the
CDOs.
• The Opaqueness and the complexity of CDOs created a market panic: Overnight the market
for CDOs disappeared!
29. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
1. Induced Risk & Complexity … but in the Shadow: Camouflaged By
The Rating Agencies and Overlooked by The Regulators.
• Despite the good intentions, ratings agencies and regulators were significant contributors to the
imbalances that culminated in financial crisis.
• The big three Rating Agencies’ (S & P, Moody’s, and Fitch) oligopoly prevailed –
Without their ratings, companies could not sell debt instruments.
An inherent conflict of interest arose; issuers paid the companies for ratings.
Many investors depended on those evaluations when purchasing debt in lieu of a more thorough due‐
diligence review.
Investors ran into further difficulties because the evaluations frequently lagged material market
development.
• The Ratings Agencies were complicit in the growing complacency of investors leading up to the
credit crisis.
Large structured‐product deals involving complex securities were very profitable for ratings agencies.
Issuers had the ability to choose among potential raters, leading to “ratings shopping.”
The rating agencies shift from an Investor‐Pay to an Issuer‐Pay business model degraded the value of the
evaluations provided because the agencies faced little risk from inaccurate ratings.
30. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
• Regulatory Arbitrage
• Reserve Requirements imposed a disadvantage
on banks
• Compliance
• Technological Innovations
• Erosion of Banks’ informational and transactions
cost advantages
• Encouragement from the Regulator
• Financial Sector Productivity
• Appetite of Market Players for speculation
• Finance Know‐How
• De‐Banking became a plausible alternative.
• Etc ….
The Journey from
Traditional Banking to
Shadow Banking was
made possible By:
31. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
• Because the Rating Agencies did not examine the underlying mortgages, they failed to see a shift
in borrower behavior and mortgage terms.
The emergence of speculative home purchases with 100% financing,
The emergence of low‐ and no‐documentation loans
Meant that the environment was very different from the past, when homebuyers made significant down payments and
lived in the houses they purchased.
• The Rating Agencies’ failings affected the Shadow Banking industry:
Because many of these securitized products were rated AAA, assuming risk mitigation through diversification, they
were perceived as the safest of the safe.
These investment‐grade products garnered significantly more demand than would have otherwise been the case.
This sent broker‐dealers into overdrive, producing more of these securities and fueling a flood of credit.
Robust credit supply, in turn, led to declining underwriting standards to meet broker‐dealer demand.
The AAA ratings also allowed Shadow Banks to “lever up” because Repos counterparties required smaller discounts
for higher‐quality, investment‐grade collateral.
Lax Regulatory oversight compounded the issue as securitized instruments spread globally. Banks and Shadow Banks
became increasingly intertwined.
Regulations incentivized purchases of highly rated ABS by requiring banks to retain a smaller amount of capital in
support of these assets.
2. Induced Risk & Complexity … but in the Shadow: Camouflaged By
The Rating Agencies and Overlooked by The Regulators.
33. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
The Basel Accord: An Evolution or a Revolution!
Basel I Basel I½ Basel II
Credit Risk
Credit Risk
Market Risk
Credit Risk
Market Risk
Operational Risk
1986
proposed
1993
proposed
1999
proposed
1988 effective 1996 effective 2007 effective
Consultative Paper (CP1)
in Nov 18, 1999, and CP3
in July 2003
Debt Crisis
Financial
Crisis Financial
Innovations
Response Quality:
Reactive
Response Quality:
Reactive
Response Quality: Pro-Active
Basel III
Credit Risk
Market Risk
Operational Risk
Capital Quality
Capital Buffers
Liquidity: LCR, NSFR
2009
proposed
In response to Financial Crisis
which dawned on us in 2007:
Sub-Prime Real Estate Lending
Back To
Financial Crisis
Kick Off in 2011
Basel IV
Credit Risk
Market Risk
Operational Risk
Shadow Banking
Additional Buffers
(Primary response: increase
capital requirements)
2015
Anticipated
In response to the growth
of Shadow Banking and its
implications on Financial
Stability
To Prevent Yet
Another Financial
Crisis
Kick Off in 20__
?
34. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
ON The Banking Model: Regulators Induced a Very Demanding Model
MAXIMIZE PROFIT subject to:
RISK Constraints
REGULATORY Constraints
RISK . . .
Default
Liquidity
Maturity
Other Types of Risks
REGULATORY . . .
Basel I
Basel II
Basel III
Other Types of
Regulations
Sanctions Rules
FATCA Requirements
AML, Etc.
Uses of
Funds
Sources of
Funds
Reserves
Loans
Securities
Other
Investments
Fixed Assets
. . .
All Types of
Deposits
Borrowings
Other
Sources
Equity
Capital
. . .
. . . and Off-Balance Sheet . . .
Management …. For
both regulated and
unregulated financial
institutions
Compliance . … only for
regulated with an
additional cost of
Compliance
35. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Return
Risk
Return
Risk
Intentional Risks
Managing Revenue
Unintentional Risks
Managing Costs
CreditRisk
MarketRisk
Reputation&
OtherRisks
Operational
Risk
TOTAL Risks = Intentional (Speculative) + (Unintentional (Hazards)
ON Risks: Multi‐dimensional and much more … !
The higher the realized
risks; the lower the realized
return…
The higher the anticipated
risks; the higher the
expected return…
The Risk reality in both regulated and unregulated Financial Institutions
36. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
Legal Obligation:
• The Public at Large has the
Right to Know! Where its
impact on the Financial
Institution’s Reputation and
Performance is often severe.
Profitability suffers, and it
triggers immediate additional
expenses for Damage Control.
Regulator Obligation:
Issues of non‐compliance
are handled inside closed
doors at the Central Bank.
ON Compliance: Shifted from a Regulatory Obligation to a Legal Obligation
De-Risking
De‐Risking would have the effect of driving the development of
alternative financial markets and payment mechanism – i.e.,
Shadow Banking.
37. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
RiskRisk Management is a Decision & a Choice.
Complianceis a Task
You are suited to follow a
well defined track!
You are geared up
and equipped to
travel through
unchartered
territories and be
creative in
avoiding danger
(not Risk)
38. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.comRisk
The Challenge for the Regulator is to be flexible and to allow innovation to occur, and to adopt
standards and regulations to deal with threats and dangers but not at the expense of killing
innovation.
Should We
Be Scared Of
Shadows! . . .
Yes
6
39. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
1. The Potential Future of Shadow Banking
The Long‐run equilibrium share of Shadow banking is
• Negatively related to information costs, and
• Positively related to
the absolute burden of bank reserve requirements
the relative burden of capital requirements on commercial versus shadow bank
credit.
The steps taken towards de‐regulations
The extent of Financial Innovations
Recent Financial crisis proved that Shadow Banking is Procyclical and vulnerable to
Liquidity shocks.
40. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
• Shadow Banking is likely to remain suppressed due to current
regulatory climate (e.g., DFA); however, future financial innovations
might create “New Shadows”.
• Regulatory arbitrage may occur on a Country‐to‐Country basis.
• Traditional Banks may consider funding alternatives as new regulations
place constraints on Shadow Banking.
• Under New Regulatory Regimes, Banks will likely need to consider how
exposed their counterparties are to the Shadow Banking System.
• More attention must be put in understanding of the linkages between
the Shadow Banking and Traditional Banking Systems.
• The Complexity of financial innovations must push us to pay close more
attention to financial activities regardless of institution… Focus on Bank
Deposit Substitutes (Alternatives to traditional funding).
2. The Potential Future of Shadow Banking
41. Mohammad Fheili ⌂⌂⌂ fheilim@jtbbank.com
• Regulatory Arbitrage can never be eliminated fully because of the Diversity of
Regulators & Regulations, and the Creativity & Resourcefulness of Banks.
• The increasing Complexity of the Financial Landscape makes it impossible to
effectively regulate the Shadow Banking System.
• If Banks can bypass Capital Regulation in an opaque shadow banking sector, it may
be optimal to relax capital requirements so that liquidity dries up in the shadow
banking system.
• Tightened capital requirements may spur a surge in shadow banking activity that
leads to an overall larger risk on the Money‐Like Liabilities of the formal and
shadow banking institutions.
• If the liquidity in the Shadow Banking System is needed for stability in the overall
financial system, an institutionalized guarantees for buyers of securitized assets to
sit alongside guarantees for retail depositors – An FDIC type regime for the
Securitization Market.
3. The Potential Future of Shadow Banking