3/22/2010. Chapter 11. Eight Categories of Bank Regulation. Economic Analysis of. Regulation Lecture 1. Asymmetric Information and Bank Regulation

Size: px
Start display at page:

Download "3/22/2010. Chapter 11. Eight Categories of Bank Regulation. Economic Analysis of. Regulation Lecture 1. Asymmetric Information and Bank Regulation"

Transcription

1 Chapter 11 Economic Analysis of Banking Regulation Lecture 1 Asymmetric Information and Bank Regulation Adverse Selection and Moral Hazard are the two concepts that underlie government regulation of the banking system Copyright 2007 Pearson Addison-Wesley. All rights reserved Eight Categories of Bank Regulation 1)Government safety net 2)Restrictions on bank assets 3)Capital requirements 4)Chartering and bank examination 5)Assesment of risk management 6)Disclosure requirements 7)Consumer protection 8)Restrictions on competition Copyright 2007 Pearson Addison-Wesley. All rights reserved

2 Government safety net The fact that depositors do not have information about the private loans leads to two reasons why the banking system may not function well: Because depositors don't know whether the managers are taking too much risk or not, they may be unwilling to put their money in a bank Depositors lack of info. about the quality of bank assets can lead to bank panics Following a negative shock, all depositors may rush to get their deposits back irrespective of knowing whether their bank is affected from the shock or not Copyright 2007 Pearson Addison-Wesley. All rights reserved Government safety net (cont d) Government safety net provides protection for depositors: FDIC: deposit insurance Payoff method: pay deposits up to $100,000 The goal of deposit insurance is to short circuit bank failures and contagion effect Copyright 2007 Pearson Addison-Wesley. All rights reserved Government safety net: Drawbacks What is the drawback? Commercial banks may be willing to take more risk if the government is there to save them from bankruptcy This is particularly a problem with developing countries with weak institutional environments Copyright 2007 Pearson Addison-Wesley. All rights reserved

3 Government safety net: Drawbacks Moral Hazard Depositors do not impose the discipline of marketplace (i.e. they don t withdraw funds if there is government insurance) Banks have an incentive to take on greater risk Adverse Selection Risk-lovers find banking attractive Gov. insurance may make it more appealing for risky entrepreneurs to enter the banking sector Those who are more likely to engage in risky activities are those who are more willing to take the insurance Copyright 2007 Pearson Addison-Wesley. All rights reserved Too Big to Fail Because the failure of a very large bank may trigger a financial crisis, the government may provide extra support for these banks (e.g. guarantees of repayment to large uninsured creditors) This may increase the M.H problem for big banks because depositors have little reason to monitor the bank Recent example: AIG (not a bank) Copyright 2007 Pearson Addison-Wesley. All rights reserved Restrictions on Asset Holding and Bank Capital Requirements These restrictions aim to decrease M.H risk that is increased due to government safety net regulations that restrict banks from holding risky assets (e.g. stocks) regulations to promote diversification regulations to ensure sufficient bank capital Copyright 2007 Pearson Addison-Wesley. All rights reserved

4 Regulations to ensure sufficient bank capital 1) Leverage ratio : Assets/Capital : set a minimum leverage ratio 3% 2) Basel Accord (risk based capital requirements): Banks hold as capital at least 8% of their risk-weighted assets Weights: -little default risk (e.g. government securities of OECD) 0% -claims on banks 20% -municipal bonds and residential mortgages 50% -Customer loans 100% Copyright 2007 Pearson Addison-Wesley. All rights reserved Drawbacks of Basel Accord The weighting scheme can not account for actual risk accurately. In order to get the most out of their capital requirements banks tended d to give more loans to more risky customers rather than less risky ones (which is not differentiated in the weighting scheme above): regulatory arbitrage Basel 2 Accord (too complex) Copyright 2007 Pearson Addison-Wesley. All rights reserved Bank (Prudential) Supervision: Chartering and Examination Chartering refers to screening out proposals for new banks to prevent undesirable people from controlling them. This is a measure against Adverse Selection If the chartering agency decides that the bank is likely to be sound, it gives the bank a charter and the bank can be formed. Once the charter is received, the bank is required to file periodic call reports that reveal the banks assets and liabilities, income dividends, etc. Copyright 2007 Pearson Addison-Wesley. All rights reserved

5 The bank is also subject to examination by regulatory agencies annually to prevent moral hazard. Asset quality Management Earnings Liquidity Sensitivity to market risk Copyright 2007 Pearson Addison-Wesley. All rights reserved Assessment of Risk Management The traditional way of evaluating a bank s position at a point in time proved to be inefficient Today s world of financial innovations and new markets make it very easy for a bank to become insolvent. This led to the rise of Risk Management which involves an evaluation of the bank s management process with respect to controlling risk. Copyright 2007 Pearson Addison-Wesley. All rights reserved Assessment of Risk Management Four elements of risk management: Quality of oversight provided (internally) Adequacy of policies (to limit risky activities) Quality of the risk measurement and monitoring systems Adequacy of internal controls Interest-rate risk limits Internal policies and procedures Internal management and monitoring Implementation of stress testing and Value-at risk (VAR) Copyright 2007 Pearson Addison-Wesley. All rights reserved

6 Disclosure Requirements Requirements to adhere to standard accounting principles and to disclose wide range of information This helps the markets assess the bank s portfolio and exposure to risk. Copyright 2007 Pearson Addison-Wesley. All rights reserved Consumer Protection Lenders are required to provide info. to consumers about the cost of borrowing and total finance changes associated with a loan. Same rules for credit card users. Copyright 2007 Pearson Addison-Wesley. All rights reserved Restrictions on Competition Competition decreases profitability Banks may try to maintain the same profit level by engaging in riskier activities Moral hazard Gov. imposes regulation to limit competition in the banking industry. Copyright 2007 Pearson Addison-Wesley. All rights reserved

7 What is the drawback? Limited competition leads to: higher charges on consumers decrease the efficiency of the banking sector Trend towards removal of restrictions Question: Which way is this trend going to change after the recent crisis? Copyright 2007 Pearson Addison-Wesley. All rights reserved Summary Understanding the theory behind regulation does not mean that regulation and supervision is easy in practice. Several Reasons: i) financial institutions have strong motives to avoid existing regulations ii) difficulty in supervising : small differences in details may have unintended consequences iii) regulators may face political pressures to not to do their jobs Copyright 2007 Pearson Addison-Wesley. All rights reserved Copyright 2007 Pearson Addison-Wesley. All rights reserved

8 Copyright 2007 Pearson Addison-Wesley. All rights reserved Copyright 2007 Pearson Addison-Wesley. All rights reserved

Chapter 11. Economic Analysis of Banking Regulation

Chapter 11. Economic Analysis of Banking Regulation Chapter 11 Economic Analysis of Banking Regulation How Asymmetric Information Explains Banking Regulation 1.Government safety net and deposit insurance prevents bank runs due to asymmetric information

More information

What s on a bank s balance sheet?

What s on a bank s balance sheet? The Capital Markets Initiative January 2014 TO: Interested Parties FROM: David Hollingsworth and Lauren Oppenheimer RE: Capital Requirements and Bank Balance Sheets: Reviewing the Basics What s on a bank

More information

Basel II, Pillar 3 Disclosure for Sun Life Financial Trust Inc.

Basel II, Pillar 3 Disclosure for Sun Life Financial Trust Inc. Basel II, Pillar 3 Disclosure for Sun Life Financial Trust Inc. Introduction Basel II is an international framework on capital that applies to deposit taking institutions in many countries, including Canada.

More information

Homework Assignment #5: Answer Key

Homework Assignment #5: Answer Key Homework Assignment #5: Answer Key Write out solutions to the following problems from your textbook. Be sure to show your work on an math and use figures or graphs where appropriate. Chapter 11: #1 Describe

More information

Financial-Institutions Management. Solutions 5. Chapter 18: Liability and Liquidity Management Reserve Requirements

Financial-Institutions Management. Solutions 5. Chapter 18: Liability and Liquidity Management Reserve Requirements Solutions 5 Chapter 18: Liability and Liquidity Management Reserve Requirements 8. City Bank has estimated that its average daily demand deposit balance over the recent 14- day reserve computation period

More information

a. If the risk premium for a given customer is 2.5 percent, what is the simple promised interest return on the loan?

a. If the risk premium for a given customer is 2.5 percent, what is the simple promised interest return on the loan? Selected Questions and Exercises Chapter 11 2. Differentiate between a secured and an unsecured loan. Who bears most of the risk in a fixed-rate loan? Why would bankers prefer to charge floating rates,

More information

Key learning points I

Key learning points I Key learning points I What do banks do? Banks provide three core banking services Deposit collection Payment arrangement Underwrite loans Banks may also offer financial services such as cash, asset, and

More information

Economic Analysis of Banking Regulation

Economic Analysis of Banking Regulation CH11 260-286.qxp 4/4/03 2:12 PM Page 260 11 Chapter Economic Analysis of Banking Regulation PREVIEW As we have seen in the previous chapters, the financial system is among the most heavily regulated sectors

More information

Ch 19 Deposit Insurance Overview

Ch 19 Deposit Insurance Overview Ch 19 Deposit Insurance Overview The focus of this chapter is the mechanisms designed to protect FIs from liquidity crises. Deposit Insurance Funds Securities Investors Protection Corporation Pension Benefit

More information

CHAPTER 2. Overview of the Financial System. Copyright 2012 Pearson Prentice Hall. All rights reserved.

CHAPTER 2. Overview of the Financial System. Copyright 2012 Pearson Prentice Hall. All rights reserved. CHAPTER 2 Overview of the Financial System Copyright 2012 Pearson Prentice Hall. All rights reserved. Chapter Preview Suppose you want to start a business manufacturing a household cleaning robot, but

More information

Conceptual Framework: What Does the Financial System Do? 1. Financial contracting: Get funds from savers to investors

Conceptual Framework: What Does the Financial System Do? 1. Financial contracting: Get funds from savers to investors Conceptual Framework: What Does the Financial System Do? 1. Financial contracting: Get funds from savers to investors Transactions costs Contracting costs (from asymmetric information) Adverse Selection

More information

COMPUTERSHARE TRUST COMPANY OF CANADA BASEL III PILLAR 3 DISCLOSURES

COMPUTERSHARE TRUST COMPANY OF CANADA BASEL III PILLAR 3 DISCLOSURES COMPUTERSHARE TRUST COMPANY OF CANADA BASEL III PILLAR 3 DISCLOSURES December 31, 2013 Table of Contents Scope of Application... 3 Capital Structure... 3 Capital Adequacy... 3 Credit Risk... 4 Market Risk...

More information

ZAG BANK BASEL II & III PILLAR 3 DISCLOSURES. December 31, 2014

ZAG BANK BASEL II & III PILLAR 3 DISCLOSURES. December 31, 2014 ZAG BANK BASEL II & III PILLAR 3 DISCLOSURES December 31, 2014 Zag Bank (the Bank ) is required to make certain disclosures to meet the requirements of the Office of the Superintendent of Financial Institutions

More information

Financial Research Advisory Committee Liquidity and Funding Working Group. August 1, 2013

Financial Research Advisory Committee Liquidity and Funding Working Group. August 1, 2013 Financial Research Advisory Committee Liquidity and Funding Working Group August 1, 2013 Executive Summary Overview The Liquidity and Funding Working Group of the FSRM focused its work efforts around the

More information

Chapter 2. Practice Problems. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 2. Practice Problems. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 2 Practice Problems MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Assume that you borrow $2000 at 10% annual interest to finance a new

More information

BS2551 Money Banking and Finance. Commercial Bank Risk Management. - Competition and deregulation

BS2551 Money Banking and Finance. Commercial Bank Risk Management. - Competition and deregulation BS2551 Money Banking and Finance Commercial Bank Risk Management Need for Risk Management Increased complexity of risks faced by banks since 1970s due to: - Competition and deregulation - Asset price volatility

More information

FSB/IOSCO Consultative Document - Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions

FSB/IOSCO Consultative Document - Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions CAPITAL GROUP'" The Capital Group Companies, Inc. 333 South Hope Street Los Angeles, California 90071-1406 Secretariat of the Financial Stability Board c/o Bank for International Settlements CH -4002 Basel,

More information

PROPERTY/CASUALTY INSURANCE AND SYSTEMIC RISK

PROPERTY/CASUALTY INSURANCE AND SYSTEMIC RISK PROPERTY/CASUALTY INSURANCE AND SYSTEMIC RISK Steven N. Weisbart, Ph.D., CLU Chief Economist President April 2011 INTRODUCTION To prevent another financial meltdown like the one that affected the world

More information

A Proposal to Resolve the Distress of Large and Complex Financial Institutions

A Proposal to Resolve the Distress of Large and Complex Financial Institutions A Proposal to Resolve the Distress of Large and Complex Financial Institutions Viral V Acharya, Barry Adler and Matthew Richardson 1 Due to the difficulty in resolving bankruptcies of large multinational

More information

Risk management in banks

Risk management in banks Econ 4335 Lecture 13 University of Oslo April 26, 2010 Types of risk Credit risk (default) Exchange rate risk Market risk Counterparty risk Operational risk Mitigating risks Risk pricing Diversification

More information

EC 341 Monetary and Banking Institutions, Boston University Summer 2, 2012 Homework 3 Due date: Tuesday, July 31, 6:00 PM.

EC 341 Monetary and Banking Institutions, Boston University Summer 2, 2012 Homework 3 Due date: Tuesday, July 31, 6:00 PM. EC 341 Monetary and Banking Institutions, Boston University Summer 2, 2012 Homework 3 Due date: Tuesday, July 31, 6:00 PM. Problem 1 Questions 1, 4, 6, 8, 12, 13, 16, 18, 22, and 23 from Chapter 8. Solutions:

More information

BRUNEL UNIVERSITY Economics and Finance EC1004 LECTURE 10. Issues in commercial bank risk management. Reading: Madura Chapter 19

BRUNEL UNIVERSITY Economics and Finance EC1004 LECTURE 10. Issues in commercial bank risk management. Reading: Madura Chapter 19 BRUNEL UNIVERSITY Economics and Finance EC1004 LECTURE 10 Issues in commercial bank risk management Reading: Madura Chapter 19 We are going to discuss the overall nature of risk control in banks and related

More information

I. Introduction. II. Financial Markets (Direct Finance) A. How the Financial Market Works. B. The Debt Market (Bond Market)

I. Introduction. II. Financial Markets (Direct Finance) A. How the Financial Market Works. B. The Debt Market (Bond Market) University of California, Merced EC 121-Money and Banking Chapter 2 Lecture otes Professor Jason Lee I. Introduction In economics, investment is defined as an increase in the capital stock. This is important

More information

Investing in unlisted property schemes?

Investing in unlisted property schemes? Investing in unlisted property schemes? Independent guide for investors about unlisted property schemes This guide is for you, whether you re an experienced investor or just starting out. Key tips from

More information

Investing in mortgage schemes?

Investing in mortgage schemes? Investing in mortgage schemes? Independent guide for investors about unlisted mortgage schemes This guide is for you, whether you re an experienced investor or just starting out. Key tips from ASIC about

More information

Deposit Insurance. Seminar for Sr. Bank Supervisors. F. Montes-Negret, Sector Manager, LCSFF The World Bank, Oct. 24, 2002

Deposit Insurance. Seminar for Sr. Bank Supervisors. F. Montes-Negret, Sector Manager, LCSFF The World Bank, Oct. 24, 2002 Deposit Insurance Seminar for Sr. Bank Supervisors F. Montes-Negret, Sector Manager, LCSFF The World Bank, Oct. 24, 2002 Agenda A. Introduction B. The Theory: Deposit Insurance & Risk Objectives Pros and

More information

FIN 683 Financial Institutions Management Liquidity Management and Deposit Insurance

FIN 683 Financial Institutions Management Liquidity Management and Deposit Insurance FIN 683 Financial Institutions Management Liquidity Management and Deposit Insurance Professor Robert B.H. Hauswald Kogod School of Business, AU Bank Runs Can arise due to concern about: Bank solvency

More information

CONSULTATION PAPER P016-2006 October 2006. Proposed Regulatory Framework on Mortgage Insurance Business

CONSULTATION PAPER P016-2006 October 2006. Proposed Regulatory Framework on Mortgage Insurance Business CONSULTATION PAPER P016-2006 October 2006 Proposed Regulatory Framework on Mortgage Insurance Business PREFACE 1 Mortgage insurance protects residential mortgage lenders against losses on mortgage loans

More information

Chapter 13 Money and Banking

Chapter 13 Money and Banking Chapter 13 Money and Banking Multiple Choice Questions Choose the one alternative that best completes the statement or answers the question. 1. The most important function of money is (a) as a store of

More information

Market Risk Capital Disclosures Report. For the Quarter Ended March 31, 2013

Market Risk Capital Disclosures Report. For the Quarter Ended March 31, 2013 MARKET RISK CAPITAL DISCLOSURES REPORT For the quarter ended March 31, 2013 Table of Contents Section Page 1 Morgan Stanley... 1 2 Risk-based Capital Guidelines: Market Risk... 1 3 Market Risk... 1 3.1

More information

MORGAN STANLEY Financial Supplement - 4Q 2015 Table of Contents

MORGAN STANLEY Financial Supplement - 4Q 2015 Table of Contents Page # MORGAN STANLEY Financial Supplement - 4Q 2015 Table of Contents 1. Quarterly Consolidated Financial Summary 2. Quarterly Consolidated Income Statement Information 3. Quarterly Consolidated Financial

More information

the actions of the party who is insured. These actions cannot be fully observed or verified by the insurance (hidden action).

the actions of the party who is insured. These actions cannot be fully observed or verified by the insurance (hidden action). Moral Hazard Definition: Moral hazard is a situation in which one agent decides on how much risk to take, while another agent bears (parts of) the negative consequences of risky choices. Typical case:

More information

HOUSING FINANCE IN TRANSITION ECONOMIES

HOUSING FINANCE IN TRANSITION ECONOMIES HOUSING FINANCE IN TRANSITION ECONOMIES OECD Workshop Warsaw, Poland December 5-6, 5 2002 Loïc Chiquier The World Bank 1 Challenge in Transition Economies! Key for growth, poverty, wealth (75 wealth),

More information

Bank Lending. -Doing due diligence before making loans in order to separate the wheat from the chaff; -Work-out/foreclose when loans go bad.

Bank Lending. -Doing due diligence before making loans in order to separate the wheat from the chaff; -Work-out/foreclose when loans go bad. Bank Lending A. Moral Hazard and Adverse Selection in Financial Contracting As we saw in the first week, a key role of intermediaries is to transform illiquid loans into liquid deposits. Loans are illiquid

More information

Federal Reserve Bank of Atlanta. Components of a Sound Credit Risk Management Program

Federal Reserve Bank of Atlanta. Components of a Sound Credit Risk Management Program Federal Reserve Bank of Atlanta Components of a Sound Credit Risk Management Program LOAN POLICY The loan policy is the foundation for maintaining sound asset quality because it outlines the organization

More information

Basel II. Tamer Bakiciol Nicolas Cojocaru-Durand Dongxu Lu

Basel II. Tamer Bakiciol Nicolas Cojocaru-Durand Dongxu Lu Basel II Tamer Bakiciol Nicolas Cojocaru-Durand Dongxu Lu Roadmap Background of Banking Regulation and Basel Accord Basel II: features and problems The Future of Banking regulations Background of Banking

More information

Bank Regulatory Capital Quick Reference. Very simply: to limit risk and reduce our potential, unexpected losses.

Bank Regulatory Capital Quick Reference. Very simply: to limit risk and reduce our potential, unexpected losses. Bank Regulatory Capital: Why We Need It Very simply: to limit risk and reduce our potential, unexpected losses. Unlike normal companies, banks are in the business of issuing loans to individuals and businesses

More information

APRA Prudential Standard APS 330 Capital and Credit Risk Disclosures 31 March 2014

APRA Prudential Standard APS 330 Capital and Credit Risk Disclosures 31 March 2014 Australian Defence Credit Union Limited, as an Authorised Deposit-Taking Institution (ADI), is regulated by the Australian Prudential Regulation Authority (APRA). APRA is the prudential regulator of the

More information

Research on Liquidity Risk Information Disclosure of China s Commercial Banks

Research on Liquidity Risk Information Disclosure of China s Commercial Banks Research on Liquidity Risk Information of China s Commercial Banks SHI Yanli 1, GUO Xuemeng 1, SUN Yuanyuan 1,2 1. School of Economics and Management, Beijing Jiaotong University, China, 100044 2. Business

More information

Basel II Pillar 3 Market Discipline and Transparency. Simon Topping Hong Kong Monetary Authority

Basel II Pillar 3 Market Discipline and Transparency. Simon Topping Hong Kong Monetary Authority Basel II Pillar 3 Market Discipline and Transparency Simon Topping Hong Kong Monetary Authority 1 Outline of Presentation Market discipline and transparency the theory The challenges of achieving market

More information

FDIC Liquidity Management. Tony Olbrich Regional President U.S. Bank

FDIC Liquidity Management. Tony Olbrich Regional President U.S. Bank FDIC Liquidity Management Tony Olbrich Regional President U.S. Bank 0 Commercial Banks Checking and savings deposit accounts Consumer loans Business & Commercial Loans Payment Services Trust or fiduciary

More information

A guide to margin borrowing

A guide to margin borrowing A guide to margin borrowing Before you borrow on margin, it is important to review your financial situation, investment objectives, risk tolerance, time horizon, diversification needs, and liquidity objectives

More information

Practice set and Solutions 1

Practice set and Solutions 1 2013-11-07 Practice set and Solutions 1 Financial Markets and Institutions Risk Management What to do with this practice set? Practice sets are handed out to help students master the material of the course

More information

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS Peter N. Ireland Department of Economics Boston College irelandp@bc.edu http://www2.bc.edu/~irelandp/ec261.html Chapter 9: Banking and the Management

More information

5850 REGULATION OF BANKING AND FINANCIAL MARKETS

5850 REGULATION OF BANKING AND FINANCIAL MARKETS 5850 REGULATION OF BANKING AND FINANCIAL MARKETS Dirk Heremans Professor of Monetary Economics at the Center for Economic Studies, and of Law and Economics at the Law School of the Catholic University

More information

Disclosure 17 OffV (Credit Risk Mitigation Techniques)

Disclosure 17 OffV (Credit Risk Mitigation Techniques) Disclosure 17 OffV (Credit Risk Mitigation Techniques) The Austrian Financial Market Authority (FMA) and the Oesterreichsiche Nationalbank (OeNB) have assessed UniCredit Bank Austria AG for the use of

More information

Press Brief. 16 th 20, :30 p.m.

Press Brief. 16 th 20, :30 p.m. Press Brief Central Bank of Trinidad and Tobago Main Highlights from the Financial Stability Report, November 2010 16 th Floor Conferencee Facilities Monday December 20, 2010 12:30 p.m. The domestic financial

More information

Measurement of Banks Exposure to Interest Rate Risk and Principles for the Management of Interest Rate Risk respectively.

Measurement of Banks Exposure to Interest Rate Risk and Principles for the Management of Interest Rate Risk respectively. INTEREST RATE RISK IN THE BANKING BOOK Over the past decade the Basel Committee on Banking Supervision (the Basel Committee) has released a number of consultative documents discussing the management and

More information

Mortgage Finance Under Basel III Raymond Natter July, 2012

Mortgage Finance Under Basel III Raymond Natter July, 2012 Mortgage Finance Under Basel III Raymond Natter July, 2012 The Basel Committee The Basel Committee on Banking Supervision is an informal organization consisting of the chief banking regulatory authorities

More information

Capital adequacy ratios for banks - simplified explanation and

Capital adequacy ratios for banks - simplified explanation and Page 1 of 9 Capital adequacy ratios for banks - simplified explanation and example of calculation Summary Capital adequacy ratios are a measure of the amount of a bank's capital expressed as a percentage

More information

ARAB NATIONAL BANK BASEL III LIQUIDITY COVERAGE RATIO QUALITATIVE DISCLOSURE

ARAB NATIONAL BANK BASEL III LIQUIDITY COVERAGE RATIO QUALITATIVE DISCLOSURE ARAB NATIONAL BANK BASEL III LIQUIDITY COVERAGE RATIO QUALITATIVE DISCLOSURE JUNE 2015 1 Table of Contents Liquidity Coverage Ratio Qualitative Disclosure... 3 Liquidity Risk Management... 3 Funding strategy...

More information

Quarterly Financial Supplement - 1Q 2016

Quarterly Financial Supplement - 1Q 2016 Quarterly Financial Supplement - 1Q 2016 Page # Consolidated Financial Summary... 1 Consolidated Income Statement Information... 2 Consolidated Financial Information and Statistical Data... 3 Consolidated

More information

Understanding Financial Crises: A Developing Country Perspective

Understanding Financial Crises: A Developing Country Perspective Understanding Financial Crises: A Developing Country Perspective by Frederic S. Mishkin Federal Reserve Bank of New York, Graduate School of Business, Columbia University and National Bureau of Economic

More information

DISCLOSURE ON CAPITAL ADEQUACY & MARKET DISCIPLINE (CAMD)

DISCLOSURE ON CAPITAL ADEQUACY & MARKET DISCIPLINE (CAMD) DISCLOSURE ON CAPITAL ADEQUACY & MARKET DISCIPLINE (CAMD) A) Scope of Application : (a) This guidelines applies to Delta Brac Housing Finance Corporation Ltd. (b) (c) DBH has no subsidiary companies. Not

More information

Bank of Queensland Limited

Bank of Queensland Limited APRA 30 April 2012 The Basel II Capital Accord principles took effect in Australia on 1 January 2008. The framework for the application of Basel II in Australia is comprised of three pillars: Pillar 1:

More information

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS Peter N. Ireland Department of Economics Boston College irelandp@bc.edu http://www2.bc.edu/~irelandp/ec261.html Chapter 2: An Overview of the Financial

More information

Risk-Based Capital. Overview

Risk-Based Capital. Overview Risk-Based Capital Definition: Risk-based capital (RBC) represents an amount of capital based on an assessment of risks that a company should hold to protect customers against adverse developments. Overview

More information

Business Studies - Financial Planning and Management Study Notes. Financial Planning and Management Study Notes:

Business Studies - Financial Planning and Management Study Notes. Financial Planning and Management Study Notes: Business Studies - Financial Planning and Management Study Notes Financial Planning and Management Study Notes: The Role of Financial Planning: The strategic role of financial management: Organisational

More information

Risk Based Capital Guidelines; Market Risk. The Bank of New York Mellon Corporation Market Risk Disclosures. As of December 31, 2013

Risk Based Capital Guidelines; Market Risk. The Bank of New York Mellon Corporation Market Risk Disclosures. As of December 31, 2013 Risk Based Capital Guidelines; Market Risk The Bank of New York Mellon Corporation Market Risk Disclosures As of December 31, 2013 1 Basel II.5 Market Risk Annual Disclosure Introduction Since January

More information

The International Certificate in Banking Risk and Regulation (ICBRR)

The International Certificate in Banking Risk and Regulation (ICBRR) The International Certificate in Banking Risk and Regulation (ICBRR) The ICBRR fosters financial risk awareness through thought leadership. To develop best practices in financial Risk Management, the authors

More information

AN EMPIRICAL EXAMINATION OF DEPOSIT INSURANCE DECISIONS. Ei-Run Dga - Intro. University of Nebraska, 1984

AN EMPIRICAL EXAMINATION OF DEPOSIT INSURANCE DECISIONS. Ei-Run Dga - Intro. University of Nebraska, 1984 AN EMPIRICAL EXAMINATION OF DEPOSIT INSURANCE DECISIONS Ei-Run Dga - Intro University of Nebraska, 1984 Advisers: Manferd O. Peterson and Robin Grieves Deposit insurance is implicitly or explicitly compulsory

More information

Morgan Stanley Reports Fourth Quarter and Full Year 2015:

Morgan Stanley Reports Fourth Quarter and Full Year 2015: Media Relations: Michele Davis 212-761-9621 Investor Relations: Kathleen McCabe 212-761-4469 Morgan Stanley Reports Fourth Quarter and Full Year 2015: Fourth Quarter Net Revenues of $7.7 Billion and Earnings

More information

Draft Guidance Notes on Behavioural Adjustments to Banks Liquidity Positions

Draft Guidance Notes on Behavioural Adjustments to Banks Liquidity Positions Draft Guidance Notes on Behavioural Adjustments to Banks Liquidity Positions November 2005 Contents Page No. 1 Rationale for Behavioural Adjustments 3 2 Overview of the Commission s Approach to 4 Behavioural

More information

Funds Transfer Pricing A gateway to enhanced business performance

Funds Transfer Pricing A gateway to enhanced business performance Funds Transfer Pricing A gateway to enhanced business performance Jean-Philippe Peters Partner Governance, Risk & Compliance Deloitte Luxembourg Arnaud Duchesne Senior Manager Governance, Risk & Compliance

More information

House Committee on Financial Services. November 29, 2012

House Committee on Financial Services. November 29, 2012 House Committee on Financial Services Joint Hearing Before the Subcommittee on Financial Institutions and Consumer Credit and the Subcommittee on Insurance, Housing and Community Opportunity Entitled Examining

More information

Banks, Liquidity Management, and Monetary Policy

Banks, Liquidity Management, and Monetary Policy Discussion of Banks, Liquidity Management, and Monetary Policy by Javier Bianchi and Saki Bigio Itamar Drechsler NYU Stern and NBER Bu/Boston Fed Conference on Macro-Finance Linkages 2013 Objectives 1.

More information

The recent financial crisis is reopening the debate about how

The recent financial crisis is reopening the debate about how Kansas Banking in the 1930s: The Deposit Insurance Choice and Implications for Public Policy By Kenneth Spong and Kristen Regehr The recent financial crisis is reopening the debate about how much public

More information

CAROLINA FINANCIAL CORPORATION

CAROLINA FINANCIAL CORPORATION CAROLINA FINANCIAL CORPORATION October 18, 2012 Jennifer J. Johnson Secretary Board of Governors ofthe Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551 Office of

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) When a new depositor opens a checking account at the First National Bank, the bank's

More information

Guidelines on Investment in Shares, Interest-in-Shares and Collective Investment Schemes

Guidelines on Investment in Shares, Interest-in-Shares and Collective Investment Schemes Interest-in-Shares and Collective BNM/RH/GL 001-30 Prudential Financial Policy Department PART A INTRODUCTION AND OVERVIEW... 1 1. Overview of the Guidelines... 1 2. Definitions... 1 3. Legal Enforceability

More information

Bankruptcy law, bank liquidations and the case of Brazil. Aloisio Araujo IMPA, FGV Banco Central do Brasil May 6 th, 2013

Bankruptcy law, bank liquidations and the case of Brazil. Aloisio Araujo IMPA, FGV Banco Central do Brasil May 6 th, 2013 Bankruptcy law, bank liquidations and the case of Brazil Aloisio Araujo IMPA, FGV Banco Central do Brasil May 6 th, 2013 Description of the talk A. Corporate bankruptcy law reform in Brazil How bad is

More information

Compensation and Risk Incentives in Banking

Compensation and Risk Incentives in Banking Compensation and Risk Incentives in Banking By Jian Cai, Kent Cherny, and Todd Milbourn Abstract In this Economic Commentary, we review why executive compensation contracts are often structured the way

More information

Fixed Income Strategy

Fixed Income Strategy Patrick McCluskey, Senior Fixed Income Strategist Fixed Income Strategy May 23, 2016 A Guide to Investing in Community Bank Preferred Stock What is Preferred Stock? Preferred stock is a perpetual fixed-income

More information

Basel Committee on Banking Supervision. Consultative Document. Net Stable Funding Ratio disclosure standards. Issued for comment by 6 March 2015

Basel Committee on Banking Supervision. Consultative Document. Net Stable Funding Ratio disclosure standards. Issued for comment by 6 March 2015 Basel Committee on Banking Supervision Consultative Document Net Stable Funding Ratio disclosure standards Issued for comment by 6 March 2015 December 2014 This publication is available on the BIS website

More information

VISUAL 1 TERMS OF MODERN FINANCIAL MARKETS

VISUAL 1 TERMS OF MODERN FINANCIAL MARKETS VISUAL 1 TERMS OF MODERN FINANCIAL MARKETS Instruments Asset-backed security Credit default swap Bond Common stock Mortgage-backed security Mutual fund Option Futures contract Subprime mortgage Institutions

More information

SMALL BUSINESS DEVELOPMENT CENTER RM. 032

SMALL BUSINESS DEVELOPMENT CENTER RM. 032 SMALL BUSINESS DEVELOPMENT CENTER RM. 032 FINANCING THROUGH COMMERCIAL BANKS Revised January, 2013 Adapted from: National Federation of Independent Business report Steps to Small Business Financing Jeffrey

More information

Key Points to Borrowing Money

Key Points to Borrowing Money Key Points to Borrowing Money Borrowing money is one of the most common sources of funding for a small business, but obtaining a loan isn't always easy. Before you approach your banker for a loan, it is

More information

Towards a more stable banking system next steps for the Basel Committee

Towards a more stable banking system next steps for the Basel Committee Towards a more stable banking system next steps for the Basel Committee Centre for Business and Policy Studies/SIFR Finance panel 3 October 2014 Stefan Ingves Governor of the Riksbank and Chairman of the

More information

Reporting and Interpreting Liabilities Irwin/McGraw-Hill

Reporting and Interpreting Liabilities Irwin/McGraw-Hill Chapter 9 Reporting and Interpreting Liabilities Business Background The acquisition of assets is financed from two sources: Debt - funds from creditors Equity - funds from owners Business Background The

More information

Basel III Pillar 3 CAPITAL ADEQUACY AND RISK DISCLOSURES AS AT 30 SEPTEMBER 2014

Basel III Pillar 3 CAPITAL ADEQUACY AND RISK DISCLOSURES AS AT 30 SEPTEMBER 2014 Basel III Pillar 3 CAPITAL ADEQUACY AND RISK DISCLOSURES AS AT 30 SEPTEMBER 2014 COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 5 NOVEMBER 2014 1 Scope of Application The Commonwealth Bank of Australia

More information

The Failure of Capital Corporate Federal Credit union

The Failure of Capital Corporate Federal Credit union United States General Accounting Office Testimony Before the Committee on Banking, Housing, and Urban Affairs United States Senate For Release on Delivery Expected at 1090 a.m., EST on Tuesday February

More information

Understanding a Firm s Different Financing Options. A Closer Look at Equity vs. Debt

Understanding a Firm s Different Financing Options. A Closer Look at Equity vs. Debt Understanding a Firm s Different Financing Options A Closer Look at Equity vs. Debt Financing Options: A Closer Look at Equity vs. Debt Business owners who seek financing face a fundamental choice: should

More information

What is new in Basel 3:

What is new in Basel 3: Camera dei Deputati 17 Indagine conoscitiva 4 ALLEGATO What is new in Basel 3: How it will influence market participants Krishnan Ramadurai Managing Director Camera dei Deputati 18 Indagine conoscitiva

More information

Guidelines. ADI Authorisation Guidelines. www.apra.gov.au Australian Prudential Regulation Authority. April 2008

Guidelines. ADI Authorisation Guidelines. www.apra.gov.au Australian Prudential Regulation Authority. April 2008 Guidelines ADI Authorisation Guidelines April 2008 www.apra.gov.au Australian Prudential Regulation Authority Disclaimer and copyright These guidelines are not legal advice and users are encouraged to

More information

Money, Banking, and the Financial Sector

Money, Banking, and the Financial Sector Introduction Money, Banking, and the Financial Sector Chapter 13 Real goods and services are exchanged in the real sector of the economy. For every real transaction, there is a financial transaction that

More information

General Bank of Canada. Pillar Three Disclosures

General Bank of Canada. Pillar Three Disclosures General Bank of Canada Pillar Three Disclosures The Basel Committee of Banking Supervision sets out expectations for the public qualitative disclosure of a bank s risk management objectives and policies,

More information

Lecture 10: International banking

Lecture 10: International banking Lecture 10: International banking The sessions so far have focused on banking in a domestic context. In this lecture we are going to look at the issues which arise from the internationalisation of banking,

More information

BASEL III PILLAR 3 CAPITAL ADEQUACY AND RISKS DISCLOSURES AS AT 30 SEPTEMBER 2015

BASEL III PILLAR 3 CAPITAL ADEQUACY AND RISKS DISCLOSURES AS AT 30 SEPTEMBER 2015 BASEL III PILLAR 3 CAPITAL ADEQUACY AND RISKS DISCLOSURES AS AT 30 SEPTEMBER 2015 COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 5 NOVEMBER 2015 This page has been intentionally left blank Introduction

More information

Many Banks and Thrifts Overly Reliant on Hot Money Deposits:

Many Banks and Thrifts Overly Reliant on Hot Money Deposits: Many Banks and Thrifts Overly Reliant on Hot Money Deposits: Why an FDIC Coverage Increase to $250,000 May Not Stop Bank Runs and Could Cause Other Collateral Damage Submitted by Martin D. Weiss, Ph.D.

More information

Investing With Whole Life Participating Insurance For Affluent Families

Investing With Whole Life Participating Insurance For Affluent Families Investing With Whole Life Participating Insurance For Affluent Families By Norm Ayoub, Director, Business Advisory Board HighView Financial Group November 2011 Overview: The foundation of any good financial

More information

Cash Flow. Summary. Cash Flow. Louise Söderberg, 2010-10-15

Cash Flow. Summary. Cash Flow. Louise Söderberg, 2010-10-15 Cash Flow Louise Söderberg, 2010-10-15 Summary The statement of cash flow reports the cash generated and used during the time interval specified in its headings. A cash flow analysis is a method of checking

More information

Saving and Investing. Chapter 11 Section Main Menu

Saving and Investing. Chapter 11 Section Main Menu Saving and Investing How does investing contribute to the free enterprise system? How does the financial system bring together savers and borrowers? How do financial intermediaries link savers and borrowers?

More information

CHILE FINANCIAL SECTOR ASSESSMENT PROGRAM

CHILE FINANCIAL SECTOR ASSESSMENT PROGRAM FINANCIAL SECTOR ASSESSMENT PROGRAM CHILE TECHNICAL NOTE: THE BANKING SECTOR RISK EXPOSURES AND INDUSTRY PRACTICES CONDUCIVE TO EFFECTIVE RISK BASED SUPERVISION NOVEMBER 2004 INTERNATIONAL MONETARY FUND

More information

Accounts payable Money which you owe to an individual or business for goods or services that have been received but not yet paid for.

Accounts payable Money which you owe to an individual or business for goods or services that have been received but not yet paid for. A Account A record of a business transaction. A contract arrangement, written or unwritten, to purchase and take delivery with payment to be made later as arranged. Accounts payable Money which you owe

More information

Bank Capital Adequacy under Basel III

Bank Capital Adequacy under Basel III Bank Capital Adequacy under Basel III Objectives The overall goal of this two-day workshop is to provide participants with an understanding of how capital is regulated under Basel II and III and appreciate

More information

Understanding Financial Consolidation

Understanding Financial Consolidation Keynote Address Roger W. Ferguson, Jr. Understanding Financial Consolidation I t is my pleasure to speak with you today, and I thank Bill McDonough and the Federal Reserve Bank of New York for inviting

More information

Jumping Hurdles: Adopting Basel II Standards in Islamic Banks. By Abul Hassan

Jumping Hurdles: Adopting Basel II Standards in Islamic Banks. By Abul Hassan Jumping Hurdles: Adopting Basel II Standards in Islamic Banks By Abul Hassan The Basel Committee on Banking Supervision has adopted a new accord, the Basel II. The accord aims to establish market discipline,

More information

EXTRACT FROM. Common shares issued by the bank For an instrument to be included in CET1 capital it must meet all of the criteria that follow.

EXTRACT FROM. Common shares issued by the bank For an instrument to be included in CET1 capital it must meet all of the criteria that follow. EXTRACT FROM BASEL III: A GLOBAL REGULATORY FRAMEWORK FOR MORE RESILIENT BANKS AND BANKING SYSTEMS DEFINITIONS OF COMMON EQUITY TIER 1, ADDITIONAL TIER I AND TIER II CAPITAL I. Common Equity Tier 1 (CET1)

More information

Risk Management Programme Guidelines

Risk Management Programme Guidelines Risk Management Programme Guidelines Submissions are invited on these draft Reserve Bank risk management programme guidelines for non-bank deposit takers. Submissions should be made by 29 June 2009 and

More information