Do we know what to do?
|
|
- Evelyn Hampton
- 8 years ago
- Views:
Transcription
1 Banking in flux: Do we know what to do? Arnoud W. A. Boot University of Amsterdam and CEPR Segovia,
2 Agenda My assessment of fundamental changes in financial sector Key information technology Inadequacy of current policy response, with emphasis to EU/Euro area Do we understand true value creation in financial sector? 2
3 Issues Effect of information technology Via deepening of financial markets and financial innovations: extreme tradability and changeability Risk profile can be changed instantaneously Institutions and markets more and more intertwined Risks via Opportunistic behavior Herding behavior (collective euphoria ) Amplification of risk via interbank and financial market linkages 3
4 Issues 2 Governance problem Ineffectiveness market discipline More broadly perverse incentives coming from financial market Banks suffer from cost of capital fallacy Pricing distorted we are operating in bad equilibrium Bank choices worsen complexity problem Many banks continue to go for size, conglomerate model Intra-financial sector exposures have mushroomed 4
5 More on marketability, changeability and commitment From finance literature we know that creating trading opportunities also has a dark-side Jacklin (1987) on Diamond-Dybvig (1983) liquidity transformation Bhide (1993) on dark-side of liquidity Myers and Rajan (1998) on paradox of liquidity Boot-Gopalan-Thakor (JF, 2008) on desirability stable shareholder base 5
6 Market discipline? Seems sensible complementary tool. Idea behind third pillar Basel II Paradox in normal times momentum in financial i market may lead to opportunistic behavior of banks, yet same momentum m driven markets would simultaneously have to impose discipline? Market discipline effective for idiosyncratic differences between institutions, less for financial market driven strategies 6
7 More capital seems crucial, yet Debt overhang Bankers suffer from cost of capital fallacy 7
8 Cost of capital fallacy We do not need to like M&M, nor believe M&M has relevance to banking, but to deny that t the cost of capital is affected by the risk that the capital is exposed to is disturbing Implications: - Maximizing ROE fundamental violation of corporate finance theory - Fixed high cost of capital does not make sense Yet self-fulfilling prophecy ( put capital to use ) 8
9 Are banks reluctant to raise new capital? What do we know from corporate finance when there is high leverage? Reluctance to raise equity because of windfall gain to debt holders Negative spiral Debt overhang induces even more leverage 9
10 The European problem
11 Asset quality review and banking union Observe the risks of inadequate action: Bank bail-outs via tax payer financial i repression zombie banks and low growth?? Enormous potential cost in Euro-area additional dimension. [redistribution issues] 11
12 US better here US showed that raising capital under difficult circumstances is not impossible ibl Contrast with US even bigger: US banks more profitable; Greater diversity of institutions (?) Better access to market financing i 12
13 The European problem (2) 13
14 Problem (2) cont d Left picture possibly not disturbing if Lack of deposits is compensated by access of banks to long term funding from financial markets picture on the right points at opposit. 14
15 More fundamental problem Current regulatory approach characterized by potential fallacy of stability of deposits. Intend of deposits is storing liquidity, is not an investment Institutional investors withdraw deposits upon downgrade of bank Consumers run as well (even if insured) moving deposits around frictionlessly Too much trust in stability of deposits might be like fighting last war 15
16 What then? What would work are bank funding sources that cannot run (and are considered investments, meaning, involving risk-return trade-off) Equity and long term debt funding from financial markets And do not be fooled by coco s coco s can become equity but coco s drain liquidity from bank. Equity, via capital gain mechanism, really superior 16
17 Moral hazard: same conclusion Implicit government guarantees make debt as funding source very cheap Induces more leverage and asset risk We need to get out of gaming region We are in the wrong debt-overhang equilibrium with troublesome incentives.. Basel II did not help risk-based capital approach is inducing gaming, and inadequate as regulatory instrument role for Basel III leverage ratio More capital also crucial for effectiveness bail-in, timely intervention, etc. 17
18 New equilibrium Financial sector has become more fluid we need an effective response New equilibrium fundamental higher levels of capitalization. ti Immediate benefit: - Cheaper equity and access to long term debt Other benefits - Timely intervention easier - Bail-in more effective - Banks less procyclical - Deposits more secure - Less gaming 18
19 Value creation in financial sector We do not really understand true value creation in financial sector Levine (1997, 2005): the development of financial markets and institutions is a critical and inextricable part of the growth process.. Literature has shown importance relationship orientation see Berger et al, JFE 2005; Diamond, JPE 1991; Petersen and Rajan, QJE 1995; Sharpe, JF 1990; Boot and Thakor, JF 2000); Bolton, Freixas et al (2013) How does this relate to mushrooming intra- financial sector claims? 19
20 Corporate and Retail Banking: over 70% of profit pool 20
21 Retail/SME banking profitable 21
22 Some observations on banks: rediscovering their roots?? The Economist Banks have rediscovered the virtue of knowing their customer Citigroup s head of retail in Business Week Citi should think locally And HSBC billboard in NY-City: The world s local bank 22
23 You ain t seen nothing yet. Anyone who deals in the financial markets knows that anticipating trends is difficult at best. But he or she also realizes that not to try is tantamount to accepting the most unlikely scenario of all: no change (Sandford, d 1994) 23
24 Appendix 24
25 Macro-prudential focus and capital Cyclical capital buffer marvelous idea, but note: Is orthogonal to market forces need to be really tough, market wants to lower it in good times In bad times even bigger problem. Idea of cyclical element is that it can be released in bad times.. But that is what market does not want and possibly at odds with micro- prudential focus Resolution: capital buffers need to be higher than market demands d in bad times 25
26 How to look at financial innovations? Extensive literature shows value of security design Spanning Other direct benefits for real activities (e.g. commercial letter of credit) Yet this literature may say little about more recent financial innovations (Often?) creating opaqueness rather than resolving asymmetric information Aimed at creating marketable assets or claims Opened up bank balance sheet: marketability and changeability key 26
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 informationRegulation and banks incentives to control risk
Regulation and banks incentives to control risk BY ARNOUD W. A. BOOT University of Amsterdam, Faculty of Economics and Econometrics. Introduction The financial sector has become very A more competitive
More informationDebt Overhang and Capital Regulation
Debt Overhang and Capital Regulation Anat Admati INET in Berlin: Rethinking Economics and Politics The Challenge of Deleveraging and Overhangs of Debt II: The Politics and Economics of Restructuring April
More informationHow to improve financial stability and resilience of systemically important financial institutions after the crisis?
How to improve financial stability and resilience of systemically important financial institutions after the crisis? EBA Policy Research Workshop How to regulate and resolve systemically important banks
More informationCaught between Scylla and Charybdis? Regulating Bank Leverage when there is
Discussion i of Caught between Scylla and Charybdis? Regulating Bank Leverage when there is Rent Seeking and Risk shifting By Acharya, Mehran, and Thakor Anat Admati Stanford University Financial Markets
More informationBank risk taking and liquidity creation following regulatory interventions and capital support
following regulatory interventions and capital support ALLEN N. BERGER U N I V E R S I T Y O F S O U T H C A R O L I N A W H A R T O N F I N A N C I A L I N S T I T U T I O N S C E N T E R C e n t E R
More informationConceptual 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 informationThe Financial Crises of the 21st Century
The Financial Crises of the 21st Century Workshop of the Austrian Research Association (Österreichische Forschungsgemeinschaft) 18. - 19. 10. 2012 Towards a Unified European Banking Market Univ.Prof. Dr.
More informationthe 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 informationThe Global Credit Crisis: Implications for Systemic Risk. Raghuram G. Rajan University of Chicago and NBER
The Global Credit Crisis: Implications for Systemic Risk Identification and Monitoring Raghuram G. Rajan University of Chicago and NBER What caused the crisis? Inadequate global demand. Chronically surplus
More informationProf Kevin Davis Melbourne Centre for Financial Studies. Current Issues in Bank Capital Planning. Session 4.4
Enhancing Risk Management and Governance in the Region s Banking System to Implement Basel II and to Meet Contemporary Risks and Challenges Arising from the Global Banking System Training Program ~ 8 12
More informationBank Recovery and Resolution. Sven Schelo. 01 Wolters Kluwer Law & Business
Bank Recovery and Resolution Sven Schelo 01 Wolters Kluwer Law & Business Foreword Preface List of Abbreviations xiii xv xvii CHARTER 1 Bank Business 1 1.01 Evolution of Size and Shape of Banks 1 1.02
More informationThe Relationship between Capital, Liquidity and Risk in Commercial Banks. by Tamara Kochubey and Dorota Kowalczyk. Comments by Ricardo Lago
The Relationship between Capital, Liquidity and Risk in Commercial Banks by Tamara Kochubey and Dorota Kowalczyk Comments by Ricardo Lago I- Motivation and Method U.S. commercial banks : decision making
More informationBasel 3: A new perspective on portfolio risk management. Tamar JOULIA-PARIS October 2011
Basel 3: A new perspective on portfolio risk management Tamar JOULIA-PARIS October 2011 1 Content 1. Basel 3 A complex regulatory framework With possible unintended consequences 2. Consequences on Main
More informationHow do we get banks to better serve the real economy: ethics, incentives, and the role of supervisors
How do we get banks to better serve the real economy: ethics, incentives, and the role of supervisors Washington, June 3, 2015 1. The financial crisis highlighted severe weaknesses and excesses in the
More informationCompletely Underestimating (once again) the Cost of Capital?
Stern Stewart Research // Volume 49 Completely Underestimating (once again) the Cost of Capital? The Importance of the Capital Structure and the Cost of Capital for Strategic Corporate Management von Marcus
More informationIntroduction to Health Care Accounting. What Is Financial Management?
Chapter 1 Introduction to Health Care Accounting and Financial Management Do I Really Need to Understand Accounting to Be an Effective Health Care Manager? Today s health care system, with its many types
More informationFINANCIAL DOMINANCE MARKUS K. BRUNNERMEIER & YULIY SANNIKOV
Based on: The I Theory of Money - Redistributive Monetary Policy CFS Symposium: Banking, Liquidity, and Monetary Policy 26 September 2013, Frankfurt am Main 2013 FINANCIAL DOMINANCE MARKUS K. BRUNNERMEIER
More informationGovernments as Shadow Banks: The Looming Threat to Financial Stability
Governments as Shadow Banks: The Looming Threat to Financial Stability -Viral V Acharya (NYU Stern, CEPR and NBER) Presentation at the Federal Reserve Board of Governors conference on Systemic Risk, 15
More informationFinancial-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 informationUNC Charlotte Ph.D. in Business Administration Comprehensive Exam Day 2. January 27, 2011
UNC Charlotte Ph.D. in Business Administration Comprehensive Exam Day 2 January 27, 2011 Directions: Today s exam consists of 6 questions. Please answer each question. This exam begins at 11:00am on Thursday,
More information1. State and explain two reasons why short-maturity loans are safer (meaning lower credit risk) to the lender than long-maturity loans (10 points).
Boston College, MF 820 Professor Strahan Midterm Exam, Fall 2010 1. State and explain two reasons why short-maturity loans are safer (meaning lower credit risk) to the lender than long-maturity loans (10
More informationWeaknesses in Regulatory Capital Models and Their Implications
Weaknesses in Regulatory Capital Models and Their Implications Amelia Ho, CA, CIA, CISA, CFE, ICBRR, PMP, MBA 2012 Enterprise Risk Management Symposium April 18-20, 2012 2012 Casualty Actuarial Society,
More informationPrudential Lessons from the Global Financial Crisis
Prudential lessons from the Global Financial Crisis A speech delivered to Financial Institutions of NZ 2012 Remuneration Forum in Auckland On 3 May 2012 By Grant Spencer, Deputy Governor, Reserve Bank
More informationIncentive Compensation in the Banking Industry:
Economic Policy Paper 09-1 Federal Reserve Bank of Minneapolis Incentive Compensation in the Banking Industry: Insights from Economic Theory December 2009 Christopher Phelan Professor, Department of Economics,
More informationFSI-IADI Seminar on Bank Resolution, Crisis Management and Deposit Insurance Issues. Coordination of safety net players: Role of DIA.
FSI-IADI Seminar on Bank Resolution, Crisis Management and Deposit Insurance Issues Coordination of safety net players: Role of DIA Jerzy Pruski IADI President and Chair of the Executive Council President
More informationDSF POLICY BRIEFS No. 1/ February 2011
DSF POLICY BRIEFS No. 1/ February 2011 Risk Based Deposit Insurance for the Netherlands Dirk Schoenmaker* Summary: During the recent financial crisis, deposit insurance cover was increased across the world.
More informationSmall Business Borrowing and the Owner Manager Agency Costs: Evidence on Finnish Data. Jyrki Niskanen Mervi Niskanen 10.11.2005
Small Business Borrowing and the Owner Manager Agency Costs: Evidence on Finnish Data Jyrki Niskanen Mervi Niskanen 10.11.2005 Abstract. This study investigates the impact that managerial ownership has
More informationUnderstanding 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 informationMonitoring and the acceptability of bank money
Régis Breton Conference Bank liquidity, transparency and regulation Paris, 20/12/2013 The views expressed here are my own and should not necessarily be interpreted as those of the Banque de France or the
More informationContingent Capital in the new regulatory regime Challenge or Opportunity?
Contingent Capital in the new regulatory regime Challenge or Opportunity? David Mathers, Chief Financial Officer London, October 5th, 2011 Cautionary statement Cautionary statement regarding forward-looking
More informationWORKING PAPER. An Expedited Resolution Mechanism for Distressed Financial Firms: Regulatory Hybrid Securities
WORKING PAPER An Expedited Resolution Mechanism for Distressed Financial Firms: Regulatory Hybrid Securities Squam Lake Working Group on Financial Regulation April 2009 1 Squam Lake Working Group on Financial
More informationNet Stable Funding Ratio
Net Stable Funding Ratio Aims to establish a minimum acceptable amount of stable funding based on the liquidity characteristics of an institution s assets and activities over a one year horizon. The amount
More informationChapter 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 informationIs more supervision by defintion good for stability? Amsterdam, April 28th, 2011 Wim Boonstra Chief Economist Rabobank Nederland
The costs of banking regulation Is more supervision by defintion good for stability? Amsterdam, April 28th, 2011 Wim Boonstra Chief Economist Rabobank Nederland Content The risky character of banking Why
More informationHomework 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 informationICAAP Required Capital Assessment, Quantification & Allocation. Anand Borawake, VP, Risk Management, TD Bank anand.borawake@td.com
ICAAP Required Capital Assessment, Quantification & Allocation Anand Borawake, VP, Risk Management, TD Bank anand.borawake@td.com Table of Contents Key Takeaways - Value Add from the ICAAP The 3 Pillars
More informationPro-cyclicality, current trends, issues and priorities for insurance mutuals.
1 Pro-cyclicality, current trends, issues and priorities for insurance mutuals. Giles Fairhead Head 2 Agenda Pro-cyclicality of insurers PRA perspective on Current Trends and Issues Regulatory Priorities
More informationCOMMENTARY ON THE RESTRICTIONS ON PROPRIETARY TRADING BY INSURED DEPOSITARY INSTITUTIONS. By Paul A. Volcker
COMMENTARY ON THE RESTRICTIONS ON PROPRIETARY TRADING BY INSURED DEPOSITARY INSTITUTIONS By Paul A. Volcker Full discussion by the public, and particularly by directly affected institutions, on the proposed
More informationCREDIT RISK MANAGEMENT IN INDIAN COMMERCIAL BANKS
CREDIT RISK MANAGEMENT IN INDIAN COMMERCIAL BANKS MS. ASHA SINGH RESEARCH SCHOLAR, MEWAR UNIVERSITY, CHITTORGARH, RAJASTHAN. ABSTRACT Risk is inherent part of bank s business. Effective risk management
More informationShould Life Insurers buy CoCo Bonds? - Regulatory Effects Implied by the Solvency II Standards
Should Life Insurers buy CoCo Bonds? - Regulatory Effects Implied by the Solvency II Standards Helmut Gründl, Tobias Niedrig International Center for Insurance Regulation (ICIR) and Center of Excellence
More informationSantander Views on Basel s Liquidity Framework
Santander Views on Basel s Liquidity Framework Presentation Santander welcomes the effort made by the Basel Committee to safeguard financial market stability and to preserve the system from a renewed liquidity
More informationKeynote Speech, EIB/IMF Meeting, 23 October, Brussels
Keynote Speech, EIB/IMF Meeting, 23 October, Brussels Governor Carlos Costa Six years since the onset of the financial crisis in 2008, output levels in the EU are below those observed before the crisis.
More informationA primer on Open Bank Resolution
ARTICLES A primer on Open Bank Resolution Kevin Hoskin and Ian Woolford 1 The Reserve Bank supervises registered banks with the objective of promoting the maintenance of a sound and efficient financial
More informationApproach to Regulating and Supervising Financial Groups
and Supervising Financial Issued on 21 May 2014 Page 2/26 PART A Overview... 3 1. Introduction... 3 2. Broad approach... 4 3. Scope of application... 7 PART B Prudential Framework for Financial... 16 4.
More informationInterview with Gabriel Bernardino, Chairman of EIOPA, conducted by Anke Dembowski, Institutional Money (Germany)
1 Interview with Gabriel Bernardino, Chairman of EIOPA, conducted by Anke Dembowski, Institutional Money (Germany) 1. Insurance companies vs. Occupational Retirement Provision (IORPs) EIOPA has submitted
More informationa. 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 informationLecture 2: The nature of financial intermediation:
Lecture 2: The nature of financial intermediation: The issue of why financial intermediaries exist is a puzzle for the complete markets paradigm of Arrow and Debreu. As we describe in this lecture, the
More informationCompetition and the financial markets: Financial sector conditions and competition policy ( 1 )
Competition and the financial markets: Financial sector conditions and competition policy ( 1 ) Stan Maes and Kamil Kiljanski The specificity of financial markets ( 1 Financial instruments that are traded
More informationA FRAMEWORK FOR MACROPRUDENTIAL BANKING REGULATION 1
A FRAMEWORK FOR MACROPRUDENTIAL BANKING REGULATION 1 JEAN-CHARLES ROCHET 2 March 2005 Abstract: We offer a framework for macroprudential banking regulation, with a particular emphasis on Latin American
More informationSUSTAINABLE HOUSING FINANCE
SUSTAINABLE HOUSING FINANCE Recovery, Sustainability, and Evolution: Perspectives on the Real Estate Economy 26 June, Geneva Mark Weinrich Manager International Relations & Senior Economist Association
More informationBasel Committee on Banking Supervision. Consultative Document. TLAC Holdings. Issued for comment by 12 February 2016
Basel Committee on Banking Supervision Consultative Document TLAC Holdings Issued for comment by 12 February 2016 November 2015 This publication is available on the BIS website (www.bis.org). Bank for
More informationImpact of the financial crisis and bank failure
Impact of the financial crisis and bank failure Professor Julian Franks London Business School July 2009 Introduction Some questions and issues which will affect the future of the financial services industry.
More informationEurope s Financial Crisis: The Euro s Flawed Design and the Consequences of Lack of a Government Banker
Europe s Financial Crisis: The Euro s Flawed Design and the Consequences of Lack of a Government Banker Abstract This paper argues the euro zone requires a government banker that manages the bond market
More informationPossible impact of the CRR and CRD IV on bank financing of the economy
7 October 2015 To: The European Commission Possible impact of the CRR and CRD IV on bank financing of the economy The Danish Bankers Association, the Danish Mortgage Banks' Federation and the Association
More informationThe role of capital for non-bank actors. Denis Duverne
The role of capital for non-bank actors Denis Duverne Key messages for today 1 The balance sheet structure of insurance companies is fundamentally different from that of banks The business model of insurance
More informationCMAC meeting Agenda paper 2 Debt vs Equity
17 October 2013 International Financial Reporting Standards CMAC meeting Agenda paper 2 Debt vs Equity Conceptual Framework The views expressed in this presentation are those of the presenter, not necessarily
More informationRecommendations for Improving the Effectiveness of Mortgage Banking in Belarus The Refinance Side
IPM Research Center German Economic Team in Belarus Recommendations for Improving the Effectiveness of Mortgage Banking in Belarus The Refinance Side PP/07/03 Summary Mortgage lending is of crucial importance
More informationAppendix B Weighted Average Cost of Capital
Appendix B Weighted Average Cost of Capital The inclusion of cost of money within cash flow analyses in engineering economics and life-cycle costing is a very important (and in many cases dominate) contributing
More informationuncertainty. Credit flows are especially pro cyclical
Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence Hélène Rey London Business School, CEPR and NBER Jackson Hole Symposium 2013 Global financial cycle: capital flows Strong
More informationBanking and the Fear of Exchange Rate
What s Wrong with Banking and What to Do About It Anat Admati Stanford University Money and Banking Conference Central Bank of Argentina November 15, 2013 Our Banking System is too fragile and dangerous
More informationGlossary & Definitions
Glossary & Definitions SEB Glossary & Definitions December 2014 Asset quality... 3 Credit loss level... 3 Gross level of impaired loans... 3 Net level of impaired loans... 3 Specific reserve ratio for
More informationDeposit Insurance Pricing. Luc Laeven World Bank Global Dialogue 2002
Deposit Insurance Pricing Luc Laeven World Bank Global Dialogue 2002 1 Introduction Explicit deposit insurance should not be adopted in countries with a weak institutional environment Political economy
More information3/22/2010. Chapter 11. Eight Categories of Bank Regulation. Economic Analysis of. Regulation Lecture 1. Asymmetric Information and Bank Regulation
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
More informationSIMULATING BAIL IN AND ITS IMPACT ON WEALTH TRANSFERS AND ARBITRAGE
SIMULATING BAIL IN AND ITS IMPACT ON WEALTH TRANSFERS AND ARBITRAGE Jean Roy Professor of finance, HEC-Montreal Moin El Herraoui Director, Capital Markets Analytics and Modeling, CDIC Content Introduction
More informationL actuaire et la SécuritS
28 e CONGRÈS S INTERNATIONAL DES ACTUAIRES 10 January 2005 Le rendez-vous international de la profession actuarielle L actuaire et la SécuritS curité sociale Actuarial view of Social Security Yves Guérard
More informationThe consequences of a low interest rate environment from a supervisory perspective
Annual Press Conference on 26 March 2013 Dr Patrick Raaflaub CEO The consequences of a low interest rate environment from a supervisory perspective Even if the news headlines had calmed down for a while,
More informationFinancial Crisis. Origins and Consequences on Financial Institutions Focusing on Insurance Companies (Session 1) Solvay Business School VUB
Financial Origins and Consequences on Financial Institutions Focusing on Insurance Companies (Session 1) Solvay Business School VUB Fabian Suarez April 2009 www.actuarisk.be Financial : Origins and Consequences
More information9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle
9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9.1 Current Assets and 9.1.1 Cash A firm should maintain as little cash as possible, because cash is a nonproductive asset. It earns no
More informationFinancial Services Authority (FSA)
FCA Approach Financial Services Authority 25 The North Colonnade Canary Wharf London E14 5HS E-mail: fcaapproach@fsa.gov.uk 12 December 2012 Financial Services Authority (FSA) Journey to the FCA Chapters
More information2015 Biennial IADI Research Conference. Session 5: Perspectives on the Global Financial Safety Net. Eva Hüpkes Basel, 4 June 2015
2015 Biennial IADI Research Conference Session 5: Perspectives on the Global Financial Safety Net Eva Hüpkes Basel, 4 June 2015 1 Towards Ending TBTF 2009 Pittsburgh Summit G20 call for action to address
More informationFITCH AFFIRMS RABOBANK FOLLOWING GROUP RESTRUCTURING
FITCH AFFIRMS RABOBANK FOLLOWING GROUP RESTRUCTURING Fitch Ratings-Paris/London-14 January 2016: Fitch Ratings has affirmed Cooperatieve Rabobank U.A.'s (Rabobank) Long-term Issuer Default Rating (IDR)
More informationOn Moral Hazard and Macroeconomics
On Moral Hazard and Macroeconomics Roger B. Myerson Brigham Young University March 2012 "A model of moral-hazard credit cycles" Journal of Political Economy 120(5):847-878 (2012). "On Keynes and the theory
More informationHOCH CAPITAL LTD PILLAR 3 DISCLOSURES As at 1 February 2015
HOCH CAPITAL LTD PILLAR 3 DISCLOSURES As at 1 February 2015 TABLE OF CONTENTS 1. Overview / Background 1.1 Introduction 1.2 Frequency of disclosure 1.3 Location and verification of disclosure 1.4 Scope
More informationSeparating fact and fiction
March 2015 Separating fact and fiction A Finance Watch note looking at some of the confusing and contradictory arguments made against regulating the structure of the largest, too-big-to-fail, too-complex-to-manage-andregulate
More informationFinancial stability, systemic risk & macroprudential supervision: an actuarial perspective
Financial stability, systemic risk & macroprudential supervision: an actuarial perspective Paul Thornton International Actuarial Association Presentation to OECD Insurance and Pensions Committee June 2010
More informationUncertainty and Financial Regulation. Myron S. Scholes Frank E. Buck Professor of Finance, Emeritus, Stanford University 30 August, 2011
Uncertainty and Financial Regulation Myron S. Scholes Frank E. Buck Professor of Finance, Emeritus, Stanford University 30 August, 2011 1 Six Functions of a Financial System Goal is to enhance communication
More informationDECLARATION ON STRENGTHENING THE FINANCIAL SYSTEM LONDON SUMMIT, 2 APRIL 2009
DECLARATION ON STRENGTHENING THE FINANCIAL SYSTEM LONDON SUMMIT, 2 APRIL 2009 We, the Leaders of the G20, have taken, and will continue to take, action to strengthen regulation and supervision in line
More informationINCREASING GLOBAL FINANCIAL INTEGRITY: THE ROLES OF MARKET DISCIPLINE, REGULATION, AND SUPERVISION
INCREASING GLOBAL FINANCIAL INTEGRITY: THE ROLES OF MARKET DISCIPLINE, REGULATION, AND SUPERVISION Laurence H. Meyer Recent developments, both at home and abroad, have reinforced the importance of efforts
More informationThe Business Impact of Basel III
The Business Impact of Basel III Risk Insights The proposed Basel III regulation will raise capital requirements for banks, thus strengthening the stability of the global financial system. The new rules
More informationI. Emerging markets will not be initially subject to TLAC Liability structure: Business structure:
Dear FSB, This is Bank of China Luxembourg Branch. Thank you for your attention for our reply regarding TLAC just released a version for comments from your side. From the contents, TLAC (Total Loss Absorbency
More informationManaging the Fragility of the Eurozone. Paul De Grauwe University of Leuven
Managing the Fragility of the Eurozone Paul De Grauwe University of Leuven Paradox Gross government debt (% of GDP) 100 90 80 70 UK Spain 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008
More informationMacroprudential Policies in Korea
1 IMF-Riksbank Conference Stockholm, November 13~14, 2014 Macroprudential Policies in Korea Tae Soo Kang Disclaimer This presentation represents the views of the author and not necessarily those of the
More informationReport of the Alternative Investment Expert Group: Developing European Private Equity
Report of the Alternative Investment Expert Group: Developing European Private Equity Response from The Association of Investment Trust Companies The Association of Investment Trust Companies (AITC) welcomes
More informationCompensation 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 informationThe Contribution of Trade in Financial Services to Economic Growth and Development
The Contribution of Trade in Financial Services to Economic Growth and Development 26 June 2012 Mina Mashayekhi Head Trade Negotiations and Commercial Diplomacy Branch, DITC/UNCTAD Outline 1. Financial
More informationNotes on Financial Stability and Supervision
Notes on Financial Stability and Supervision No. 1 April 2014 1 The tax treatment of loan losses: the old rules... 2 2 The effects of the new rules... 4 3. The strengthening of the ACE..6 4. The treatment
More informationVery impressive indeed, I daresay. My sincere congratulations!
The Hague, 28 January 2013 Today Frank Elderson, executive director of De Nederlandsche Bank, delivered an address during the annual conference of P.R.I.M.E. Finance, a dispute centre specialising in assisting
More informationThe Impact of Bank Capital Regulation on Financing the Economy
IW policy paper 27/2015 Contributions to the political debate by the Cologne Institute for Economic Research The Impact of Bank Capital Regulation on Financing the Economy Comments on the Public Consultation
More informationMedium-term Business Plan
Mitsubishi UFJ Financial Group, Inc. Medium-term Business Plan Tokyo, May 15, 2015 --- Mitsubishi UFJ Financial Group, Inc. (MUFG) announced today that it has formulated its medium-term business plan for
More informationSECURITIZATION RISK MANAGEMENT GUIDELINE
SECURITIZATION RISK MANAGEMENT GUIDELINE April 2009 Table of Contents Preamble...3 Introduction...4 Scope...5 Coming into effect and updating...6 1. Securitization risk management governance...7 Principle
More informationWhat 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 informationDealing with Predictable Irrationality. Actuarial Ideas to Strengthen Global Financial Risk Management. At a macro or systemic level:
Actuarial Ideas to Strengthen Global Financial Risk Management The recent developments in global financial markets have raised serious questions about the management and oversight of the financial services
More informationRATING METHODOLOGY FOR STOCK BROKING FIRMS
RATING METHODOLOGY FOR STOCK BROKING FIRMS Stock Broking Firms perform an important role in the capital market by facilitating trades for all categories of investors. The role of intermediaries like Stock
More informationNEED OF FINANCIAL INSTITUTIONS SUPERVISION THROUGH AN SINGLE FRAMEWORK OF MACRO-PRUDENTIAL SUPERVISION
NEED OF FINANCIAL INSTITUTIONS SUPERVISION THROUGH AN SINGLE FRAMEWORK OF MACRO-PRUDENTIAL SUPERVISION MEDAR LUCIAN-ION, Professor PHD, CHIRTOC IRINA-ELENA, Assistant professor PHD, CONSTANTIN BRANCUSI
More informationLiquidity Stress Testing
Liquidity Stress Testing Scenario modelling in a globally operating bank APRA Liquidity Risk Management Conference Sydney, 3-4 May 2007 Andrew Martin Head of Funding & Liquidity Risk Management, Asia/Pacific
More informationShould banks be allowed to go into bankruptcy
Should banks be allowed to go into bankruptcy Robert Kärrberg, Victor Sellman Abstract A report on what consequences bankruptcy s in financial institutes have on society. The group has been equally involved
More informationLIQUIDITY RISK MANAGEMENT GUIDELINE
LIQUIDITY RISK MANAGEMENT GUIDELINE April 2009 Table of Contents Preamble... 3 Introduction... 4 Scope... 5 Coming into effect and updating... 6 1. Liquidity risk... 7 2. Sound and prudent liquidity risk
More informationFIN 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 informationGood afternoon everyone and thanks to the Trans-Tasman Business Circle for inviting me to speak today.
Peter King, CFO Westpac Group Trans-Tasman Business Circle 3 September 2015 Capital: The next chapter INTRODUCTION Good afternoon everyone and thanks to the Trans-Tasman Business Circle for inviting me
More information