The project was a group project on fund management and administration.
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The above document can be accessed via this url:Please click to view document
Tuesday, May 31, 2011
Integrated Project - SGAM Fund
Integrated Project - SGAM Fund 2008
The project was a group project on fund management and administration.
The above document can be accessed via this url:Please click to view document
The project was a group project on fund management and administration.
The above document can be accessed via this url:Please click to view document
RM in Commercial Banking
Individual Assignment 2008
Basel III accord is important as far as banking RM is concerned. Perhaps, there is also a need to stress the Leyman Brothers' case to high light the importance of banking RM.
Some inforamtion of Basel III accord is as follows:
-----------------------------------------
In response to the global financial crisis in 2008, the Basel Committee on Banking Supervision (BCBS) set forth to update their guidelines for capital and banking regulations:
The guidelines present the Basel Committee's proposals to strengthen global capital and liquidity regulations with the goal of promoting a more resilient banking sector. The objective of the Basel Committee's reform package is to improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy.
Basel III proposes many new capital, leverage and liquidity standards to strengthen the regulation, supervision and risk management of the banking sector. The capital standards and new capital buffers will require banks to hold more capital and higher quality of capital than under current Basel II rules. The new leverage and liquidity ratios introduce a non-risk based measure to supplement the risk-based minimum capital requirements and measures to ensure that adequate funding is maintained in case of crisis.
On December 19, 2009 the BCBS issued a press release which presented to the public two consultative documents for review and comment:
* Strengthening the resilience of the banking sector
* International framework for liquidity risk measurement, standards and monitoring
The Basel Committee on Banking Supervision (BCBS) allowed a public comment period (ended April 16, 2010) resulting in 272 responses to their request for comment.
Summary of proposed changes
* First, the quality, consistency, and transparency of the capital base will be raised.
o Tier 1 capital: the predominant form of Tier 1 capital must be common shares and retained earnings
o Tier 2 capital instruments will be harmonised
o Tier 3 capital will be eliminated.
* Second, the risk coverage of the capital framework will be strengthened.
o Strengthen the capital requirements for counterparty credit exposures arising from banks’ derivatives, repo and securities financing transactions
o Raise the capital buffers backing these exposures
o Reduce procyclicality and
o Provide additional incentives to move OTC derivative contracts to central counterparties (probably clearing houses)
o Provide incentives to strengthen the risk management of counterparty credit exposures
* Third, the Committee will introduce a leverage ratio as a supplementary measure to the Basel II risk-based framework.
o The Committee therefore is introducing a leverage ratio requirement that is intended to achieve the following objectives:
+ Put a floor under the build-up of leverage in the banking sector
+ Introduce additional safeguards against model risk and measurement error by supplementing the risk based measure with a simpler measure that is based on gross exposures.
* Fourth, the Committee is introducing a series of measures to promote the build up of capital buffers in good times that can be drawn upon in periods of stress ("Reducing procyclicality and promoting countercyclical buffers").
o The Committee is introducing a series of measures to address procyclicality:
+ Dampen any excess cyclicality of the minimum capital requirement;
+ Promote more forward looking provisions;
+ Conserve capital to build buffers at individual banks and the banking sector that can be used in stress; and
o Achieve the broader macroprudential goal of protecting the banking sector from periods of excess credit growth.
+ Requirement to use long term data horizons to estimate probabilities of default,
+ downturn loss-given-default estimates, recommended in Basel II, to become mandatory
+ Improved calibration of the risk functions, which convert loss estimates into regulatory capital requirements.
+ Banks must conduct stress tests that include widening credit spreads in recessionary scenarios.
o Promoting stronger provisioning practices (forward looking provisioning):
+ Advocating a change in the accounting standards towards an expected loss (EL) approach (usually, EL amount := LGD*PD*EAD).
* Fifth, the Committee is introducing a global minimum liquidity standard for internationally active banks that includes a 30-day liquidity coverage ratio requirement underpinned by a longer-term structural liquidity ratio called the Net Stable Funding Ratio.
* The Committee also is reviewing the need for additional capital, liquidity or other supervisory measures to reduce the externalities created by systemically important institutions.
As on Sept 2010, Proposed Basel III norms ask for ratios as: 7-9.5%(4.5% +2.5%(conservation buffer) + 0-2.5%(seasonal buffer))for Common equity and 8.5-11% for tier 1 cap and 10.5 to 13 for total capital (Proposed Basel III Guidelines: A Credit Positive for Indian)'
Macroeconomic Impact of Basel III
An OECD study released on 17 February 2011, estimates that the medium-term impact of Basel III implementation on GDP growth is in the range of −0.05 to −0.15 percentage point per annum. Economic output is mainly affected by an increase in bank lending spreads as banks pass a rise in bank funding costs, due to higher capital requirements, to their customers. To meet the capital requirements effective in 2015 (4.5% for the common equity ratio, 6% for the Tier 1 capital ratio), banks are estimated to increase their lending spreads on average by about 15 basis points. The capital requirements effective as of 2019 (7% for the common equity ratio, 8.5% for the Tier 1 capital ratio) could increase bank lending spreads by about 50 basis points. The estimated effects on GDP growth assume no active response from monetary policy. To the extent that monetary policy will no longer be constrained by the zero lower bound, the Basel III impact on economic output could be offset by a reduction (or delayed increase) in monetary policy rates by about 30 to 80 basis points.
-----------------------------------------
The assignemnt was based on Basel II accord.
The above document can be accessed via this url:Please click to view document
Basel III accord is important as far as banking RM is concerned. Perhaps, there is also a need to stress the Leyman Brothers' case to high light the importance of banking RM.
Some inforamtion of Basel III accord is as follows:
-----------------------------------------
In response to the global financial crisis in 2008, the Basel Committee on Banking Supervision (BCBS) set forth to update their guidelines for capital and banking regulations:
The guidelines present the Basel Committee's proposals to strengthen global capital and liquidity regulations with the goal of promoting a more resilient banking sector. The objective of the Basel Committee's reform package is to improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy.
Basel III proposes many new capital, leverage and liquidity standards to strengthen the regulation, supervision and risk management of the banking sector. The capital standards and new capital buffers will require banks to hold more capital and higher quality of capital than under current Basel II rules. The new leverage and liquidity ratios introduce a non-risk based measure to supplement the risk-based minimum capital requirements and measures to ensure that adequate funding is maintained in case of crisis.
On December 19, 2009 the BCBS issued a press release which presented to the public two consultative documents for review and comment:
* Strengthening the resilience of the banking sector
* International framework for liquidity risk measurement, standards and monitoring
The Basel Committee on Banking Supervision (BCBS) allowed a public comment period (ended April 16, 2010) resulting in 272 responses to their request for comment.
Summary of proposed changes
* First, the quality, consistency, and transparency of the capital base will be raised.
o Tier 1 capital: the predominant form of Tier 1 capital must be common shares and retained earnings
o Tier 2 capital instruments will be harmonised
o Tier 3 capital will be eliminated.
* Second, the risk coverage of the capital framework will be strengthened.
o Strengthen the capital requirements for counterparty credit exposures arising from banks’ derivatives, repo and securities financing transactions
o Raise the capital buffers backing these exposures
o Reduce procyclicality and
o Provide additional incentives to move OTC derivative contracts to central counterparties (probably clearing houses)
o Provide incentives to strengthen the risk management of counterparty credit exposures
* Third, the Committee will introduce a leverage ratio as a supplementary measure to the Basel II risk-based framework.
o The Committee therefore is introducing a leverage ratio requirement that is intended to achieve the following objectives:
+ Put a floor under the build-up of leverage in the banking sector
+ Introduce additional safeguards against model risk and measurement error by supplementing the risk based measure with a simpler measure that is based on gross exposures.
* Fourth, the Committee is introducing a series of measures to promote the build up of capital buffers in good times that can be drawn upon in periods of stress ("Reducing procyclicality and promoting countercyclical buffers").
o The Committee is introducing a series of measures to address procyclicality:
+ Dampen any excess cyclicality of the minimum capital requirement;
+ Promote more forward looking provisions;
+ Conserve capital to build buffers at individual banks and the banking sector that can be used in stress; and
o Achieve the broader macroprudential goal of protecting the banking sector from periods of excess credit growth.
+ Requirement to use long term data horizons to estimate probabilities of default,
+ downturn loss-given-default estimates, recommended in Basel II, to become mandatory
+ Improved calibration of the risk functions, which convert loss estimates into regulatory capital requirements.
+ Banks must conduct stress tests that include widening credit spreads in recessionary scenarios.
o Promoting stronger provisioning practices (forward looking provisioning):
+ Advocating a change in the accounting standards towards an expected loss (EL) approach (usually, EL amount := LGD*PD*EAD).
* Fifth, the Committee is introducing a global minimum liquidity standard for internationally active banks that includes a 30-day liquidity coverage ratio requirement underpinned by a longer-term structural liquidity ratio called the Net Stable Funding Ratio.
* The Committee also is reviewing the need for additional capital, liquidity or other supervisory measures to reduce the externalities created by systemically important institutions.
As on Sept 2010, Proposed Basel III norms ask for ratios as: 7-9.5%(4.5% +2.5%(conservation buffer) + 0-2.5%(seasonal buffer))for Common equity and 8.5-11% for tier 1 cap and 10.5 to 13 for total capital (Proposed Basel III Guidelines: A Credit Positive for Indian)'
Macroeconomic Impact of Basel III
An OECD study released on 17 February 2011, estimates that the medium-term impact of Basel III implementation on GDP growth is in the range of −0.05 to −0.15 percentage point per annum. Economic output is mainly affected by an increase in bank lending spreads as banks pass a rise in bank funding costs, due to higher capital requirements, to their customers. To meet the capital requirements effective in 2015 (4.5% for the common equity ratio, 6% for the Tier 1 capital ratio), banks are estimated to increase their lending spreads on average by about 15 basis points. The capital requirements effective as of 2019 (7% for the common equity ratio, 8.5% for the Tier 1 capital ratio) could increase bank lending spreads by about 50 basis points. The estimated effects on GDP growth assume no active response from monetary policy. To the extent that monetary policy will no longer be constrained by the zero lower bound, the Basel III impact on economic output could be offset by a reduction (or delayed increase) in monetary policy rates by about 30 to 80 basis points.
-----------------------------------------
The assignemnt was based on Basel II accord.
The above document can be accessed via this url:Please click to view document
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