The Development Of The Basel 3 Finance Essay - Free Essay Example

Sample details Pages: 10 Words: 3144 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Basel 3 is refers to the new update of the Basel accords that is under development. Basel 3  is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to: improve the banking sectors ability to absorb shocks arising from financial and economic stress, whatever the source improve risk management and governance Strengthen banks transparency and disclosures. Don’t waste time! Our writers will create an original "The Development Of The Basel 3 Finance Essay" essay for you Create order The reforms target: Bank-level, or micro prudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress. Macro prudential,  system wide risks that can build up across the banking sector as well as the procyclical amplification of these risks over time. These two approaches to supervision are complementary as greater resilience at the individual bank level reduces the risk of system wide shocks. The Basel Committees oversight body the Group of Central Bank Governors and Heads of Supervision (GHOS) agreed on the broad framework of Basel 2I in September 2009and the Committee set out concrete proposals in December 2009. These consultative documents formed the basis of the Committees response to the financial crisis and are part of the global initiatives to strengthen the financial regulatory system that have been endorsed by the G20 Leaders. The GHOS subsequently agreed on key design elements of the reform pack age at its July 2010 meeting and on the calibration and transition to implement the measures at its September 2010 meeting. Basel 3 is part of the Committees continuous effort to enhance the banking regulatory framework.  It builds  on the International Convergence of Capital Measurement and Capital Standards document (Basel 2). 1.2. DEVELOPMENT OF BASEL 3 ACCORD: 1.2.1. Summary of proposed changes in Basel 3: The consistency, transparency and the consistency of the capital is raised. The risk coverage of the framework is strengthened. The committee introduced the leverage ratio as a supplementary measure to the Basel 2 framework. The committee introduced a series of measures to promote to the buildup of the capital buffers. The committee is introducing the series of measures to the address procyclicality. Achieve the macro prudential goal of protecting the bank from the excess of the credit growth. Providing the stronger provisions. Th e committee is introducing a global liquidity standard for internationally active banks. 1.2.2. Basel 3 and Recent Efforts to Address Pro Cyclical Effects of Basel 2 In response to the recent Financial Crisis and to the realization that capital levels (which banks operated with) during the period of the Crisis were insufficient and also lacking in quality, the Basel Committee responded by raising the quality of capital as well as its level. Further consequences of the recent Basel reforms also include: A tightening of the definition of common equity Limitation of what qualifies as Tier 1 capital An introduction of a harmonized set of prudential filters The enhancement of transparency and market discipline through new disclosure requirements. The introduction of Basel 2 resulted in changes being made to the 1988 Basel Capital Accord to provide for a choice of three broad approaches to credit risk. This was introduced into Basel 2 in view of the realization th at the optimal balance may differ significantly across banks.The increased focus on risk (and particularly credit risk), resulted from growing realization of the importance of risk within the financial sector. The range of approaches to credit risk as introduced under Basel 2, and which also exists for market risk, consists of the standardized approach (which is the simplest of the three broad approaches), the Internal Ratings based (IRB) foundation approach and the IRB advanced approach. Under the standardized approach, regulatory capital requirements are more closely aligned and in harmony with the principal elements of banking risk owing to the introduction of wider differentiated risk weights and a broader recognition of techniques which are applied in the risks. The proposals defining the contents of the Basel 3 framework evolved during the crisis that started in 2007, and reflect the prudential regulatory lessons learned throughout the crisis. Based on these experien ces, including the success of various regulatory policies and tools used in mitigating and resolving the effects of the crisis on the banking system and the global financial system, the Basel Committee on Banking Supervision outlined these new regulations. 1.3. BASEL COMMITTEE: The Basel Committee on Banking Supervision, which sets rules that national banking regulators implement, announced a comprehensive reform package in September that raises capital requirements and, for the first time, sets global standards for overall borrowing, known as leverage, and liquidity. The Basel 3 rules are designed to make banks more resilient and prevent a repeat of the financial crisis, but several provisions combine to make trade finance, already a low-margin business, much less profitable. Portions of the leverage rule, new risk-weighting requirements and the rules for liquidity raise the costs of trade finance for banks. The combination could drive many smaller banks out of the market and prompt large banks to cut back their lending, bankers and policymakers say. Banking groups and policymakers are lobbying for changes to the proposals, as is Lars Thunell, head of the IFC, the World Banks private sector arm. They point out that outsourcing by companies in the developed world is a critical source of jobs and investment and trade finance is an essential part of the process. Mike Rees, chief executive of wholesale banking at Standard Chartered, the worlds second-biggest provider of trade finance after HSBC, says: If they want to promote economic growth, the Basel Committee should encourage trade finance, one of the few things that create jobs in a global economy. The Basel 3 reforms hit at trade finance in several ways. The rules sharply increase the risk-weighting of lending between financial firms an essential element of trade finance because it involves the importers bank lending money to the exporters bank, often through a letter of credit. The Basel 3 ru les risk making it uneconomic to provide transaction banking services, warns Brian Stevenson, head of transaction banking at RBS: Tougher operational risk capital and liquidity requirements could make the business of providing services to financial institutions inefficient if they went too far. Much of trade finance is also supported by export credit guarantees, which are essentially government credits and therefore in theory low-risk. But the new rules also tighten the definition of what counts as a government guarantee; some export credit agencies may not qualify. Simon Gleeson, partner at Clifford Chance, the law firm, says: An enormous number of letters of credit are guaranteed by a form of government support, which should mean they carry a zero per cent risk rating. But Basel 3 is much tighter about what can count as a government-backed credit and many export credit agencies have been privatized. Basel 3s new leverage ratio will also bring trouble for trade finance, wh en it takes effect in the latter part of this decade. The rule seeks to prevent banks from gaming the risk-weighting rules, by requiring banks to hold top quality core tier one capital equal to 3 per cent of their total assets, including those traditionally held off-balance sheet. The part of the liquidity proposals that would require banks to match long-term obligations with long-term funding and vice versa, could also penalize trade finance. Bankers say they understand why regulators are trying to crack down on dependence on short-term funding but they also say that it is unfair to lump trade finance which is well collateralized and not self-renewing with other short-term funding, such as working capital and liquidity guarantees. A transaction banking subgroup within the UK Bankers Association for Finance and Trade is lobbying the Basel Committee in an effort to persuade regulators to soften the rules. 1.4. Research objectives and questions: The research object ives of the study are: To focus on the liquidity risk from the wide range of risks available in Basel 3. To focus on the impacts of the Basel 3 proposals for Liquidity Risk.    Questions:   Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  The purpose of the study was to discover the following: Does the liquidity risk break down the risk silos? Is the liquidity risk in the Basel 3 on the right track? Will the new rules in the liquidity risk will be helpful to improve the committees approach? Will the liquidity risk makes bank strong? Does the Basel committee understand the linkage between the liquidity risk and capital? Does the committee fail to understand the nature of liquidity risk? Is the Basel 3s approach to the liquidity risk missed the opportunity to break down the risk silos? 1.5. BASEL 3 IMPACT: The Basel Committee on Banking Supervision (Basel Committee) has undertaken a program of substantial revisions of its capi tal guidelines. In particular, the changes envisaged in the so called Basel 2.5 guidelines will result in increased capital requirements for market risk; in addition, the so-called Basel 3 guidelines set new minimum capital ratios, revise the definition of Tier 1 Capital, introduce Tier 1 common equity as a regulatory metric, and make substantial revisions to the computation of risk-weighted assets for credit exposures. Implementation of the new requirements under Basel 2.5 and Basel 3 is expected to take place over an extended transition period, starting at the end of 2012. There continues to be considerable uncertainty regarding the impact of the Basel Committees new guidelines. Although certain important aspects of Basel 3 have now been finalized, other matters remain under discussion; in addition, the federal banking regulatory agencies in the United States have not yet issued draft regulations by which they will implement either Basel 2.5 or Basel 3 for banks and bank holdin g companies. Accordingly, the final regulations to which Goldman Sachs will be subject may be substantially different from our current expectations. In order to assess the firms position under the Basel Committees new guidelines, we have adjusted our computation of Tier 1 common equity and risk-weighted assets as of June 2010 to reflect our good faith estimate of the impact of the methodologies set out in Basel 2.5 and Basel 3. In addition, we have adjusted the June 2010 computation to reflect assumed changes in shareholders equity and risk-weighted assets at year-end 2012. In particular, shareholders equity has been increased from June 2010 levels by an amount equal to analysts consensus earnings expectations for 2010 less actual June YTD earnings, plus earnings for 2011 and 2012, which are assumed to be equal to consensus earnings for 2010. Risk-weighted assets have been adjusted to reflect the contractual and expected run-off of positions in our mortgage derivative and credit correlation businesses, both of which will be significantly impacted by the introduction of Basel 2.5. No other items have been adjusted, and this calculation should not be taken as a projection of what our capital ratios, risk-weighted assets, earnings or other results will actually be at year-end 2012.  1.6. STUDY OF THE RISK MANAGEMENT: The Basel Committee on Banking Supervision expects risks such as the credit risk, liquidity risk, operational risk etc to be recognized, addressed and managed by banking institutions in a prudent manner according to the fundamental characteristics and challenges of e-banking services. These characteristics include the unprecedented speed of change related to technological and customer service innovation, the ubiquitous and global nature of open electronic networks, the integration of e-banking applications with legacy computer systems and the increasing dependence of banks on third parties that provide the necessary information technology. While not creating inherently new risks, the Committee noted that these characteristics increased and modified Some of the traditional risks associated with banking activities, in particular strategic, operational, legal and reputational risks, thereby influencing the overall risk profile of banking.à ƒâ€š   Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  In the following sections the liquidity risk is focused on risk management. LIQUIDTY RISK MANAGEMENT: The recent financial crisis involved a sharp decrease in market liquidity and growing distrust among market participants, resulting in serious (liquidity and solvency) problems for many banks. This led in turn  to reliance upon financial support from governments, often  under restrictive conditions or even nationalization. This lack of liquidity, the vast sums the central banks injected into markets and sovereigns provided for the support of tarnished institutes to alleviate the problems as well as the subsequent substantial impact on the real economy has brought  liquidity risk to the forefront of regulatory authorities priorities, and to the attention of the public in general. Dimensions of liquidity (risk) The term liquidity is used in the financial world in different contexts: liquidity as a measure of the salability of securities such as bonds or shares liquidity as a description of the financial solvency of individual institutions liquidity as a level of market activity liquidity as unhindered cash flows within an economy The primary objective of liquidity risk management remains the same: to ensure  an institutions ability to meet financial obligations as they fall due at all times for example, achievable by an adequate liquidity buffer consisting of unencumbered, high quality liquid assets. By its digital character (either a firm is able to meet financial obligations or it is out of business) liquidity risk takes on a unique position within the risk management; unlike other types of risk (market risk, credit risk, operational risk etc.) it cannot be covered entirely by regulatory capital requirements, but it has a significant emphasis on short term activities, requiring immediate but adequate reaction in stresse d situations.  Ãƒâ€š To successfully manage liquidity risk, one should consider all relevant factors: from the business structure which determines liquidity needs, the analysis of markets (market price, market liquidity and market depth), and finally the necessary level of funding diversification. This makes liquidity risk management a very complex and comprehensive topic. New regulatory requirements One consequence of the recent crisis is closer supervision and a tighter regulatory regime to be imposed upon the banks and financial markets by Government-sponsored regulatory authorities. Recent updates of the MaRisk (regulatory requirements in Germany, 08/2009) reveal the lessons learned through the financial crisis. The following innovations can be found: Specification of three types of stress scenarios (idiosyncratic, market-wide and combination of both) that have to be considered in the treatment of liquidity risk Updated requirements for the pro vision of liquidity reserves Separate analysis of liquidity per currency In general, the updated MaRisk requirements (regarding the coverage and the degree of specification) are significantly less stringent than those released by the UKs FSA, as described in the following section. In October 2009 the FSA (the UK regulatory authority) specified new regulatory requirements concerning liquidity risk management in the policy statement PS09/16 (Strengthening liquidity standards), thereby  finalizing a series of consultation papers (CP08/22, CP09/13 and CP09/14). The policy details new requirements such as the Individual Liquidity Adequacy Standards (ILAS) or the Liquidity Reporting. Crucial points are: enhanced system and control requirements for adequate liquidity risk management  Ãƒâ€š definition of principles of adequate liquidity and self-sufficiency multidimensional breakdown of contracts (e.g. currency, asset type or time buckets) s tress-test scenarios have to cover short-term and protracted stress scenarios (2 weeks / 3 months), institution-specific (idiosyncratic) and market-wide stress, as well as combinations of both all evaluated across 10 prescribed key risk drivers coherent interpretation of results and individual liquidity guidance (ILG) by the FSA new definition of liquid assets and risk-based buffer as well as the demand for a regular realization of a significant portion of the liquidity buffer New reporting regime: granular, frequent (daily, weekly, monthly, quarterly) and partially automated the Enhanced Mismatch Report has to be submitted weekly (with the ability to report daily) in an automated process. With regard to systemic risks  these standards do not only apply to UK firms only, but also to non-UK firms with branches in the UK. In order to keep the regulatory requirements to a reasonable  level, modifications and simplification on an individual basis are provided . In particular, non-UK firms with branches in UK may apply for a whole-firm modification in the course of which the supervision is mainly left to the parent firm and only a significantly reduced amount of reports at low frequency (but for the whole firm) has to be submitted. Based on their Principles for Sound Liquidity Risk Management and Supervision published in 09/2008 the Basel Committee on Banking Supervision (BCBS) issued a new consultation document International framework for liquidity risk measurement, standards and monitoring for comment in December 2009. Within this paper they propose amongst other things two new standards: Liquidity Coverage Ratio (LCR): ratio of the stock of unencumbered, high quality liquid assets  to the net cash outflows over a 30-day time period under an acute liquidity stress scenario (prescribed combination of idiosyncratic and market-wide shock). Net Stable Funding (NSF) ratio: ratio of the available amount of stable f unding  to the required amount of stable funding.  Ãƒâ€š The LCR is intended as a measure for the short-term (30 days) view in a stressed situation (prescribed by the supervisors), whereas the NSF ratio has a longer perspective (1 year) on the funding needs with respect to illiquid assets and securities held (regardless of accounting treatment). Furthermore, the paper recommends consistent monitoring tools; including contractual maturity mismatch, concentration of funding, available unencumbered assets, and market-related tools to monitor the liquidity risk profiles of supervised entities. Following the invitation of the BCBS to comment upon this document, the international discussion on sound liquidity risk management and corresponding supervision will continue, and further standards and requirements on national level will be developed. Liquidity risk management framework Prior to the crisis, the management of liquidity risks was not an issue because banks were  accustomed to a functioning interbank money market which usually was a reliable source for short-term funding. Nowadays sound liquidity risk management has gained significant importance and is emphatically required by public and regulators. All firms active in the financial  markets should be equipped with an adequate framework to identify measure, manage and monitor  their liquidity risks. The aims of a comprehensive liquidity risk management, based on a well-founded knowledge and understanding of the institutions liquidity profile, are included in (but not limited to) the following aspects: Securing the institutions ability to meet its financial obligations at all times, and  possessing a graduated and detailed plan for different stress situations at hand Creation of revenue possibilities by controlled maturity transformation and resulting in applicable steering recommendations Optimization of liquidity costs (e.g. the composit ion of the liquidity buffer) On  an organizational level, the liquidity risk management framework should be separated into a management and a controlling side. At the top level, the Board of Directors defines the risk appetite and sets the liquidity risk strategy which has to be approved, and will be continuously monitored, by the Supervisory Board. On  an operational level the Treasury department is responsible for meeting the short-term financial obligations of the firm. The risk controlling department assures that all Treasury operations stay within the liquidity risk strategy. Moreover, the risk controlling department defines modeling for liquidity risk analyses (e.g. for non-deterministic cash flows) and performs stress tests. Results emanating from  the risk controlling departments actions  on the liquidity situation of the bank may also serve as basis for regulatory reporting. We can see the liquidity risk in detail in the following chapters .

Mandela A Life Devoted to Change and Freedom - 2008 Words

In order to achieve freedom, equality, and social justice, how much is a person willing to sacrifice? During the early 1900s, Britain colonized four colonies in Africa. Through a slow process between 1902 and 1910, the four colonies became a unified union. By May 1910, Britain passed the South Africa Act and the four colonies became one independent colony. It was formally named the Union of South Africa. While white South Africans rejoiced, black South Africans did not see hope in their future. Although black South Africans made up two-thirds of the population, the South African Parliament was controlled by extremist Afrikaners – people who favored white supremacy. Race and skin color determined one’s fate and destiny. White people were†¦show more content†¦However, they were wrong. As Mandela stated in his speech, he fought against white domination, but also against black domination. He does not believe in one race dominating another race. Mandela wanted to in form all white South Africans that they should not be afraid of reformation, because reformation does not equal to black domination. Giving blacks the opportunity to vote does not mean limiting the rights of whites, but giving equal rights to blacks. Before he ended his 176 minute long speech, through the addition of pathos and Mandela’s tone of voice, the audience could sense Mandela’s superb determination in ending apartheid, ending racial injustice, and uniting the country as a whole. Speaking loud and clear, Mandela states: I have cherished the ideal of a democratic and free society in which all persons will live together in harmony and with equal opportunities. It is an ideal for which I hope to live for and to see realized. But, My Lord, if it needs be, it is an ideal for which I am prepared to die for. (147) Mandela’s emotional ending of the speech became a release for him. After years of suffering, Mandela wants to inform his audience that he is not afraid of death. If necessary, he is willing to die for a democratic and free society. His great determination draws his audience and deeply touches all citizens of South Africa. Mandela’s life is like a roller coaster ride – many ups and downs. The many events that occurred during his lifetime mayShow MoreRelatedNelson Mandela And His Success1408 Words   |  6 PagesNelson Mandela and His Success Introduction Nelson Mandela, the pursuit of freedom let him go out of the tribal sheikhs and take part in the movement for the emancipation of the underground. He had spent much time in the prison of a quarry, finally entered the presidential palace of the richest country in Africa. Nelson Mandela has strong character and he venerated national heroes. He is the eldest son in the family and is designated as the emirate. 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FAITH free essay sample

We define faith as believing confidence, happiness, obedience, security. The word of God in the book of Hebrews defines faith as the substance of things chopped for, the evidence of things not seen, faith makes us believe that we can achieve ,acquire or obtain many things we want faith goes far of our understanding, man gets discouraged and stops fighting when time passes and stop believing and trust . Len that moments ,full of discouragement men receives a divine touch that drives back and encourages him to keep fighting, waiting and hoping that the day will come, that divine touch is called faith.Faith assures us, that causes us to believe that God does not abandon us in our walk he walk with us through the valleys and the hills, faith move mountains, faith in God is waiting for him, to acknowledge that because of him it was Built the universe. Having faith is to believe that we can be different , and even now we are no different, have faith is to know that God can heal the sick an d clear our sins every day. We will write a custom essay sample on FAITH or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Faith is the root of love, give love even you do not get loved in return, but keep fighting because of FAITH evidence of things not seen, faith makes us believe that we can achieve ,culler or vine touch Is called faith.Faith assures us, that causes us to believe that God does not abandon us In our walk he walk with us through the valleys and the hills, faith move mountains, faith In God Is waiting for him, to acknowledge that because of him it was Built the universe. Having faith Is to believe that we can be different , and even now we are no different, have faith Is to know that God can heal the sick and clear our sins every day. Faith Is the root of love, give love even you do not get loved In return, but keep fighting because of FAITH

Things They Carried Persuasive Essay Example For Students

Things They Carried Persuasive Essay annonFor young people, the Vietnam War is a thing of the past and they canonly learn about it from second hand sources. In Tim Obriens TheThings They Carried, it becomes very apparent that the Vietnamconflict has proved to be one that many of the participants have notbeen able move away from, while getting on with their lives. Obrienshows that the conflict takes on a parasitic form that eats away onits victims for the rest of their lives. A parasite is defined as an organism that grows, feeds, and issheltered on or in a different organism while harming its host. Thewar in this case takes the place of the organism, and the host becomesthe soldiers. There are several examples of the parasitic nature ofwar through out the book. In one particular section, Tim OBrienreturns to Vietnam with his daughter. Twenty years had gone by, but itseems as though all of his thoughts are geared back to the time he hadspent in the jungle so long before. The two of them travel all overthe country, but before their departure, he returns to the field wherehe feels he lost everything. On this list he includes his honor, hisbest friend, and all faith in himself. For OBrien, evidence of theparasite is not solely in his return Vietnam, but rather a constantpersonal preoccupation that seems to flow through the collection ofstories. OBrien shows how the memories of the war take on a parasiticform, and uses himself as an example. We will write a custom essay on Things They Carried Persuasive specifically for you for only $16.38 $13.9/page Order now In the chapter Speaking of Courage, OBrien introduces a characterby the name of Norman Bowker. In the story Norman finds him self homeafter serving his time in Vietnam. Even though he is back in his hometown, things do not seem the same to him. The was seems to have put anew spin on his life. Most of the story he spends driving in circleswhile thinking about the war and his lack of place in his old society. The war becomes his whole life, and he feels as though he is to fardistant from the town people for them to understand. The reader thenfinds out that Bowker commits suicide because the parasitic affect ofhis memories became to much for him to handle. There is another section in the book where a man named Jimmy Crosscomes to visit OBrien after the war. They talk of experiences andhardships, then it becomes apparent Cross has also been unable tototally move on with his life. There are still secrets, and they stillweigh heavy on his mind even during his his every day civilian life. OBrien never complains about these problems, but it is clear the theybother him a great deal. There are countless themes in this book, but one of the major ones isthe after effects the war had and still has on the men that werethere. It is clear from OBriens writing on Cross, Bowker, andhimself is more than just story telling. In using these people heattempts to show what the war has done to the population of soldiersthat participated in the conflict.