Download or read book Perverse Effects of a Ratings related Capital Adequacy System written by Patrick Honohan and published by World Bank Publications. This book was released on 2000 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is important to harness market information to improve bank safety (for example, by increasing the role of large, well-informed, but uninsured claimants) but the approach of a ratings-related capital adequacy system could be counterproductive. Relying on ratings could induce borrowers to increase their exposure to systemic risk even if they reduce exposure to specific risk.
Download or read book Perverse Effects of a Ratings Related Capital Adequacy System written by Patrick Honohan and published by . This book was released on 2016 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: Allowing banks to hold less capital against loans to borrowers who have received a favorable rating by an approved rating agency may result in a rating system that neither reveals risk information about borrowers nor protects the deposit insurance fund. Part of the problem is the very idea of basing portfolio risk evaluation on the sum of individual loan risks, but there are also important incentive issues.It has recently been proposed that banks be allowed to hold less capital against loans to borrowers who have received a favorable rating by an approved rating agency. But a plausible model of rating-agency behavior shows that this strategy could have perverse results, actually increasing the risk of deposit insurance outlays.First, there is an issue of signaling, with low-ability borrowers possibly altering their behavior to secure a lower capital requirement for their borrowing.Second, establishing a regulatory cut-off may actually reduce the amount of risk information made available by raters.Besides, the credibility of rating agencies may not be damaged by neglect of the risk of unusual systemic shocks, although deposit insurers greatest outlays come chiefly at times of systemic crisis. And using agencies' individual ratings is unlikely to be an effective early-warning system for the risk of systemic failure, so use of the ratings could lull policymakers into a false sense of security.It is important to harness market information to improve bank safety (for example, by increasing the role of large, well-informed, but uninsured claimants), but this particular approach could be counterproductive. Relying on ratings could induce borrowers to increase their exposure to systemic risk even if they reduce exposure to specific risk.This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to examine the effects of financial sector regulation.
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Governance of Credit Rating Agencies written by Andrea Miglionico and published by Edward Elgar Publishing. This book was released on 2019 with total page 360 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global crisis revealed that credit rating agencies (CRAs) are capable of bringing about potential distortions in the financial sector, thereby resulting in a reduction in market confidence which, in turn, influences negotiations and expectations. CRAs need to be held accountable for lack of transparency and inaccurate ratings, however the existing regulatory framework does not secure adequate investor protection. This book provides a new and important contribution to research in the area, at a crucial time in the debate around financial regulation and investment regimes.
Download or read book Towards a New Paradigm in Monetary Economics written by Joseph Stiglitz and published by Cambridge University Press. This book was released on 2003-09-04 with total page 356 pages. Available in PDF, EPUB and Kindle. Book excerpt: A pioneer treatment of monetary economics written by two of world's leading authorities.
Download or read book Complex Systems and Sustainability in the Global Auditing Consulting and Credit Rating Agency Industries written by Nwogugu, Michael I. C. and published by IGI Global. This book was released on 2021-05-07 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: Current and future issues in the global accounting/consulting, business opportunity, and credit rating agency (CRA) industries can have significant multiplier-effects on international trade, sustainable growth, and compliance (as physical phenomena). These three industries are among the most international and human-capital-intensive of all service industries. In these industries, analysis of business models and industry dynamics can provide insights about how human-computer interaction (HCI) and contract theory affect the evolution of financial market ecosystems and cross-border information flows, and how business models, work-allocation mechanisms, and liability allocation can evolve to manage change. An often-overlooked issue is that non-performing loans (NPLs), sustainability, and CRA efficiency can be significantly affected by business processes, corporate strategy, and HCI in industry ecosystems, multinational corporations (MNCs), and economic systems. Complex Systems and Sustainability in the Global Auditing, Consulting, and Credit Rating Agency Industries compares these three industries and introduces theories of public policy and “inter-business” processes. The book links industry structure, complex systems (including networks), behavioral game theory, structural changes, and antitrust problems to sustainability and the efficiency of pollution-remediation systems. The book introduces new “informal algorithms” and business/resource-allocation models that solve social-choice problems, and also contravene “impossibility theorems” that are at the core of modern computer science and mechanism design. This book is essential for professors and masters/PhD-level students and employees (in industry, financial services, research institutes, consulting firms, and government agencies) who are interested in industrial mathematics and theoretical computer science.
Download or read book How the Proposed Basel Guidelines on Rating agency Assessments Would Affect Developing Countries written by Giovanni Ferri and published by World Bank Publications. This book was released on 2000 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Basel Committee has proposed linking capital asset requirements for banks to the banks' private sector ratings. Doing so would reduce the capital requirements for banks that lend prudently in high-income countries; the same incentives would not apply in developing countries.
Download or read book Seeds of Corruption written by Harry G. Broadman and published by World Bank Publications. This book was released on 2000 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economists in the field of industrial organization, antitrust, and regulation have long recognized certain factors as potent determinants of opportunistic behavior, corruption, and "capture" of government officials. Only now are these relationships becoming conventional wisdom among specialists in economies in transition.
Download or read book A New Model for Market based Regulation of Subnational Borrowing written by Marcelo Giugale and published by World Bank Publications. This book was released on 2000 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: To bring fiscal discipline to state and municipal governments, Mexico's federal government has established a two-pillar framework that explicitly renounces federal bail-outs and establishes a Basel - consistent link between the capital-risk weighting of bank loans to subnational governments and the borrower's credit rating. Whether the framework succeeds will depend partly on market assessments of the government's commitment to enforce bank capital rules and refrain from bailing out defaulting subnational governments.
Download or read book Leading Indicator Project Lithunia written by Stephen S. Everhart and published by World Bank Publications. This book was released on 2000 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: June 2000 - A method for forecasting growth cycles in economic activity (measured as total industrial production), as applied to Lithuania. Everhart and Duval-Hernandez present a method for forecasting growth cycles in economic activity, measured as total industrial production. They construct a series which they aggregate into a composite leading indicator to predict the path of the economy in Lithuania. The cycle is the result of the economy's deviations from its long-term trend. A contractionary phase means a decline in the growth rate of the economy, not necessarily an absolute decline in economic activity. The indicator they select for economic activity is usually the Index of Industrial Production, plus a group of variables that, when filtered and adjusted, becomes the composite leading indicator that forecasts the reference series. Variables include economically and statistically significant financial, monetary, real sector, and business survey data. They base selection of the components of the leading indicator on the forecast efficiency and economic significance of the series. Once selected, the relevant variables are aggregated into a single composite leading indicator, which forecasts the detrended Index of Industrial Production. They apply the Hodrick-Prescott filter method for detrending the series. This is a smoothing technique that decomposes seasonally adjusted series into cyclical and trend components. One advantage of the Hodrick-Prescott filter is that it provides a reasonable estimate of a series' long-term trend. The OECD uses a system of leading indicators to predict growth cycles in the economies of its member countries. These exercises have been very effective in their forecasting ability and accuracy - but for the technique to work it is essential to have an adequate statistical system that provides many economic variables in a precise and timely manner, preferably monthly. The authors extend the OECD technique and present an application to a country of the former Soviet Union. This paper - a joint product of the Poverty Reduction and Economic Management Sector Units, Europe and Central Asia and Latin America and the Carribean Regions, and the Mexico Country Management Unit - is part of a larger effort in the Bank to foster the development of macroeconomic monitoring techniques. Authors may be contacted by email at [email protected] or [email protected].
Download or read book The Effects of Higher Bank Capital Requirements on Credit in Peru written by Xiang Fang and published by International Monetary Fund. This book was released on 2018-09-28 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper offers novel evidence on the impact of raising bank capital requirements in the context of an emerging market: Peru. Using quarterly bank-level data and exploiting the adoption of bank-specific capital buffers, we find that higher capital requirements have a short-lived, negative impact on bank credit in Peru, although this effect becomes statistically insignificant in about half a year. This finding is robust to estimating different specifications to address concerns about the exogeneity of capital requirements. The fact that the reform was gradual and pre-announced and that banks were highly profitable at the time could explain the short-lived effects on credit.
Download or read book The Effect of Early Childhood Development Programs on Women s Labor Force Participation and Older Children s Schooling in Kenya written by Michael Lokshin and published by World Bank Publications. This book was released on 2000 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic incentives have a powerful effect on the work behavior of women with children in Kenya. In addition to increasing the future productivity of children, government subsidies of low-cost early childhood development programs would increase the number of mothers who work, thus increasing the incomes of poor households and lifting some families out of poverty. They would also increase older girls' enrollment in school, by releasing them from child care responsibilities.
Download or read book Prudential Supervision written by Frederic S. Mishkin and published by University of Chicago Press. This book was released on 2009-02-15 with total page 379 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since banking systems play a crucial role in maintaining the overall health of the economy, the adverse effects of poorly supervised systems may be quite severe. Without some form of vigilant external oversight, banking systems could fall prey to excessive risk taking, moral hazard, and corruption. Prudential supervision provides that oversight, using government regulation and monitoring to ensure the soundness of the banking system and, by extension, the economy at large. The contributors to this thoughtful volume examine the current state of prudential supervision, focusing on fundamental issues and key pragmatic concerns. Why is prudential supervision so important? What kinds of excess must it guard against? What particular forms does it take? Which of these are the most effective deterrents against mismanagement and system overload in today's rapidly shifting financial climate? The contributors foresee a continued movement beyond simple regulatory rules in banking and toward a more active evaluation and supervision of a bank's risk management practices.
Download or read book Reciprocity Across Modes of Supply in the World Trade Organization written by Aaditya Mattoo and published by World Bank Publications. This book was released on 2000 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: If negotiations on trade in services at the World Trade Organization are to advance liberalization beyond levels undertaken unilaterally and lead to more balanced outcomes, reciprocity must play a greater role in negotiations. This may be facilitated by the use of negotiating rules that establish credible links across sectors and modes of delivery.
Download or read book Financial Openness Democracy and Redistributive Policy written by Mansoor Dailami and published by World Bank Publications. This book was released on 2000 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: What explains the spread of both democracy and financial openness at this time in history, given the constraining impact of financial market integration on national policy autonomy? International policy coordination is part of the answer, but not all. Also important is the presence of cost-effective redistributive schemes that provide insurance against the risk of financial instability.
Download or read book Banks Adjustment to Basel III Reform written by Michal Andrle and published by International Monetary Fund. This book was released on 2017-02-20 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper seeks to identify strategies of commercial banks in response to higher capital requirements of Basel III reform and its phase-in. It focuses on a sample of nine EU emerging market countries and picks up 5 largest banks in each country assessing their response. The paper finds that all banking sectors raised CAR ratios mainly through retained earnings. In countries where the banking sector struggled with profitability, banks have resorted to issuance of new equity or shrunk the size of their balance sheets to meet the higher capital-adequacy requirements. Worries echoed at the early stage of Basel III compilation, namely that commercial banks would shrink their balance sheet by reducing their lending to meet stricter capital requirements, did materialize only in banks struggling with profitability.
