...works; this has been fully acknowledged by citation in the main text and inclusion in the reference list Word Count: 14,650 words ABSTRACT This thesis analyses the main reason why banks securitise their loans including bank liquidity, credit risk transfer, regulatory capital arbitrage and bank performance in a comparison between UK securitising bank and non-securitising banks during the period from 2000 to 2010, and analysing a case study of Northern Rock bank, a fifth biggest volume securitising bank in the UK from 2001 to 2007 (Goldsmith- Pinkham and Yorulmazer, 2010) with Lloyds TSB, a stable bank with less securitisation. First, this dissertation will contribute to major literature on the securitisation background and determinants of securitisation. Next, the data, methodology and four groups of variables contributing to bank‟s securitisation decisions, namely liquidity needs, credit risk transfer, regulatory capital arbitrage and efficiency will be described using a logistic regression model adopting from Cardone-Riportella et al. (2010). Finally, the comparisons between securitising banks and non-securitising banks in general and between Northern Rock and Lloyds TSB in particular are analysed based on four above proxies. The empirical results in this study demonstrate that the needs for liquidity and regulatory capital...
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...Filenote The purpose of this filenote is to outline the accounting treatment associated with the receivables securitisation arrangement with Westpac. Introduction AASB 9's requirements on de-recognition are complex and require interpretation in a number of areas. Factoring arrangements are often referred to as "with recourse" or "without recourse". In a "with recourse" arrangement, all or most of the credit risk remains with the entity. Such an arrangement will almost always fail the risks and rewards tests (and possibly others). It should therefore be accounted for as a loan. By contrast, a "without recourse" arrangement transfers all or most of the credit risk to the factor (transferee). Such an arrangement is likely to qualify for de-recognition (subject to an evaluation of other risks that might be relevant such as slow payment risk). In substance, such an arrangement could be economically similar to a sale of the receivables in which case it is accounted for accordingly. The continuing involvement accounting requirements of IAS 39 will rarely apply in most factoring arrangements because most arrangements result in substantially all the risks and rewards being either transferred or retained. These requirements include special rules on recording and measuring continuing involvement assets and liabilities that deviate from the normal requirements of IAS 39. Accounting Implications When an entity factors its trade receivables, an analysis should be carried...
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...What are the salient features of the Securitisation Act? The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitisation Act) was passed in order to regulate securitisation and reconstruction of financial assets and enforcement of security interest. There was an acute need for assistance to the banks and other financial institutions when it comes to the recovery of loans as heavy losses being were incurred on account of unpaid debts. Initially, the Act was considered to be a boon to financial institutions and banks. However, gradually the flaws of the Act became evident, especially in terms of enforcement of security interest. It is true that there are certain deformities in the provisions for the enforcement of security interest. Firstly, a secured creditor can enforce any security interest, created in his favor, without the intervention of any court or tribunal. This may imply that whether the enforcement of security interest is justified or not, the secured creditor can enforce his claims without the intervention of any court or tribunal. Secondly, an inherent flaw in the provisions is that if the dues of the secured creditor are not satisfied under the Securitisiation Act, he can recover such dues by filing an application in the manner and form prescribed by the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ("DRT"). Therefore, there are parallel provisions for recovering these dues...
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...WEBSITES: DRT Cases • DRTC is the only Journal available, devoted exclusively to DRT cases. • DRTC published in monthly parts provides in full text, the most systemic access to cases by the Supreme Court, High Courts, DRAT & DRT’s. • DRTC is a current record of the latest substantive cases on the DRT Auction Sale, Bank & Customer, Banking Frauds, Cheating, Banking relating to Companies, Partner-ship, Proprietorship, Central & Financial Corporation Act, Dishonour of Cheques, Debt Laws, Embezzle-ment, Hypo-thecation. Interest Act, Selected cases under Banking Regulation Act, Negotiable Instruments Act, BIFR, AAIFR, MRTP Commissions, SEBI, SICA, State Recoveries of Dues Act and several Allied Act making this an essential reading for Practitioners, Financial Institutions, Banks, Corporate Sector wth an invaluable reference source of developments in matters related to the above topics. • Fast access to information. • Each issue contains up to 20 decisions with full text every Judgment. • Almost all reportable / non-reportable judgements, decisions delivered by Debt Recovery Appellate Tribunals and DRT’s. • Cases are clearly presented ith catch words and concise head notes summarizing the judgments clearly and accurately. • Cross – references are given to other major legal decisions delivered by the Supreme Court & various High Courts. Accurate Case Reporting of land mark case, with topical Index, Subject Index & Important Law Point and the background of the case, the judgement...
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...Basel III : A. Tier 1 Capital Tier 1 Capital Ratio = 6% Core Tier 1 Capital Ratio (Common Equity after deductions) = 4.5% Core Tier 1 Capital Ratio (Common Equity after deductions) before 2013 = 2%, 1st January 2013 = 3.5%, 1st January 2014 = 4%, 1st January 2015 = 4.5% The difference between the total capital requirement of 8.0% and the Tier 1 requirement can be met with Tier 2 capital. B. Capital Conservation Buffer Banks will be required to hold a capital conservation buffer of 2.5% to withstand future periods of stress bringing the total common equity requirements to 7%. Capital Conservation Buffer of 2.5 percent, on top of Tier 1 capital, will be met with common equity, after the application of deductions. Capital Conservation Buffer before 2016 = 0%, 1st January 2016 = 0.625%, 1st January 2017 = 1.25%, 1st January 2018 = 1.875%, 1st January 2019 = 2.5% The purpose of the conservation buffer is to ensure that banks maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress. While banks are allowed to draw on the buffer during such periods of stress, the closer their regulatory capital ratios approach the minimum requirement, the greater the constraints on earnings distributions. C. Countercyclical Capital Buffer A countercyclical buffer within a range of 0% – 2.5% of common equity or other fully loss absorbing capital will be implemented according to national circumstances. ...
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...when banks fall into the buffer range. Countercyclical buffer Imposed within a range of 0-2.5% comprising common equity, when authorities judge credit growth is resulting in an unacceptable build up of systematic risk. Liquidity Pillar 2 Containing leverage Leverage ratio A non-risk-based leverage ratio that includes off-balance sheet exposures will serve as a backstop to the risk-based capital requirement. Also helps contain system wide build up of leverage. Pillar 3 Market discipline Revised Pillar 3 disclosures requirements The requirements introduced relate to securitisation exposures and sponsorship of off-balance sheet vehicles. Enhanced disclosures on the detail of the components of regulatory capital and their reconciliation to the reported accounts will be required, including a comprehensive explanation of how a bank calculates its regulatory capital ratios. Risk coverage Securitisations Strengthens the capital treatment...
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...Dangerous derivatives at the heart of the financial crisis Financiers have engineered a “shadow banking system” that has subverted regulation and dumped risk. Complex derivative trades have fuelled a decade or more of cheap credit and destabilised the financial system. The financial and human costs are now being revealed as the massive borrowing spree unwinds, leaving the public purse to pay for failed corporate structures and the threat of a major economic recession. Fund managers, insurers and bankers have transformed investment practices by creating financial instruments known as derivatives, whose value is derived from the price of another underlying asset. The original idea of derivatives was to help actors in the real economy, such as farmers and manufacturers, insure against risk. A company may want, for example, to guard against increases in the prices of steel, wheat or other commodities. Price stabilisation and risk mitigation are worthwhile objectives, but many derivatives trades have crossed the line into speculation rather than risk management. Companies have been encouraged in this by derivative traders, who make money each time they create or sell a new product. Most derivatives are sold “over the counter” through private trades rather than on public stock or commodity exchanges. This gives investment banks flexibility to propose to their customers whatever deal they want, rather than being bound by the trades sanctioned by exchange supervisors. As the deals are...
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...Is Kenya ripe for securitization of real estate? Defination of securitization Securitisation is the issuance of debt certificates that are secured by cash flows from different kinds of assets. The issued securities are called Asset-Backed Securities (ABS). In essence a pool of payment claims are packaged and are made to securities in order to create a secondary market for the underlying receivables or other various illiquid assets. Securitisation is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling said consolidated debt as bonds, pass-through securities, or collateralized mortgage obligation (CMOs), to various investors. The principal and interest on the debt, underlying the security, is paid back to the various investors regularly. Securities backed by mortgage receivables are called mortgage-backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS). Therefore, securitization of real estate is the pooling of real estate assets as underlying assets securing a debt, which is issued to investors in return for cash flows from the underlying real estate assets. The illiquid real estate assets that generate a constant cash flow are formed into a tradable security and are floated on the debt market. Securitization process In its most basic form, the process involves two steps. 1. A company with loans...
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...www.pwc.com/journal The Journal Capital management in banking: The way forward Looking ahead, the future for banking is becoming clearer. It is a future of more capital, more liquidity and less risk. In this article we look into Basel III and the challenges firms will face as these changes come into operation. December 2010 The future of banking is becoming clearer. It is a future of more capital, more liquidity and less risk. And, inevitably, it is a future with lower returns on capital, higher costs of doing business and slower growth with ultimate effects to be felt by shareholders and end consumers. Greater scrutiny by investors, regulators and other stakeholders regarding balance sheet usage is also expected. Basel III is set to redraw the banking landscape. It will have a profound impact PwC (US) on profitability and force many banks to +1 (646) 471 5257 transform their business models. It will fernando.de.la.mora@us.pwc.com also require firms to undertake significant process and system changes. Fernando De La Mora challenges but also keep abreast of the competition. The markets have already started to price Basel III impact. As shown in Figure 1, the credit default swap (CDS) market already pays more attention to banks’ pro-forma capital adequacy levels under Basel III rather than to the current standards. As the equity markets better understand the return on equity (ROE) impact of new standards and bank strategies become more clearly articulated, investors...
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...the nature and the aftermath of the 2008 financial crisis During the periods the 2008 financial crisis, zero equity lending to homebuyers immensely flourished through the development of financial instruments known as Mortgage Backed Securities(MBS). There are many possible explanation how mortgage securitisation in subprime was effectively encouraged. First of all, a major policy set by the Bush Administration to fuel home ownership to lower income groups by providing easier access to loans for borrowers with zero equity lending. In addition, the crisis was triggered by overvalued subprime mortgages based on the idea of continuous increases in housing prices. Hamilton and Schwab (1985) find that house price changes are positively correlated...
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...This article was downloaded by: [Texas A&M University-Commerce] On: 05 January 2015, At: 16:08 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Geopolitics Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/fgeo20 Rethinking Climate Change, Conflict and Security Jan Selby & Clemens Hoffmann a a b Department of International Relations, University of Sussex, Brighton, UK b Department of International Relations, Bilkent University, Ankara, Turkey Published online: 30 Oct 2014. Click for updates To cite this article: Jan Selby & Clemens Hoffmann (2014) Rethinking Climate Change, Conflict and Security, Geopolitics, 19:4, 747-756, DOI: 10.1080/14650045.2014.964866 To link to this article: http://dx.doi.org/10.1080/14650045.2014.964866 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon...
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...Basel Committee on Banking Supervision International Convergence of Capital Measurement and Capital Standards A Revised Framework Comprehensive Version This document is a compilation of the June 2004 Basel II Framework, the elements of the 1988 Accord that were not revised during the Basel II process, the 1996 Amendment to the Capital Accord to Incorporate Market Risks, and the 2005 paper on the Application of Basel II to Trading Activities and the Treatment of Double Default Effects. No new elements have been introduced in this compilation. June 2006 Requests for copies of publications, or for additions/changes to the mailing list, should be sent to: Bank for International Settlements Press & Communications CH-4002 Basel, Switzerland E-mail: publications@bis.org Fax: +41 61 280 9100 and +41 61 280 8100 © Bank for International Settlements 2006. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN print: 92-9131-720-9 ISBN web: 92-9197-720-9 Contents Introduction ...............................................................................................................................1 Structure of this document........................................................................................................6 Part 1: Scope of Application .....................................................................................................7 I. Introduction.....................
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...FINC 6016 Financial Instruments and Markets Final Exam Guide * The final exam for FINC6016 Financial Instruments and Markets will be held on Thursday, November 13, 2014 at 1:50 pm. Please check the location for your specific exam on the Sydney Student section of the University of Sydney website. Note that there are multiple venues for the final exam due to the large class size – you may not have the same room as other students in the class. * The final exam is worth 50% of your total mark for the course. It will last for three hours, plus ten minutes reading time. You are allowed a non-alphanumeric calculator for the exam (which will be checked). Please ensure that you bring your student ID card as well. The formula sheet you will receive is attached to the end of the exam. * The exam consists of two parts * Part A: 45 Multiple Choice Questions, worth a total of 15 marks. These questions cover material from later portion of semester only (since the second multiple choice mid-term examination), but there will be obvious benefits to understanding material from earlier in the course.. * Part B: 5 short-answer questions with multiple parts, worth a total of 35 marks. These cover material mainly from the second half of the course, but an understanding of some parts of the first half of the subject would help (particularly the management of financial institutions, capital accords and the problems with Basel II, and duration gaps, duration measurement...
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...SPEECH Indian Derivatives Market - A Regulatory and Contextual Perspective Shyamala Gopinath Indian Derivatives Market - A Regulatory and Contextual Perspective* Shyamala Gopinath Let me first thank Euromoney for inviting me for this seminar on Indian derivatives market. The esoteric world of derivatives has come into sharp focus in recent times precisely on account of their complexity and recent events have triggered a debate on their impact on the financial system stability. My discussion today will be confined to the regulatory framework in India in regard to forex, debt and credit derivative markets and the regulatory imperatives arising in dealing with these instruments and their future development, particularly in the context of global developments. The financial markets, including derivative markets, in India have been through a reform process over the last decade and a half, witnessed in its growth in terms of size, product profile, nature of participants and the development of market infrastructure across all segments - equity markets, debt markets and forex markets. Derivative markets worldwide have witnessed explosive growth in recent past. According to the BIS Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity as of April 2007 was released recently and the OTC derivatives segment, the average daily turnover of interest rate and non-traditional foreign exchange contracts increased by 71 per cent to US $ 2.1 trillion in April 2007...
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...Subject: FINANCIAL MANAGEMENT Course Code: M. Com Author: Dr. Suresh Mittal Lesson: 1 Vetter: Dr. Sanjay Tiwari FINANCIAL MANAGEMENT OF BUSINESS EXPANSION, COMBINATION AND ACQUISITION STRUCTURE 1.0 Objectives 1.1 Introduction 1.2 Mergers and acquisitions 1.2.1 Types of Mergers 1.2.2 Advantages of merger and acquisition 1.3 Legal procedure of merger and acquisition 1.4 Financial evaluation of a merger/acquisition 1.5 Financing techniques in merger/Acquisition 1.5.1 Financial problems after merger and acquisition 1.5.2 Capital structure after merger and consolidation 1.6 Regulations of mergers and takeovers in India 1.7 SEBI Guidelines for Takeovers 1.8 Summary 1.9 Keywords 1.10 Self assessment questions 1.11 Suggested readings 1.0 OBJECTIVES After going through this lesson, the learners will be able to • Know the meaning and acquisition. 1 advantages of merger and • Understand the financial evaluation of a merger and acquisition. • Elaborate the financing techniques of merger and acquisition. • Understand regulations and SEBI guidelines regarding merger and acquisition. 1.1 INTRODUCTION Wealth maximisation is the main objective of financial management and growth is essential for increasing the wealth of equity shareholders. The growth can be achieved through expanding its existing markets or entering in new markets. A...
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