Finance and Accounting Essay: Credit and Market Risk

Finance and Accounting Essay: Credit and Market Risk Essay example
Masters
Essay
Finance & Accounting
Pages 14 (3514 words)
Download 0
Credit and Market Risk Introduction The 2008 financial crisis is responsible for bankruptcy and closedown of various reputed companies. The developed nations were the major victims. Basel II set for banking supervision has been blamed for occurrence of such a crisis…

Introduction

Failure of Basel II was claimed chiefly due to maintenance of inappropriate standards for the banking sector as a whole. It failed to bring about strict regulatory control and hence most of the international banks were able to mould the rules in accordance to their interests. Basel II was absolutely a failure in terms of financial stability (Lall, 2009). The main culprit of financial crisis has been the risks. Banks indulged themselves in various activities of capital markets without having sufficient capital to do so. Linking of Variable Interest Entities (VIE) with banks was completely absent for capital regulations under Basel II (Blundell-Wignall and Atkinson, 2010). The Basel II regulations were unable to trace out this integration between market and credit risk that led to liquidity reduction. More significant regulations were required for liquidity management. This increased risks and capital market activities of banks led to significant reduction of liquidity (Madigan, 2010) .This made the drafters and regulators introduce Basel III which was expected to bring about stricter regulation across the banking sector by setting higher capital standards and requiring the international banking system to maintain a higher amount of minimal capital ratios. Overall liquidity requirements experienced a hike under Basel III. ...
Download paper
Not exactly what you need?

Related papers

Finance and Accounting Essay: Stock Market Analysis
(Katsanos, 2010) On the other hand, Dow Jones indexes is leading full-service index provider that develops, maintains and licenses indexes for use a benchmarks as the basis of investment products. In addition to this service, it offers equity indexes, fixed income and alternative indexes including measures of hedging funds, risks and real estates from risks that may hinder its growth and…
Finance and Accounting Assignment: Credit and Market Risk
Ratio analysis helps in identifying how a firm is utilizing its resources, how it is managing its cash flow and how much profit it is able to earn on the investment the firm has made and these ratios are helpful for the management to make certain decisions like whether the management should raise more capital from debt or not, how much capital structure of the firm is risky at the moment, does the…
Market Risk and Credit Risk: Risk management strategy, policies & procedures
Commercial banks are the backbone of any economy and they contribute to the economic development in the following ways: 1) Promoting capital formation in the economy 2) Promotion of trade and industry through loans and investments 3) Development of agriculture through Agri-financing 4) Transferring surplus capital from developed to less developed regions to allow for balanced development of the…
Credit Risk
The following part of this paper will make one aware of the concept of credit risk in detail. Credit risk-background The last few decades witnessed the collapse of some major banks as a result of borrowers’ credit repayment failure. Hence, many of the world’s largest banks and other financial institutions have developed comprehensive systems in order to deal with credit risk arising from…
Finance and Accounting Essay
Government. Since the institution of FDIC insurance in January 1934, no client has lost any deposited funds as a result of malfunction. This paper delves into the history of FDIC, its administration, operations, functions and effectiveness. It also looks into its performance over the years, whether or not it is regulated by laws and whether or not it is still a preferable insurance institution. My…
Finance and Accounting Essay
‘000 Rustic plc ?‘000 Market value of stocks (3x10)=30000 (1.62x8)=12,960 ROI 4,500, 2,952, Fixed assets 20,000 20,000 Current Assets 7,000 9,000 Current Liabilities -3,000 -5,000 Net assets 24,000 24,000 Long term debt @ 5% 4,000 8,000 Shareholders’ funds 20,000 16,000 Long-term investment 24,000 24,000 126, 000 108,960 Shareholder Value Added approach to estimation of cash flows for the…
Finance and Accounting Essay
The funny bit about such adjustments is that they can be based on the annual expenses of operating leases (Arms 2010). On the other hand, they can as well be based on the undiscounted available future operating lease payments. These are normally available on the notes to the financial statements. Such is the information that is normally available to many users of the statements and the entire…