The Likely Impact of the Basel II Accord on Shipping Finance - Dissertation Example

Only on StudentShare

Extract of sample
The Likely Impact of the Basel II Accord on Shipping Finance

The main purpose of the research is to present that the Basel Committee on Banking Supervision developed a set of rules in relation to the capital adequacy requirement for banks in 1988 known as Basel 1 which primarily targeted credit risk and which made it a requirement that banks “hold capital equal at least 8% of the risk-weighted assets”. Under the Basel I Accord “...the amount of capital being put aside by a bank as a type of ‘buffer’ for the risk taken was very simple and standardized.” However, the Basel Committee of Banking Supervision needing a more risk-sensitive approach to capital requirements as well as needing to incorporate “more advanced modeling and risk management in the regulatory banking system...designed a new worldwide framework” referred to as Basel II which replaced the existing Basel I legislation. It is held that Basel II and the Capital Requirements Directive (CRD) should enable effective operation within the European Financial Single Market and to enable competition with “peer institutions on a level playing field.” Stated as the purpose of Basel II is “to improve the stability and soundness of the financial system by more closely linking capital requirements to risks and by promoting a more forward-looking approach to capital management”. In addition the Basel II has the objective of maintaining the “aggregate level of minimum capital requirements, while also providing incentives to adopt more risk-sensitive approaches. ...
Download paper

Summary

The aim of the paper was to determine the impact of Basel II Accord on shipping industry financing. The aim of the accord is to impose a formula that is used by banks to access risk before lending to any organisation. Shipping industry has a unique risk that affects the financial performance. …
Author : kathryne03

Related Essays

Financial Services
The paper tells that various regulatory bodies have recognised that the prevalent strategies of capital regulations of the banks in the United States as well as the European Union, on the basis of the Basel I and the Basel II Accords as a major reason contributing to the 2008 financial disaster. This can be substantiated from the fact that under the prevalent capital adequacy policies prior to the financial crisis, the least regulatory capital obligations of banks were inadequate. The low capital obligations imposed on the banks as per the Basel II in addition to certain standards linked to…
12 pages (3012 words) Essay
Finance
Although, it is practically not possible to control some forces that operate outside a business, such as availability of the capital and the world economic conditions, management need to inspire and guide internal operations in helping ensure a secure competitive position within the marketplace. Moreover, both innovation and adaptability are essential in helping gain market share, and stay profitable in the event of fluctuating economic climates (Hill & Westbrook, 1997). Research show that for a business to remain being competitive in the market, it has to always impress innovative services…
5 pages (1255 words) Essay
Finance
The equity finance is an expensive and exclusive method for raising capital in the business and it comprises of ordinary and preference shareholdings, bonds and floating market shares. It also includes a listing cost and legal paper work, potential shareholders and raises wider opportunity for pool of finance (Slee, 2011). …
5 pages (1255 words) Term Paper
Basel Accord
The paper tells that the Basel Committee on Bank Supervision (BCBS) was originally established in the 1970s to tackle the new challenges of banking across international boundaries. It became apparent that the failings and collapse of one country's banks was now being felt in other countries all over the world. It was obvious that intervention and prevention was necessary. In the 1980s, the United States Congress, pushed domestic regulatory agencies to set and enforce standards, including a fixed proportion of capital a bank must hold, or capital adequacy. This is how the Basel Accords began.…
4 pages (1004 words) Essay
Finance
The capital structures of the companies were affected strongly since the availability of debt capital financing as well as equity capital financing declined considerably. Under influence of the financial crunch firms reduced security issuance and financial institutions reduced issuance of loans by a large extent (Fosberg, 2012). Among many consequences, the major consequence faced by the firms was in their capital structure. The defaults of mortgage loans led to significant increase in debt amount of the firm’s capital structure. Results of recent research show that between the years 2006…
12 pages (3012 words) Essay
Corporate Finance II Essay
The bank is listed in the Australian Stock Exchange and has made a satisfactory performance over time. Financial Policies of Westpac Banking Corporation related to Capital Structure In 2008, Westpac went into a strategic alliance with St. George Bank Limited in a merger operation. In that merger the exchange ratio of St. George Bank Limited to Westpac Bank was 1.31. This means that the valuation of the assets of St George was at a higher level than that of Westpac, and therefore the shareholders of St George have got a better valuation as compared to the shareholders of Westpac. The bank went…
4 pages (1004 words) Essay
finance
Sainsburys is second in terms of market share, ASDA is third and Morrisons is fourth (with 11.8), according to Reuters Finance. But when we look into market share increase over the past two years we find that Tesco’s profit margin in 2011 was 8.47% and decreased to 8.15% in 2012 perhaps reflecting the overall decline in retail profits due to the weakened economy. It is important to note though that Tesco was still operating with a profit margin of over 8%. When comparing this to Morrisons, who experienced an slightly decrease from 6.9% in 2011 to 6.89%, even though this was only a slight…
8 pages (2008 words) Assignment
Got a tricky question? Receive an answer from students like you! Try us!