Bank capital requirements for market risk: the internal models approach

The increases prominence of trading activities at many large banking companies has highlighted bank exposure to market risk-the risk of loss from adverse movements in financial market rates and prices. In response, bank supervisors in the United States and abroad have developed a new set of capital requirements to ensure that banks have adequate capital resources to address market risk. This paper offers an overview of the new requirements, giving particular attention to their most innovative feature: a capital charge calculated for each bank using the output of that bank's internal risk measurement model. The authors contend that the use of internal models should lead to regulatory capital charges that conform more closely to banks' true risk exposures. In addition, the information generated by the models should allow supervisors and market participants to compare risk exposures over time and across institutions.Bank capital ; Risk

Transaction Cost and Asymmetry of Information -The Twin Odds of Indian Commercial Banks in Rural Credit Market: Theoretical Fragility

This paper delves into the issues of transaction cost and asymmetry of information in the rural credit market. The first two sections deal with theoretical postulation of bank intermediation. The third section discusses the policy and administrative interventions in the rural credit market in India. The fourth section discusses the problem of asymmetry of information and high transaction cost the faced by the commercial banks in the rural credit market in India. The fifth section analyses the interrelation between the role of trust and transaction cost and examines the role of SHGs in bridging information asymmetry, fostering trust between bankers and the rural borrowers and thereby reduce the transaction cost.Transaction cost, information asymmetry

Incorporating financial literacy into the secondary school accounting curriculum: a New Zealand perspective

This paper examines whether selected stakeholder groups believe accounting should continue to be taught as an elective subject in its current form at New Zealand secondary schools or whether incorporating a financial literacy component would increase the subject’s relevance to students. A mixed method approach combining qualitative and quantitative research methods was used. An electronically administered survey was used to obtain the responses of secondary school accounting teachers, while additional insight in the form of semi-structured interviews was obtained from other stakeholders. Although respondents generally agreed that students benefited from accounting as an elective subject at secondary school, all agreed that the development of financial literacy skills was important. Difficulties in introducing a new core subject into an already overcrowded curriculum were acknowledged. However, this difficulty could be overcome by making modifications to the subject “Accounting”. As the most widespread, existing “finance” related subject, Accounting would be the most appropriate vehicle through which to teach financial literacy

FINANCIAL INTERMEDIARY IN MONETARY ECONOMICS: AN EXCERPT

This is a short literature overview. (1) The literature demonstrates no coherent view on the nature of economic exchange and, in particular, provides no conventionally accepted, fully satisfactory explanation of the real effects of money. Recent developments in macroeconomics suggest a role for financial intermediaries. (2) The economics literature, however, has very little to say about that though the role of intermediaries in economic history has always been emphasised. (3) Further reading suggests that intermediation is largely missing from economics for methodological reasons. Revival of interest in this topic became evident in recent years thanks to developments in the treatment of asymmetric information, thin markets, and dynamics with innovations. (4) Today's literature, however, still primarily addresses empirical and specific issues like particular functions of intermediaries. Analysis of intermediation in the context of general equilibrium, explanation of its role in the monetary transmission and non-neutrality have not been seriously undertaken. Only a few authors so far have put forward their proposals for this perspective.monetary theory, financial intermediary, asymmetric information, microfoundations