Chapter 6 The Role of Corporate Governance in Macro-Prudential Regulation of Systemic Risk

Bank Regulation, Risk Management, and Compliance is a concise yet comprehensive treatment of the primary areas of US banking regulation – micro-prudential, macroprudential, financial consumer protection, and AML/CFT regulation – and their associated risk management and compliance systems. The book’s focus is the US, but its prolific use of standards published by the Basel Committee on Banking Supervision and frequent comparisons with UK and EU versions of US regulation offer a broad perspective on global bank regulation and expectations for internal governance. The book establishes a conceptual framework that helps readers to understand bank regulators’ expectations for the risk management and compliance functions. Informed by the author’s experience at a major credit rating agency in helping to design and implement a ratings compliance system, it explains how the banking business model, through credit extension and credit intermediation, creates the principal risks that regulation is designed to mitigate: credit, interest rate, market, and operational risk, and, more broadly, systemic risk. The book covers, in a single volume, the four areas of bank regulation and supervision and the associated regulatory expectations and firms’ governance systems. Readers desiring to study the subject in a unified manner have needed to separately consult specialized treatments of their areas of interest, resulting in a fragmented grasp of the subject matter. Banking regulation has a cohesive unity due in large part to national authorities’ agreement to follow global standards and to the homogenizing effects of the integrated global financial markets. The book is designed for legal, risk, and compliance banking professionals; students in law, business, and other finance-related graduate programs; and finance professionals generally who want a reference book on bank regulation, risk management, and compliance. It can serve both as a primer for entry-level finance professionals and as a reference guide for seasoned risk and compliance officials, senior management, and regulators and other policymakers. Although the book’s focus is bank regulation, its coverage of corporate governance, risk management, compliance, and management of conflicts of interest in financial institutions has broad application in other financial services sectors

Solvation vs. freezing in a heteropolymer globule

We address the response of a random heteropolymer to preferential solvation of certain monomer types at the globule-solvent interface. For each set of monomers that can comprise the molecule's surface, we represent the ensemble of allowed configurations by a Gaussian distribution of energy levels, whose mean and variance depend on the set's composition. Within such a random energy model, mean surface composition is proportional to solvation strength under most conditions. The breadth of this linear response regime arises from approximate statistical independence of surface and volume energies. For a diverse set of monomer types, the excess of solvophilic monomers at the surface is large only for very strong solvent preference, even in the ground state.Comment: 10 pages, 1 figur

Redundancy, Unilateralism and Bias beyond GDP – results of a Global Index Benchmark

Eight out of ten leading international indices to assess developing countries in aspects beyond GDP are showing strong redundancy, bias and unilateralism. The quantitative comparison gives evidence for the fact that always the same countries lead the ranks with a low standard deviation. The dependency of the GDP is striking: do the indices only measure indicators that are direct effects of a strong GDP? While the impact of GDP can be discussed reverse as well, the standard deviation shows a strong bias: only one out of the twenty countries with the highest standard deviation is among the Top-20 countries of the world, but 11 countries among those with the lowest standard deviation. Let’s have a look at the backsides of global statistics and methods to compare their findings. The article is the result of a pre-study to assess Social Capital for development countries made for the German Federal Ministry for Economic Cooperation and Development. The study leaded to the UN Sustainable Development Goals (UN SDG) project World Social Capital Monitor

Redundancy, Unilateralism and Bias beyond GDP – results of a Global Index Benchmark

Eight out of ten leading international indices to assess developing countries in aspects beyond GDP are showing strong redundancy, bias and unilateralism. The quantitative comparison gives evidence for the fact that always the same countries lead the ranks with a low standard deviation. The dependency of the GDP is striking: do the indices only measure indicators that are direct effects of a strong GDP? While the impact of GDP can be discussed reverse as well, the standard deviation shows a strong bias: only one out of the twenty countries with the highest standard deviation is among the Top-20 countries of the world, but 11 countries among those with the lowest standard deviation. Let’s have a look at the backsides of global statistics and methods to compare their findings. The article is the result of a pre-study to assess Social Capital for development countries made for the German Federal Ministry for Economic Cooperation and Development. The study leaded to the UN Sustainable Development Goals (UN SDG) project World Social Capital Monitor

Heteropolymer Sequence Design and Preferential Solvation of Hydrophilic Monomers: One More Application of Random Energy Model

In this paper, we study the role of surface of the globule and the role of interactions with the solvent for designed sequence heteropolymers using random energy model (REM). We investigate the ground state energy and surface monomer composition distribution. By comparing the freezing transition in random and designed sequence heteropolymers, we discuss the effects of design. Based on our results, we are able to show under which conditions solvation effect improves the quality of sequence design. Finally, we study sequence space entropy and discuss the number of available sequences as a function of imposed requirements for the design quality

Freezing Transition of Random Heteropolymers Consisting of an Arbitrary Set of Monomers

Mean field replica theory is employed to analyze the freezing transition of random heteropolymers comprised of an arbitrary number ($q$) of types of monomers. Our formalism assumes that interactions are short range and heterogeneity comes only from pairwise interactions, which are defined by an arbitrary $q \times q$ matrix. We show that, in general, there exists a freezing transition from a random globule, in which the thermodynamic equilibrium is comprised of an essentially infinite number polymer conformations, to a frozen globule, in which equilibrium ensemble is dominated by one or very few conformations. We also examine some special cases of interaction matrices to analyze the relationship between the freezing transition and the nature of interactions involved.Comment: 30 pages, 1 postscript figur

Thermodynamic stability of folded proteins against mutations

By balancing the average energy gap with its typical change due to mutations for protein-like heteropolymers with M residues, we show that native states are unstable to mutations on a scale M* ~ (lambda/sigma_mu)^(1/zeta_s), where lambda is the dispersion in the interaction free energies and sigma_mu their typical change. Theoretical bounds and numerical estimates (based on complete enumeration on four lattices) of the instability exponent zeta_s are given. Our analysis suggests that a limiting size of single-domain proteins should exist, and leads to the prediction that small proteins are insensitive to random mutations.Comment: 5 pages, 3 figures, to be published in Physical Review Letter

Free Energy Self-Averaging in Protein-Sized Random Heteropolymers

Current theories of heteropolymers are inherently macrpscopic, but are applied to folding proteins which are only mesoscopic. In these theories, one computes the averaged free energy over sequences, always assuming that it is self-averaging -- a property well-established only if a system with quenched disorder is macroscopic. By enumerating the states and energies of compact 18, 27, and 36mers on a simplified lattice model with an ensemble of random sequences, we test the validity of the self-averaging approximation. We find that fluctuations in the free energy between sequences are weak, and that self-averaging is a valid approximation at the length scale of real proteins. These results validate certain sequence design methods which can exponentially speed up computational design and greatly simplify experimental realizations.Comment: 4 pages, 3 figure

Random walks in the space of conformations of toy proteins

Monte Carlo dynamics of the lattice 48 monomers toy protein is interpreted as a random walk in an abstract (discrete) space of conformations. To test the geometry of this space, we examine the return probability $P(T)$, which is the probability to find the polymer in the native state after $T$ Monte Carlo steps, provided that it starts from the native state at the initial moment. Comparing computational data with the theoretical expressions for $P(T)$ for random walks in a variety of different spaces, we show that conformational spaces of polymer loops may have non-trivial dimensions and exhibit negative curvature characteristic of Lobachevskii (hyperbolic) geometry.Comment: 4 pages, 3 figure

Non-monotonic variation with salt concentration of the second virial coefficient in protein solutions

The osmotic virial coefficient $B_2$ of globular protein solutions is calculated as a function of added salt concentration at fixed pH by computer simulations of the ``primitive model''. The salt and counter-ions as well as a discrete charge pattern on the protein surface are explicitly incorporated. For parameters roughly corresponding to lysozyme, we find that $B_2$ first decreases with added salt concentration up to a threshold concentration, then increases to a maximum, and then decreases again upon further raising the ionic strength. Our studies demonstrate that the existence of a discrete charge pattern on the protein surface profoundly influences the effective interactions and that non-linear Poisson Boltzmann and Derjaguin-Landau-Verwey-Overbeek (DLVO) theory fail for large ionic strength. The observed non-monotonicity of $B_2$ is compared to experiments. Implications for protein crystallization are discussed.Comment: 43 pages, including 17 figure