Quantitative easing and the functioning of the gilt repo market

We assess the impact of quantitative easing (QE) on the provision of liquidity and pricing in the UK gilt repo market. We compare the behaviour of banks that received reserve injections via QE operations to other similar banks in terms of the amounts lent and pricing. We also investigate whether leverage ratio capital requirements affected the amounts of liquidity supplied by broker-dealers and the spreads they charged. We find that QE interventions can improve liquidity provision and that their size determines how this is attained. QE can also reduce the cost of borrowing in the repo market unless it is associated with spikes in demand for liquidity. Our findings indicate that the leverage ratio supports the provision of liquidity during stress, as it prompts banks to become less leveraged. However, the larger capital charge repo transactions attract under the leverage ratio requirements reflects on the spreads these banks charge

The cyclicality of bank credit losses and capital ratios under expected loss model

We model the evolution of stylised bank loan portfolios to assess the impact of IFRS 9 and US GAAP expected loss model (ECL) on the cyclicality of loan write-off losses, loan loss provisions (LLPs) and capital ratios of banks, relative to the incurred loss model of IAS 39. We focus on the interaction between the changes in LLPs charges (the flow channel) and stocks (the stock channel) under ECL. Our results show that, when GDP growth doesn’t demonstrate high volatility, ECL model smooths the impact of credit losses on profits and capital resources, reducing the pro-cyclicality of capital and leverage ratios, especially under US GAAP. However, when GDP growth is highly volatile, the large differences in lifetime probabilities of defaults (PDs) between booms and busts cause sharp increases in LLPs in deep downturns, as seen for US banks during the COVID-19 crisis. Volatile GDP growth makes capital and leverage ratios more pro-cyclical, with sharper falls in both ratios in deep downturns under US GAAP, compared to IAS 39. IFRS 9 ECL demonstrates less sensitivity to lifetime PDs fluctuations due to the existence of loan stages, and hence can reduce the pro-cyclicality of capital and leverage ratios, even when GDP is highly volatile

Economic support during the COVID crisis. Quantitative easing and lending support schemes in the UK

We investigate how UK bank business lending responded to the simultaneous use of quantitative easing, leverage ratio capital requirements, and government COVID lending support schemes. We find no evidence that the Brexit wave increased lending to nonfinancial businesses, compared to the previous waves, except for QE-banks subject to the UK leverage ratio, suggesting that the ratio incentivised QE-banks to lend to businesses. The government schemes helped expand lending especially to SMEs post the COVID wave, indicating that complementing QE with other credit easing programmes can reinforce its impact on lending to the real economy. During COVID-stress, changes to the UK leverage ratio supported better market-making in securities markets, and additional QE liquidity boosted stronger repo market intermediation

Agomelatine-based in situ gels for brain targeting via the nasal route: statistical optimization, in vitro, and in vivo evaluation

Agomelatine (AGM) is an antidepressant drug with a low absolute bioavailability due to the hepatic first pass metabolism. AGM-loaded solid lipid nanoparticles were formulated in the form of an in situ gel to prolong the intranasal retention time and subsequently to increase the absorbed amount of AGM. The optimized in situ gel formula had a sol–gel transition temperature of 31 °C ± 1.40, mucociliary transport time of 27 min ±1.41%, released after 1 and 8 h of 46.3% ± 0.85 and 70.90% ± 1.48. The pharmacokinetic study of the optimized in situ gel revealed a significant increase in the peak plasma concentration, area under plasma concentration versus time curve and absolute bioavailability compared to that of the oral suspension of Valdoxan® with the values of 247 ± 64.40 ng/mL, 6677.41 ± 1996 ng.min/mL, and 37.89%, respectively. It also gave drug targeting efficiency index of 141.42 which revealed more successful brain targeting by the intranasal route compared to the intravenous route and it had direct transport percent index of 29.29 which indicated a significant contribution of the direct nose to brain pathway in the brain drug delivery

Carbon Emissions Announcements and Market Returns

The paper investigates the impact of carbon emissions on stock price returns of European listed firms. This relationship is assessed across all three emissions scopes, as well as using expectations to detect if future emissions impact contemporary returns. Our findings show that firms with higher expected future emissions deliver lower contemporary returns after controlling for market capitalization, profit and other known return predictors. This result is statistically significant in the post Paris Agreement period for two- to three-year expectations of Scope 2 emissions. However, there is marginal to no significant negative relationship between current emissions and current returns. Overall, the results suggest that more environment-minded investors look further ahead and would expect lower returns from a polluting firm compared to a firm with no carbon emissions after the Paris Agreement

Leverage ratio, risk-based capital requirements, and risk-taking in the United Kingdom

We assess the impact of the leverage ratio capital requirements on the risk-taking behaviour of banks both theoretically and empirically. Conceptually, introducing binding leverage ratio requirements into a regulatory framework with risk-based capital requirements induces banks to re-optimise, shifting from safer to riskier assets (higher asset risk). Yet, this shift would not be one-for-one due to risk weight differences, meaning the shift would be associated with a lower level of leverage (lower insolvency risk). The interaction of these two changes determines the impact on the aggregate level of risk. Empirically, we use a difference-in-differences setup to compare the behaviour of UK banks subject to the leverage ratio requirements (LR banks) to otherwise similar banks (non-LR banks). Our results show that LR banks did not increase asset risk, and slightly reduced leverage levels, compared to the control group after the introduction of leverage ratio in the UK. As expected, these two changes led to a lower aggregate level of risk. Emperical results indicate that credit default swap spreads on the 5-year subordinated debt of LR banks decreased relative to non-LR banks post leverage ratio introduction, suggesting the market viewed LR banks as less risky, especially during the COVID 19 stress

Foreign exchange hedging using regime‐switching models: The case of pound sterling

We develop a four-state regime-switching model for optimal foreign exchange (FX) hedging using forward contracts. The states reflect four possible market conditions, defined by the direction and magnitude of deviation of the prevailing FX spot rate from its long-term trends. The model’s performance is tested for five currencies against Pound Sterling for various horizons. Our analysis compares the hedging outcomes of the proposed model to those of other frequently used hedging approaches. The empirical results suggest that our model demonstrates the highest level of risk reduction for the US dollar, Euro, Japanese yen and Turkish lira and the second-best performance for the Indian rupee. The risk reduction is significantly higher for lira, which suggests that the proposed model might be able to provide much more effective hedging for highly volatile currencies. The improved performance of the model can be attributed to the adjustability of the estimation horizon for the optimal hedge ratio based on the prevailing market conditions. This, in turn, allows it to better capture fat-tail properties that are frequently observed in FX returns. Our findings suggest that FX investors tend to use short-term memory during low market conditions and long-term memory in high ones. This could be useful for policy makers to understand of how FX risk evolves with the market mode. It would be also useful to build a better understanding of how investor behaviour depends on market conditions and mitigate the adverse behavioural implications of short-term memory, such as panic