Estimating liquidity risk using the exposure-based cash-flow-at-risk approach: an application to the UK banking sector

This paper uses a relatively new quantitative model for estimating UK banks' liquidity risk. The model is called the exposure-based cash-flow-at-risk (CFaR) model, which not only measures a bank's liquidity risk tolerance but also helps to improve liquidity risk management through the provision of additional risk exposure information. Using data for the period 1997–2010, we provide evidence that there is variable funding pressure across the UK banking industry, which is forecasted to be slightly illiquid with a small amount of expected cash outflow (i.e. £0.06 billion) in 2011. In our sample of the six biggest UK banks, only the HSBC maintains positive CFaR with 95% confidence, which means that there is only a 5% chance that HSBC's cash flow will drop below £0.67 billion by the end of 2011. RBS is expected to face the largest liquidity risk with a 5% chance that the bank will face a cash outflow that year in excess of £40.29 billion. Our estimates also suggest Lloyds TSB's cash flow is the most volatile of the six biggest UK banks, because it has the biggest deviation between its downside cash flow (i.e. CFaR) and expected cash flow

The sub-prime crisis, the credit squeeze, Northern Rock and beyond: the lessons to be learnt

On 14 September 2007, after failing to find a 'White Knight' to take over its business, Northern Rock bank turned to the Bank of England ('the Bank') for a liquidity lifeline. This was duly provided but failed to quell the financial panic, which manifested itself in the first fully-blown nationwide deposit run on a UK bank for 140 years. Subsequent provision of a blanket deposit guarantee duly led to the (eventual) disappearance of the depositor queues from outside the bank's branches but only served to heighten the sense of panic in policymaking circles. Following the Government's failed attempt to find an appropriate private sector buyer, the bank was then nationalised in February 2008. Inevitably, post mortems ensued, the most transparent of which was that conducted by the all-party House of Commons' Treasury Select Committee. And a variety of reform proposals are currently being deliberated at fora around the globe with a view to patching up the global financial system to prevent a recurrence of the events which precipitated the bank's illiquidity and the wider financial instability which set in towards the end of 2008. This article briefly explains the background to these extraordinary events before setting out, in some detail, the tensions and flaws in UK arrangements which allowed the Northern Rock spectacle to occur. None of the interested parties – the Bank, the Financial Services Authority (FSA) and the Treasury – emerges with their reputation intact, and the policy areas requiring immediate attention, at both the domestic and international level, are highlighted. A review and assessment of both the House of Commons Treasury Committee's Report on Northern Rock and the Tripartite Authorities' proposals for reform are also provided before analysis of the subsequent measures taken to stabilise the UK financial sector – involving further nationalisation of banks, the brokering of takeover rescues of banks and building societies, a £400 billion bailout of the deposit-taking sector and a subsequent bank bailout scheme – is undertaken. Accordingly, this paper represents an update, covering developments until end-January 2009, of my earlier paper on the Northern Rock affair (Working Paper No. WP 2008-09), which was published in September 2008. Specifically, it covers the latest domestic (i.e. UK) developments on a number of fronts. The text, for example, provides updates on the reform proposals of the Tripartite Authorities, amendments to deposit protection arrangements, and the emergency funding initiatives adopted by the Bank of England. Table 2 (where, along with Table 1, most of the new material is located), meanwhile, provides updates and analysis of the following: the latest developments in the UK housing market; the latest developments in the real economy; the latest financial statements of the major banks; the latest nationalisation moves;* the latest inflation figures and interest rate decisions of the MPC; the latest government bailout plans for deposit-takers; the latest official support packages introduced for the housing market, mortgage borrowers and small businesses; the latest fiscal stimulus plans (e.g. as contained in the Pre-Budget Report of November 2008); and the latest domestic financial and regulatory developments. Meanwhile, Table 1 provides up-to-date information on: emergency funding initiatives undertaken by the Fed, the ECB and other major central banks; financial institution takeovers/bailouts in the US and Europe; interest rate developments in the major economies; financial and regulatory developments in the US and Europe; developments in the real economies of the US and Europe; the financial statements of banks in the USA and Europe; the evolution of official bailout plans in the US ('TARP') and Europe; deposit protection developments in the US and Europe; fiscal stimulus packages adopted in the US, Europe and the wider international community; G7/EU plans to tackle the worsening financial crisis; IMF 'bailouts' of beleaguered countries; and the Basel Committee's proposals for revamping Basel II in the light of the crisis. *A more detailed discussion of these developments is provided in Hall (2008)

The sub-prime crisis, the credit squeeze, Northern Rock and beyond: the lessons to be learnt

On 14 September 2007, after failing to find a 'White Knight' to take over its business, Northern Rock bank turned to the Bank of England ('the Bank') for a liquidity lifeline. This was duly provided but failed to quell the financial panic, which manifested itself in the first fully-blown nationwide deposit run on a UK bank for 140 years. Subsequent provision of a blanket deposit guarantee duly led to the (eventual) disappearance of the depositor queues from outside the bank's branches but only served to heighten the sense of panic in policymaking circles. Following the Government's failed attempt to find an appropriate private sector buyer, the bank was then nationalised in February 2008. Inevitably, post mortems ensued, the most transparent of which was that conducted by the all-party House of Commons' Treasury Select Committee. And a variety of reform proposals are currently being deliberated at fora around the globe with a view to patching up the global financial system to prevent a recurrence of the events which precipitated the bank's illiquidity and the wider financial instability which set in towards the end of 2008. This article briefly explains the background to these extraordinary events before setting out, in some detail, the tensions and flaws in UK arrangements which allowed the Northern Rock spectacle to occur. None of the interested parties – the Bank, the Financial Services Authority (FSA) and the Treasury – emerges with their reputation intact, and the policy areas requiring immediate attention, at both the domestic and international level, are highlighted. A review and assessment of both the House of Commons Treasury Committee's Report on Northern Rock and the Tripartite Authorities' proposals for reform are also provided before analysis of the subsequent measures taken to stabilise the UK financial sector – involving further nationalisation of banks, the brokering of takeover rescues of banks and building societies, a £400 billion bailout of the deposit-taking sector and a subsequent bank bailout scheme – is undertaken. Accordingly, this paper represents an update, covering developments until end-January 2009, of my earlier paper on the Northern Rock affair (Working Paper No. WP 2008-09), which was published in September 2008. Specifically, it covers the latest domestic (i.e. UK) developments on a number of fronts. The text, for example, provides updates on the reform proposals of the Tripartite Authorities, amendments to deposit protection arrangements, and the emergency funding initiatives adopted by the Bank of England. Table 2 (where, along with Table 1, most of the new material is located), meanwhile, provides updates and analysis of the following: the latest developments in the UK housing market; the latest developments in the real economy; the latest financial statements of the major banks; the latest nationalisation moves;* the latest inflation figures and interest rate decisions of the MPC; the latest government bailout plans for deposit-takers; the latest official support packages introduced for the housing market, mortgage borrowers and small businesses; the latest fiscal stimulus plans (e.g. as contained in the Pre-Budget Report of November 2008); and the latest domestic financial and regulatory developments. Meanwhile, Table 1 provides up-to-date information on: emergency funding initiatives undertaken by the Fed, the ECB and other major central banks; financial institution takeovers/bailouts in the US and Europe; interest rate developments in the major economies; financial and regulatory developments in the US and Europe; developments in the real economies of the US and Europe; the financial statements of banks in the USA and Europe; the evolution of official bailout plans in the US ('TARP') and Europe; deposit protection developments in the US and Europe; fiscal stimulus packages adopted in the *A more detailed discussion of these developments is provided in Hall (2008). US, Europe and the wider international community; G7/EU plans to tackle the worsening financial crisis; IMF 'bailouts' of beleaguered countries; and the Basel Committee's proposals for revamping Basel II in the light of the crisis

Flow in a slowly-tapering channel with oscillating walls

The flow of a fluid in a channel with walls inclined at an angle to each other is investigated at arbitrary Reynolds number. The flow is driven by an oscillatory motion of the wall incorporating a time-periodic displacement perpendicular to the channel centreline. The gap between the walls varies linearly with distance along the channel and is a prescribed periodic function of time. An approximate solution is constructed assuming that the angle of inclination of the walls is small. At leading order the flow corresponds to that in a channel with parallel, vertically oscillating walls examined by Hall and Papageorgiou \cite{HP}. A careful study of the governing partial differential system for the first order approximation controlling the tapering flow due to the wall inclination is conducted. It is found that as the Reynolds number is increased from zero the tapering flow loses symmetry and undergoes exponential growth in time. The loss of symmetry occurs at a lower Reynolds number than the symmetry-breaking for the parallel-wall flow. A window of asymmetric, time-periodic solutions is found at higher Reynolds number, and these are reached via a quasiperiodic transient from a given set of initial conditions. Beyond this window stability is again lost to exponentially growing solutions as the Reynolds number is increased

Finitely presented wreath products and double coset decompositions

We characterize which permutational wreath products W^(X)\rtimes G are finitely presented. This occurs if and only if G and W are finitely presented, G acts on X with finitely generated stabilizers, and with finitely many orbits on the cartesian square X^2. On the one hand, this extends a result of G. Baumslag about standard wreath products; on the other hand, this provides nontrivial examples of finitely presented groups. For instance, we obtain two quasi-isometric finitely presented groups, one of which is torsion-free and the other has an infinite torsion subgroup. Motivated by the characterization above, we discuss the following question: which finitely generated groups can have a finitely generated subgroup with finitely many double cosets? The discussion involves properties related to the structure of maximal subgroups, and to the profinite topology.Comment: 21 pages; no figure. To appear in Geom. Dedicat

Assessing the effectiveness of the Birdsbesafe® anti-predation collar cover in reducing predation on wildlife by pet cats in Western Australia

Many pet cats hunt and, irrespective of whether or not this threatens wildlife populations, distressed owners may wish to curtail hunting while allowing their pets to roam. Therefore we evaluated the effectiveness of three patterned designs (simple descriptions being rainbow, red and yellow) of the anti-predation collar cover, the Birdsbesafe® (BBS), in reducing prey captures by 114 pet cats over 2 years in a suburban Australian context. The BBS offers a colourful indicator of a cat's presence and should therefore alert prey with good colour vision (birds and herpetofauna), but not most mammals with limited colour vision. We also interviewed the 82 owners of cats in the study about their experience using the BBS and their assessment of the behavioural responses of their cats. In the first year of the study, which focused on the effectiveness of different BBS colours, captures of prey with good colour vision were reduced by 54% (95% CL 43-64%) when cats were wearing a BBS of any colour, with the rainbow and red BBS more effective than the yellow when birds were prey. Captures of mammals were not reduced significantly. The second year assessed the rainbow BBS alone, and those data combined with rainbow data in the first year found a significant reduction of 47% (95% CL 43-57%) in capture of prey with good colour vision, with no effect of differences across years. We found no evidence that cats maintained a lower predation rate once the BBS was removed. Seventy-nine per cent of owners reported that their cats had no problems with the BBS and another 17% reported that their cats adjusted within 2 days. Fourteen owners reported that their cats spent more time at home and ate more while wearing the BBS. Two owners reported their cats stayed away from home more while wearing it. Sixty-four per cent of owners using the red collar, 48% using rainbow and 46% using yellow believed that it worked. Overall, 77% of owners planned to continue using the BBS after the study had finished. The BBS is an option for owners wishing to reduce captures of birds and herpetofauna by free-ranging cats, especially where mammalian prey are introduced pests. To date, the BBS is the only predation deterrent that reduces significantly the number of herpetofauna brought home. It is unsuitable where endangered mammalian prey or large invertebrates are vulnerable to predation by pet cats

Proton Radiative Capture by Deuterium at Medium Energies

This research was sponsored by the National Science Foundation Grant NSF PHY 87-1440

Absence of a dose-rate effect in the transformation of C3H 10T1/2 cells by α-particles

The findings of Hill et al. (1984) on the greatly enhanced transformation frequencies at very low dose rates of fission neutrons induced us to perform an analogous study with -particles at comparable dose rates. Transformation frequencies were determined with γ-rays at high dose rate (0·5 Gy/min), and with -particles at high (0·2 Gy/min) and at low dose rates (0·83-2·5 mGy/min) in the C3H 10T1/2 cell system. α-particles were substantially more effective than γ-rays, both for cell inactivation and for neoplastic transformation at high and low dose rates. The relative biological effectiveness (RBE) for cell inactivation and for neoplastic transformation was of similar magnitude, and ranged from about 3 at an -particle dose of 2 Gy to values of the order of 10 at 0·25 Gy. In contrast to the experiments of Hill et al. (1984) with fission neutrons, no increased transformation frequencies were observed when the -particle dose was protracted over several hours

Derivative moments for characteristic polynomials from the CUE

We calculate joint moments of the characteristic polynomial of a random unitary matrix from the circular unitary ensemble and its derivative in the case that the power in the moments is an odd positive integer. The calculations are carried out for finite matrix size and in the limit as the size of the matrices goes to infinity. The latter asymptotic calculation allows us to prove a long-standing conjecture from random matrix theory.Comment: 31 pages, 3 figure