Financial instruments fair value accounting for (not against) the banking industry

The paper analyses the effects of three sets of accounting rules for financial instruments - Old IAS before IAS 39 became effective, Current IAS or US GAAP, and the Full Fair Value (FFV) model proposed by the Joint Working Group (JWG) - on the financial statements of banks. We develop a simulation model that captures the essential characteristics of a modern universal bank with investment banking and commercial banking activities. We run simulations for different strategies (fully hedged, partially hedged) using historical data from periods with rising and falling interest rates. We show that under Old IAS a fully hedged bank can portray its zero economic earnings in its financial statements. As Old IAS offer much discretion, this bank may also present income that is either positive or negative. We further show that because of the restrictive hedge accounting rules, banks cannot adequately portray their best practice risk management activities under Current IAS or US GAAP. We demonstrate that - contrary to assertions from the banking industry - mandatory FFV accounting adequately reflects the economics of banking activities. Our detailed analysis identifies, in addition, several critical issues of the accounting models that have not been covered in previous literature. December 2002. Revised: June 2003. Later version: http://publikationen.ub.uni-frankfurt.de/volltexte/2005/1026/ with the title: "Accounting for financial instruments in the banking industry : conclusions from a simulation model

Kapitalmarktorientierte Risikosteuerung in Banken : Marktwertsteuerung statt Marktzinsmethode

In diesem Beitrag wird das Konzept der Marktzinsmethode als Grundlage der dualen Risikosteuerung von Kredit- und Marktpreisrisiken in Frage gestellt. Die Kreditrisiken einer Bank implizieren bonitätsinduzierte Marktpreisrisiken und bankspezifische Refinanzierungskosten. Während die bonitätsinduzierten Marktpreisrisiken in der dualen Risikosteuerung keine Berücksichtigung finden, werden die bankspezifischen Refinanzierungskosten zwar erkannt, aber bankintern nicht verursachungsgerecht zugeordnet. Das Grundmodell der Marktzinsmethode bietet keine Lösungsansätze zur Behebung dieser Probleme. Demgegenüber lassen sich die Fehlsteuerungsimpulse von vornherein durch eine konsequente Marktbewertung (Mark to Market) aller Finanzinstrumente vermeiden. Als Ausblick werden erste Überlegungen zur Implementierung einer umfassenden Marktwertsteuerung in Banken entwickelt und exemplarisch ein hierfür geeignetes Bewertungsmodell vorgestellt

Accounting for financial instruments in the banking industry : [Version Juli 2002]

Recent changes in accounting regulation for financial instruments (SFAS 133, IAS 39) have been heavily criticized by representatives from the banking industry. They argue for retaining a historical cost based "mixed model" where accounting for financial instruments depends on their designation to either trading or nontrading activities. In order to demonstrate the impact of different accounting models for financial instruments on the financial statements of banks, we develop a bank simulation model capturing the essential characteristics of a modern universal bank with investment banking and commercial banking activities. In our simulations we look at different scenarios with periods of increasing/decreasing interest rates using historical data and with different banking strategies (fully hedged; partially hedged). The financial statements of our model bank are prepared under different accounting rules ("Old" IAS before implementation of IAS 39; current IAS) with and without hedge accounting as offered by the respective sets of rules. The paper identifies critical issues of applying the different accounting rules for financial instruments to the activities of a universal bank. It demonstrates important shortcomings of the "Old" IAS rules (before IAS 39), and of the current IAS rules. Under the current IAS rules the results of a fully hedged bank may have to show volatility in income statements due to changes in market interest rates. Accounting results of a partially hedged bank in the same scenario may be less affected even though there are economic gains or losses

Accounting for financial instruments in the banking industry: conclusions from a simulation model

The paper analyses the effects of three sets of accounting rules for financial instruments - Old IAS before IAS 39 became effective, Current IAS or US GAAP, and the Full Fair Value (FFV) model proposed by the Joint Working Group (JWG) - on the financial statements of banks. We develop a simulation model that captures the essential characteristics of a modern universal bank with investment banking and commercial banking activities. We run simulations for different strategies (fully hedged, partially hedged) using historical data from periods with rising and falling interest rates. We show that under Old IAS a fully hedged bank can portray its zero economic earnings in its financial statements. As Old IAS offer much discretion, this bank may also present income that is either positive or negative. We further show that because of the restrictive hedge accounting rules, banks cannot adequately portray their best practice risk management activities under Current IAS or US GAAP. We demonstrate that - contrary to assertions from the banking industry - mandatory FFV accounting adequately reflects the economics of banking activities. Our detailed analysis identifies, in addition, several critical issues of the accounting models that have not been covered in previous literature

Matières scatologiques dans la caricature politique, de la Réforme à la Révolution

À l’omniprésence de gens déféquant en public et au déluge de la merde pendant les temps modernes correspond une obsession scatologique dans la littérature et les arts populaires. Les graveurs de caricatures politiques se sont emparés du sujet pour mieux frapper les esprits. Face à la masse variée de gravures scatologiques, l’article se borne à quatre motifs entrelacés dont il observe la trajectoire de la Réforme à la Révolution : l’exposition des représentants politiques aux latrines communes, l’accouchement anal, la déféquation profanatrice, les rois placés sur le pot de chambre ou se déchargeant de paquets douteux.The omnipresence of people defecating in public and the deluge of excrement during modern times corresponds to scatological obsessions in literature and the popular arts. The engravers of political caricatures seized on this subject to grab public attention. Given the varied abundance of scatological engravings, this article is limited to four related pictoral representations forming a continuity from the Reformation to the Revolution : the display of political representatives in public latrines, anal childbirth, profanatory defecation, the depiction of Kings sitting on chamber pots or simply defecating

Variational bound on energy dissipation in turbulent shear flow

We present numerical solutions to the extended Doering-Constantin variational principle for upper bounds on the energy dissipation rate in plane Couette flow, bridging the entire range from low to asymptotically high Reynolds numbers. Our variational bound exhibits structure, namely a pronounced minimum at intermediate Reynolds numbers, and recovers the Busse bound in the asymptotic regime. The most notable feature is a bifurcation of the minimizing wavenumbers, giving rise to simple scaling of the optimized variational parameters, and of the upper bound, with the Reynolds number.Comment: 4 pages, RevTeX, 5 postscript figures are available as one .tar.gz file from [email protected]

«Im Namen der Frankenrepublik» aux origines d’une culture démocratique en Allemagne

Rolf Reichardt, At the origins of democratic culture in Germany (Rhine-Palatinate region, 1792-1793). Rolf Reichardt exhumed some documents which bear witness to an intense political life during the period which opened with the proclamation of the Republic of Mayence. In particular, he studied rural Jacobinism : village clubs, activities of teachers and of pastors, lampoons, popular brochures, revolutionary catechisms. These medias conveyed a republicanism referenced on the French model : the republic is less a regime than a value wed to the notions of Popular Sovereignty, Legality, Responsibility, Virtue, Civil Equality. The popular participation in this republican movement was not negligible. The vote to create some municipalities modeled after the French example constituted a success for the republicans. At the gathering of the National Convention in March 1793, more than half of the deputies were peasants.Rolf Reichardt, All’origine di una cultura democratica in Germania (paesi renani : 1792-1793). R. R. riesuma documenti che offrono la testimonianza di una vita politica intensa durante il periodo che conduce alla proclamazione della Repubblica di Maganza. Studia in particolare il giacobinismo rurale : circoli paesani, attività di maestri e di pastori, libelli, opuscoli popolari, catechismi rivoluzionari. Questi mezzi di informazione costituirono un veicolo per un repubblicanesimo che si riferiva all’esempio francese : la Repubblica non è un valore legato alle nozioni di popolo Sovrano, di Legge, di Responsabilità, di Virtù, di Uguaglianza civile, ma è piuttosto un regime. Non è stata trascurabile la partecipazione del popolo a questo movimento repubblicano. L’approvazione della costituzione di comuni sul modello francese fu un vero successo per i repubblicani. Per la convenzione nazionale riunita nel marzo del 1793, una buona metà dei deputati furono contadini.R. R. exhume des documents qui témoignent d’une vie politique intense pendant la période qui débouche sur la proclamation de la République de Mayence. Il étudie en particulier le jacobinisme rural : clubs villageois, activité d’instituteurs et de pasteurs, libelles, brochures populaires, catéchismes révolutionnaires. Ces médias véhiculèrent un républicanisme se référant au modèle français : la République est moins un régime qu’une valeur liée aux notions de peuple Souverain, de Loi, de Responsabilité, de Vertu, d’Égalité civile. La participation populaire à ce mouvement républicain ne fut pas négligeable. Le vote pour la création des municipalités sur le modèle français constitua un succès pour les républicains. A la Convention nationale réunie en mars 1793, plus de la moitié des députés furent des paysans.Reichardt Rolf. «Im Namen der Frankenrepublik» aux origines d’une culture démocratique en Allemagne. In: Annales historiques de la Révolution française, n°296, 1994. pp. 235-255

« La rhétorique du discours, objet d'histoire (18e-20e siècles) », Bulletin du Centre d'analyse du discours, 5, 1981.

Reichardt Rolf. « La rhétorique du discours, objet d'histoire (18e-20e siècles) », Bulletin du Centre d'analyse du discours, 5, 1981.. In: Mots, n°7, octobre 1983. Cadrage des sujets et dérive des mots dans l'enchaînement de l'énoncé. pp. 176-180