Rethinking market discipline in banking : lessons from the financial crisis

The main objective of this paper is to rethink the use of market discipline for prudential purposes in light of lessons from the financial crisis. The paper develops the main building blocks of a market discipline framework, and argues for the need to take an expansive view of the concept. It also illustrates using actual bank case studies from the United States its apparent failures in the crisis, particularly the failure to prevent the buildup of systemic, as opposed to idiosyncratic, risks. However, while the role of market discipline in the design of macro-prudential regulation appears to be largely constrained, more can be done on the micro-prudential side to promote clearer market signals of bank riskiness and to encourage their use in the supervisory process.Banks&Banking Reform,Debt Markets,Markets and Market Access,Emerging Markets,Access to Finance

Including financial services in preferential trade agreements : lessons of international experience for China

The objective of this paper is to address the main considerations for China of including financial services in its preferential trade agreements. The paper briefly reviews China's financial liberalization process and the state of its domestic financial system, discusses the main considerations of including financial services in China's preferential trade agreements, compares and contrasts the different'architectural'approaches that have been used by countries to include financial services in such agreements, and identifies good practices in preparing for financial services negotiations. Particular emphasis is placed on lessons from Latin American preferential trade agreements, given their more frequent and extensive coverage of financial services compared with other regions.Emerging Markets,Banks&Banking Reform,Trade Law,Trade and Services,

The usefulness of earnings and cash flows in valuing security returns: empirical evidence for the U.K, U.S.A and France.

In this dissertation, I proposed to examine and test empirically six major hypotheses that relate to the role of financial information, namely earnings and cash flows, in three major capital markets, two Anglo-Saxon, the UK and the USA and one code law country, France. A theoretical framework is developed to set the groundwork for building up my research hypotheses. I hypothesize that the homogeneity across firms may not hold, due to firm-specific, industry-specific, and country specific differences across firms. The dataset consists of 36,695 USA, 4,234 UK and 1,181 French firm-year observations over the period 1990-98. Multivariate statistical regression analysis is undertaken to test the major research hypotheses. The major conclusions drawn from the empirical results are summarized as follows. First, results indicate that indeed both earnings and cash flows are taken into consideration by investors in their investment decisions. Second, given cash flows, results show that earnings are always very important to investors and financial analysts for investment purposes; given earnings though results show that cash flows are more important to investors in the Anglo-Saxon countries, possibly due to the lower importance that investors place on the manipulated earnings in these less conservative countries. As far as France is concerned, results reveal that investors place much more attention to earnings and less attention to cash flows. Third, results show that the value relevance of earnings and cash flows is industry specific. Fourth, evidence shows that investors pay more attention to longer-run earnings and cash flows rather than to shorter-run financial information. Fifth, when earnings are transitory (not stable), investors pay more attention to cash flows and less attention to earnings, a result indicating that investors penalize firms with unstable earnings. Sixth, results show that the value relevance of earnings and cash flows is country specific. Specifically, results indicate that earnings are valued more in France and less in the Anglo-Saxon countries, due to the fact that the financial Saxon countries is much more liberal (less conservative) and managers may manipulate easier financial information. Moreover, as hypothesized, results show that cash flows are the most (least) value relevant in the USA and the UK (France). In summary, the evidence provided in this dissertation supports that indeed there are substantial differences in the way investors and financial analysts perceive financial information such as earnings and cash flows in the UK, France and the USA. The results of this dissertation should be of great importance to the major stakeholders such as investors, creditors, financial analysts, especially after the latest financial scandals and collapses of giant organizations worldwide. Furthermore, these results support that fundamental analysis does play a very important role in the capital markets and it should be taken more seriously into consideration by the stakeholders for investing, credit, financing and valuation analysis purposes

Banking in Brazil: Structure, Performance, Drivers, and Policy Implications

he objective of this paper is to analyze the industry structure of banking services in Brazil in order to shed light on financial performance and its drivers at a disaggregated level. The study illustrates how differences across market segments -- which tend to be averaged out in aggregate analysis -- need to be taken into account when analyzing performance and designing public policy for the banking sector. In particular, retail banking is found to be less sensitive to price competition and to exhibit considerably higher returns than corporate banking. The authors identify and discuss the factors underlying revenues, costs, and risks in each market segment, and conclude with policy implications.Brazil; banking; competition; industry structure; performance

Sequential Quantiles via Hermite Series Density Estimation

Sequential quantile estimation refers to incorporating observations into quantile estimates in an incremental fashion thus furnishing an online estimate of one or more quantiles at any given point in time. Sequential quantile estimation is also known as online quantile estimation. This area is relevant to the analysis of data streams and to the one-pass analysis of massive data sets. Applications include network traffic and latency analysis, real time fraud detection and high frequency trading. We introduce new techniques for online quantile estimation based on Hermite series estimators in the settings of static quantile estimation and dynamic quantile estimation. In the static quantile estimation setting we apply the existing Gauss-Hermite expansion in a novel manner. In particular, we exploit the fact that Gauss-Hermite coefficients can be updated in a sequential manner. To treat dynamic quantile estimation we introduce a novel expansion with an exponentially weighted estimator for the Gauss-Hermite coefficients which we term the Exponentially Weighted Gauss-Hermite (EWGH) expansion. These algorithms go beyond existing sequential quantile estimation algorithms in that they allow arbitrary quantiles (as opposed to pre-specified quantiles) to be estimated at any point in time. In doing so we provide a solution to online distribution function and online quantile function estimation on data streams. In particular we derive an analytical expression for the CDF and prove consistency results for the CDF under certain conditions. In addition we analyse the associated quantile estimator. Simulation studies and tests on real data reveal the Gauss-Hermite based algorithms to be competitive with a leading existing algorithm.Comment: 43 pages, 9 figures. Improved version incorporating referee comments, as appears in Electronic Journal of Statistic

Credit risk measurement under Basel II : an overview and implementation issues for developing countries

The objective of this paper is to provide an overview of the changes in the calculation of minimum regulatory capital requirements for credit risk that have been drafted by the Basel Committee on Banking Supervision (Basel II). Even though the revised credit capital rules represent a dramatic change compared to Basel I, it is shown that Basel II merely seeks to codify (albeit incompletely) existing good practices in bank risk measurement. However, its effective implementation in many developing countries is hindered by fundamental weaknesses in financial infrastructure that will need to be addressed as a priority.Banks&Banking Reform,Banking Law,Insurance&Risk Mitigation,Financial Intermediation,Economic Theory&Research

Financing of the private sector in Mexico, 2000-05 : evolution, composition, and determinants

The objective of this paper is to describe the evolution, composition, and determinants of financing to the nonfinancial private sector in Mexico between 2000 and 2005. Supported by the macroeconomic environment and financial system reforms, total financing to the private sector (particularly consumer credit) increased relative to GDP, while accessibilityand affordability generally improved. Equity issuance did not play an important role during the period under consideration. Although the supply of financing shifted toward domestic nonbank providers, commercial banks remain the primary source of funding. Significant progress was made in cleaning up bank loan portfolios and in strengthening financial system soundness and infrastructure. The prospects for continued private sector financing growth remain very positive, but financing is not spread out evenly across all market segments. The authors conclude with some policy implications to further facilitate deeper and broader financing of the private sector.Banks&Banking Reform,Financial Intermediation,Economic Theory&Research,Public Sector Economics&Finance,Financial Crisis Management&Restructuring

Exact Multi-Restricted Schur Polynomial Correlators

We derive a product rule satisfied by restricted Schur polynomials. We focus mostly on the case that the restricted Schur polynomial is built using two matrices, although our analysis easily extends to more than two matrices. This product rule allows us to compute exact multi-point correlation functions of restricted Schur polynomials, in the free field theory limit. As an example of the use of our formulas, we compute two point functions of certain single trace operators built using two matrices and three point functions of certain restricted Schur polynomials, exactly, in the free field theory limit. Our results suggest that gravitons become strongly coupled at sufficiently high energy, while the restricted Schur polynomials for totally antisymmetric representations remain weakly interacting at these energies. This is in perfect accord with the half-BPS (single matrix) results of hep-th/0512312. Finally, by studying the interaction of two restricted Schur polynomials we suggest a physical interpretation for the labels of the restricted Schur polynomial: the composite operator $\chi_{R,(r_n,r_m)}(Z,X)$ is constructed from the half BPS ``partons'' $\chi_{r_n}(Z)$ and $\chi_{r_m}(X)$.Comment: 42 page

Grasp planning under uncertainty

The planning of dexterous grasps for multifingered robot hands operating in uncertain environments is covered. A sensor-based approach to the planning of a reach path prior to grasping is first described. An on-line, joint space finger path planning algorithm for the enclose phase of grasping was then developed. The algorithm minimizes the impact momentum of the hand. It uses a Preshape Jacobian matrix to map task-level hand preshape requirements into kinematic constraints. A master slave scheme avoids inter-finger collisions and reduces the dimensionality of the planning problem

Caregiver burden: Support needed for those who support others and the National Health Service

This literature review focuses on the complexities and inequalities of informal caregiving in the UK and was inspired by the story of the following individual: EL is a 68-year-old Caucasian lady who attended Movement Disorder Clinic and was diagnosed with Parkinson\u27s Disease Dementia following many years of symptoms. The diagnosis came as a big relief to EL and her daughter (SL) who were eager to get treatment started as soon as possible. EL lives alone with SL and solely relies on her for care and support. SL does not have children and devotes her daily routine to looking after her mother, never spending more than a few hours away from her. SL has found this situation very challenging, while EL has felt she has lost her independence. This frustration on a background of mutual love and concern was evident from both parties during the appointment. Informal carers play a crucial role in looking after individuals and provide massive relief to healthcare systems but are often left without support. This puts themselves and the people they care for at risk of poor physical and psychological outcomes. The number of informal carers continues to rise but staggering rates of burnout are still observed. By understanding the complexities and emotional impact of this role, together with the inadequacies of current social care policies, we can strive to reveal areas of improvement that can grant carers the support they deserve to carry on performing their invaluable roles. Experience Framework This article is associated with the Staff & Provider Engagement lens of The Beryl Institute Experience Framework (https://theberylinstitute.org/experience-framework/). Access other PXJ articles related to this lens. Access other resources related to this lens