The heavenly liquidity twin : the increasing importance of liquidity risk

Liquidity and solvency have been called the"heavenly twins"of banking (Goodhart, Charles,'Liquidity Risk Management', Financial Stability Review -- Special Issue on Liquidity, Banque de France, No. 11, February, 2008). Since these"twins"interact in complex ways, it is difficult -- particularly at times of crisis--to distinguish between them, especially in the presence of information asymmetries (Information asymmetry occurs when one party has more or better information than the other, creating an imbalance of power, giving rise to adverse selection and moral hazard ). An insolvent bank can be liquid or illiquid, and a solvent bank may be at times illiquid. In the latter case, insolvency is not far away, since banking is grounded in information and confidence, and it is confidence which in the end determines liquidity. In other words, liquidity is very much endogenous, determined by the general condition of a bank, as well as the perception of it by the public and market participants. Dealing with liquidity risk is more challenging than dealing with other risks, since liquidity is the result of all the operations of a bank and it is fundamentally a relative concept which compares segments of the balance sheet on the asset and liability sides. It does not deal with absolutes, like arguably the concept of capital and it explains why there is not an internationally recognized"Liquidity Accord". This Working Paper addresses key concepts like market and funding liquidity and basic tools to address liquidity issues like cash flows, liquidity gaps and some selected financial ratios. It aims at providing an introductory guide to risk assessment and management, and provides useful and practical guidelines to undertake liquidity assessments which could prove useful in preparing Financial Assessment Programs (FSAPS) in member countries of the Bretton Woods institutions.Debt Markets,Banks&Banking Reform,Currencies and Exchange Rates,Emerging Markets,Bankruptcy and Resolution of Financial Distress

Payment systems in Latin America : a tale of two countries - Colombia and El Salvador

Payment systems include all the paper (including cash) and electronic systems a country uses to exchange financial value to discharge obligations. Financial markets rely on promptness and certainty of payment and settlement for borrowing and investing. Consumers want convenience, choice (of payment options), privacy, and low cost. Inefficiencies in payment systems cause a drag on the national economy. The authors compare trends and areas for improvement in payment systems in Colombia and El Salvador, two countries that differ in size, volume of check-based transactions, and national issues. Check standards have developed slowly in both countries, which has retarded automation, particularly in Colombia, where the volume of checks handled makes manual processing unmanageable. Both countries need stronger leadership from central banks and bankers associations; incentives to adopt common check standards; streamlined check sorting and encoding, microfilming, and manual data processing; alternative (especially credit-based) payment mechanisms and private check-processing bureaus; and settlement of stock exchange transactions through several banks, rather than one bank. The countries differ in important ways: 1) it will be easier to reach economies of scale in check processing in Colombia (which has too many local clearinghouses) than in El Salvador (which has too few). Both countries need a more balanced approach; 2) same day payments are possible in Colombia; payments in El Salvador are next day, at best; 3) financial markets are less mature in El Salvador and may not need to be as sophisticated as markets in other countries; and 4) Colombia has yet to create effective disincentives for writing checks against insufficient funds. Both countries must take certain actions to develop a system for electronic payment and the settlement of payments at the central bank: 1) draft new laws and regulations; 2) provide more systematic data collection and analysis of payment flows; 3) undertake more risk analysis and prevention in the central banks and supervisory agencies, and draft contingency plans for major failures; 4) reexamine the dual roles of the central banks and other government agencies in operating and supervising payment systems; 5) review check-clearing pricing policies; and 6) analyze the economics of automating check processing.Banks&Banking Reform,Payment Systems&Infrastructure,Financial Intermediation,Banking Law,Economic Theory&Research,Payment Systems&Infrastructure,Banks&Banking Reform,Financial Intermediation,Banking Law,Economic Theory&Research

Modernizing payment systems in emerging economies

The authors address the following questions in this overview of payment systems: What is a payment system? How can efficient systems contribute to the development of modern, market-based financial institutions and markets? What elements are necessary for payment systems to operate efficiently? What are the operational characteristics of a modern payment system? What is the World Bank approach to selected payment system initiatives, design, and development? Effective, efficient payment systems, they conclude, are vital for the economic development of emerging economies. Efficient payment systems help promote the development of commerce, enhance economic policy oversight, control the risk inherent in moving large values, and reduce the financial, capital and human resources devoted to the transfer of payments. Many emerging economies lack the financial and technical resources to develop such systems. Many turn technical resources to develop such systems. Many turn to the World Bank and other international agencies for assistance. Unfortunately, some believe that the entire solution for an effective payment system rests in obtaining modern computer hardware and believe the World Bank's sole contribution is to finance hardware costs. Hardware procurement alone will not solve problems of payment systems. These countries need organizational plans and structure for national payment systems before they spend money on computer equipment. They often lack the expertise to design and operate modern payment systems, so they may need technical assistance from financial experts before they invest in systems development. The design of a new payment system should be kept simple. Many emerging economies lack the infrastructure and banking sophistication to leapfrog from basic to state-of-the-art payment systems. The first task is to fix the most serious problems. The second is to upgrade the current systems incrementally, to meet basic standards of timeliness, security, and reliability. As these improvements are made, the countries can turn their attention to long-term, advanced solutions. Each country's payments system is unique. To simply import another country's system without adjusting for the target country's geography, infrastructure, banking and legal structures, culture, and needs could lead to suboptimal solutions. Development of the system should follow a disciplined plan for defining the needs of users and for organizing the project team and project goals.Payment Systems&Infrastructure,Banks&Banking Reform,Economic Theory&Research,Financial Intermediation,Information Technology

Brazil's efficient payment system : a legacy of high inflation

Brazil's efficient, highly automated payment system developed over many years in response to hyperinflationary conditions. The authors describe the system, its payment instruments, and its links to other networks and the government's payment and collections operations. They examine factors that have affected system development, planned innovations and improvement opportunities. The principal payment instruments used in Brazil are cash, checks, cobrancas (like European GIRO payments) and DOCs (Documentos de Credito). DOCs are used to make interbank credit payments, intrabank transfers of funds between a client's different accounts and client to client payments between parties with accounts at the same banking institution. Although they can be initiated on paper, all DOCs are electronic and processed only by banks. Networks include direct deposit and direct debit services, automated teller machines, credit cards and home banking services. The system is highly automated, with separate systems for clearing and settling checks and credit payments; government securities, private securities, state, local, and municipal securities; government payments; and foreign exchange. Among the lessons learned: a) banks can cut costs by cooperating on check processing and transportation; b) a broad, inclusive approach should be taken to modernizing the payments system, taking into account the needs of all users; and c) a wider menu of payment instruments should be offered.Financial Intermediation,Payment Systems&Infrastructure,Banks&Banking Reform,Banking Law,Economic Theory&Research,Financial Intermediation,Banks&Banking Reform,Payment Systems&Infrastructure,Economic Theory&Research,Banking Law

Deposit insurance and banking reform in Russia

The objective of this paper is not to review the pros and cons of deposit insurance systems, but to focus, rather narrowly, on the recent adoption of a deposit insurance system (DIS) in Russia, the rationale offered, and the potential impact it might have on the stability and development of the Russian banking system. An attempt is made to draw some lessons from the implementation experience in Russia. The paper starts with a brief description of the Russian DIS, followed by an overview of the banking system's structure and some observations on the sequencing followed for adopting the DIS and the political economy of its adoption. It concludes with a discussion of areas requiring attention.Banks&Banking Reform,Financial Intermediation,Financial Crisis Management&Restructuring,Corporate Law,Insurance&Risk Mitigation

Cost recovery and pricing of payment services

A modern payment system is essential for promoting domestic and international trade and exchange as well as developing financial markets. Payment users will be directed toward the most efficient payment methods when the costs of producing those services are reflected in the prices paid. Resources are being wasted in the United States because consumers see no important difference in transaction prices or bank costs between using a check or using electronic direct debit in paying a bill, even though the social costs of these two instruments are different. Electronic payments cost only a third to half as much as paper-based payments. An estimated $100 billion (or 1.5 percent of GDP) is being lost by the continued use of paper-based checks. When payment instruments are not appropriately priced, the costs must be covered elsewhere. One common solution is to let loan revenues cover part of payment expenses (keeping loan rates higher to compensate). When prices reflect the full cost of producing the service, users demand the services that use the fewest real resources. The authors give examples of payment prices and price schedules and show how underlying cost data are used to"build up"to a price. They outline how payment services may best be structured to: a) Appropriately reflect economies of scale or scope in the production of payment services; b) Adjust cost recovery percentages to accommodate how much demand conditions associated with start-up differ from those associated with mature operation. (During a new system's early years of operation, the transaction volume may be low and some form of underrecovery of costs may be required to encourage use of the system. But any such underrecovery must be built into future pricing arrangements oncethe systems are established and traffic volumes are at a level where full cost recovery is practical. To ensure fairness, the pricing structure must also guarantee that latecomers to the system not get more favorable treatment than the initial user group.); and c) Induce efficient use of scarce resources. They note the economic principles that recommend certain pricing methods over others and apply equally to payment services provided by the private sector or through a government agency. They show why costs should be recovered through user transaction fees.Banks&Banking Reform,Payment Systems&Infrastructure,Economic Theory&Research,Markets and Market Access,Decentralization,Payment Systems&Infrastructure,Economic Theory&Research,Banks&Banking Reform,Environmental Economics&Policies,Markets and Market Access

DEONTOLOGIA E TELEOLOGIA NA MORAL DE ANSELMO DE CANTERBURY

This paper aims to present the fundamental lines of the ethical thought of Anselm of Canterbury (1033-1109) developed in the trilogy of treatises dedicated to the study of Holy Scripture, De Veritate, De Libertate Arbitrii and De Casu Diaboli, as well as try to indicate the nature of his ethics: whether deontological or teleological-eudaimonist. To this end, I will first give a brief outline of Anselmian ethics and show how difficult it is to categorize it. In a second moment, I will list both arguments that allow categorizing it as deontological and arguments that allow categorizing it as teleological-eudaimonistic. In the end, I show that, although it does contain what we could call a theory of happiness, Anselmian ethical thought seems to be essentially deontological insofar as it is based on the concept of righteousness of the will or justice.El presente trabajo pretende presentar las líneas fundamentales del pensamiento ético de Anselmo de Canterbury (1033-1109) desarrolladas en la trilogía de tratados dedicados al estudio de la Sagrada Escritura, De Veritate, De Libertate Arbitrii y De Casu Diaboli, así como tratar de indicar la naturaleza de su ética: si es deontológica o teleológica-eudaimonista. Para ello, inicialmente, haremos un breve esquema de la ética anselmiana y mostraremos lo difícil que es clasificarla. En un segundo momento, enumeraremos tanto los argumentos que permiten categorizarlo como deontológico como los que permiten categorizarlo como teleológico-eudaimonista. Al final, mostramos que, aunque no carece de lo que podríamos llamar una teoría de la felicidad, el pensamiento ético anselmiano parece ser esencialmente deontológico en la medida en que se basa en el concepto de rectitud de la voluntad o justicia.Le présent travail vise à présenter les lignes fondamentales de la pensée éthique d'Anselme de Canterbury (1033-1109) développée dans la trilogie de traités consacrés à l'étude de l'Écriture Sainte, De Veritate, De Libertate Arbitrii et De Casu Diaboli, ainsi qu'à essayer d'indiquer la nature de son éthique : déontologique ou téléologique-eudaimoniste. Pour ce faire, dans un premier temps, nous ferons une brève esquisse de l'éthique anselmienne et montrerons combien il est difficile de la catégoriser. Dans un second temps, nous énumérerons à la fois les arguments qui permettent de la catégoriser comme déontologique et ceux qui permettent de la catégoriser comme téléologique-eudaimoniste. Enfin, nous montrons que, bien qu'elle ne soit pas dépourvue de ce que l'on pourrait appeler une théorie du bonheur, la pensée éthique anselmienne semble être essentiellement déontologique dans la mesure où elle se fonde sur le concept de droiture de la volonté ou de justice.Il presente lavoro si propone di presentare le linee fondamentali del pensiero etico di Anselmo di Canterbury (1033-1109) sviluppate nella trilogia di trattati dedicati allo studio della Sacra Scrittura, De Veritate, De Libertate Arbitrii e De Casu Diaboli, così come cerca di indicare la natura della sua etica: se deontologica o teleologico-eudaimonista. Per farlo, inizialmente, faremo un breve profilo dell'etica anselmiana e mostreremo quanto sia difficile categorizzarla. In un secondo momento, elencheremo sia gli argomenti che permettono di classificarlo come deontologico sia gli argomenti che permettono di classificarlo come teleologico-eudaimonistico. Alla fine, mostriamo che, sebbene non manchi quella che potremmo chiamare una teoria della felicità, il pensiero etico anselmiano sembra essere essenzialmente deontologico nella misura in cui si basa sul concetto di rettitudine della volontà o giustizia.O presente trabalho tem como objetivo apresentar as linhas fundamentais do pensamento ético de Anselmo de Cantuária (1033-1109) desenvolvido na trilogia de tratados dedicados ao estudo da Sagrada Escritura, De Veritate, De Libertate Arbitrii e De Casu Diaboli, bem como tentar indicar qual a natureza de sua ética: se deontológica ou se teleológico-eudaimonista. Para tanto, inicialmente, faremos um breve esboço da ética anselmiana e mostrarmos o quão difícil é categorizá-la. Em um segundo momento, arrolaremos tanto argumentos que permitem categorizá-la como deontológica quanto argumentos que permitem categorizá-la como teleológico-eudaimonista. Ao final, mostramos que embora não deixe de conter o que poderíamos chamar de uma teoria sobre a felicidade, o pensamento ético anselmiano parece ser essencialmente deontológico na medida em se fundamenta no conceito de retidão da vontade ou justiça

Two capuchins friars in defense of African slaves’ liberty: Francisco José de Jaca and Epifanio de Moirans

El propósito de este artículo es presentar brevemente dos puntos del Proyecto antiesclavista desarrollado por Francisco José de Jaca, OFM Cap (1645-1689) y Epifanio de Moirans, OFM Cap (1644-1689). Esos puntos se refieren al discurso de Jaca y Moirans acerca de los títulos de esclavitud y la compra y venta de esclavos. Por medio de la presentación de esos dos puntos se puede percibir que esos misioneros capuchinos estaban muy comprometidos con la defensa de la libertad de los esclavos africanos. A diferencia de otros autores que habían escrito sobre la esclavitud negra, Jaca y Moirans asumieron el papel de abogados de los esclavos africanos y, con talante profético, no tuvieron temor de denunciar las injusticias de la trata y de predicar la manumisión de todos los esclavos africanos.The purpose of this article is to briefly present two points of the Anti-Slavery Project developed by Francisco José de Jaca, OFM Cap (1645-1689) and Epifanio de Moirans, OFM Cap (1644-1689). These points refer to the discourse of Jaca and Moirans about the titles of slavery and the trading of slaves. Through the presentation of these two points it can be perceived that these Capuchin missionaries were very committed to the defense of the freedom of the African slaves. Unlike other authors who had written about black slavery, Jaca and Moirans took on the role of advocates for African slaves and, in a prophetic way, were not afraid to denounce the injustices of the trade and to preach the manumission of all African slaves

Wastewater Treatment through Low Cost Adsorption Technologies

This chapter addresses the wastewater treatment of mining residues through adsorption methodologies. It preferentially focuses its attention on (but not limited to) the removal of heavy metals. It begins with a brief description of the most used wastewater treatment pathways highlighting both their advantages and disadvantages and focusing on adsorption industrial practice. Classic models of adsorption thermodynamics and kinetics are presented. It finalises with a more detailed description of two methodologies of low cost sorbents: (i) inorganic nanostructured silicates and (ii) organic-based sorbents—pine bark