Bank insolvency risk and aggregate Z-score measures: a caveat

We demonstrate that a popular approach to constructing (weighted) mean-based aggregate bank insolvency risk measures is inherently biased; we also suggest an alternative approach that avoids this problem.insolvency risk, aggregate Z-score, Jensen's inequality

When to Leave a Monetary Union: Now or Later?

Using a two-country model of monetary union where policymakers minimize the continuous-time equivalent of a Barro-Gordon-type loss function, we examine the value of the option of monetary break-up when the national preference parameters associated with an inflationary surprise follow correlated geometric Brownian motions. We derive the critical level of the ratio of these parameters that triggers a move to monetary disintegration and find that a country will be willing to return to monetary independence only if the other country's relative inflation preferences are strictly, and potentially substantially, greater than a benchmark value depending on the cost of monetary break-up alone.

Bank equity Involvement in Industrial Firms and Bank Risk

The regulatory framework in Europe does not prevent banks from taking large or controlling equity stakes in non-financial firms, potentially contributing to higher levels of bank risk and financial instability. Using a panel of European commercial banks for the period 2004-2008, we find that higher levels of equity positions in industrial firms and higher proportions of industrial firms where the bank is the majority shareholder lead to higher bank activity and insolvency risk. At low levels of shareholder protection, these risk measures are reduced when equity investments are held for longer, an effect attenuated at higher levels of shareholder protection

Monetary, Financial and Fiscal Stability in the East African Community: Ready for a Monetary Union?

We examine prospects for a monetary union in the East African Community (EAC) by developing a stylized model of policymakers' decision problem that allows for uncertain benefits derived from monetary,financial and fiscal stability, and then calibrating the model for the EAC for the period 2003-2010. When policymakers properly allow for uncertainty, none of the countries wants to pursue a monetary union based on either monetary or financial stability grounds, and only Rwanda might favor it on fiscal stability grounds; we argue that robust institutional arrangements assuring substantial improvements in monetary, financial and fiscal stability are needed to compensate

Does uncertainty matter for loan charge-offs?

International audienceUsing a stylized real options model, we show that discretion over the timing of charging off a non-performing loan could be economically justified when collateral values are uncertain and there is a chance of loan recovery. The implied hypothesis of an “uncertainty dependence” aspect in loan charge-offs is empirically tested and validated using a panel of European banks. A welfare-maximizing regulator might want to let banks pursue such discretionary loan charge-off behavior, with the problem of distinguishing it from alternative capital management and income smoothing objectives, while transparency-seeking accounting standards setters would presumably not

Influence of Temperature, Hypercapnia, and Development on the Relative Expression of Different Hemocyanin Isoforms in the Common Cuttlefish Sepia officinalis

The cuttlefish Sepia officinalis expresses several hemocyanin isoforms with potentially different pH optima, indicating their reliance on efficient pH regulation in the blood. Ongoing ocean warming and acidification could influence the oxygen-binding properties of respiratory pigments in ectothermic marine invertebrates. This study examined whether S. officinalis differentially expresses individual hemocyanin isoforms to maintain optimal oxygen transport during development and acclimation to elevated seawater pCO2 and temperature. Using quantitative PCR, we measured relative mRNA expression levels of three different hemocyanin isoforms in several ontogenetic stages (embryos, hatchlings, juveniles, and adults), under different temperatures and elevated seawater pCO2. Our results indicate moderately altered hemocyanin expression in all embryonic stages acclimated to higher pCO2, while hemocyanin expression in hatchlings and juveniles remained unaffected. During the course of development, total hemocyanin expression increased independently of pCO2 or thermal acclimation status. Expression of isoform 3 is reported for the first time in a cephalopod in this study and was found to be generally low but highest in the embryonic stages (0.2% of total expression). Despite variable hemocyanin expression, hemolymph total protein concentrations remained constant in the experimental groups. Our data provide first evidence that ontogeny has a stronger influence on hemocyanin isoform expression than the environmental conditions chosen, and they suggest that hemocyanin protein abundance in response to thermal acclimation is regulated by post-transcriptional/translational rather than by transcriptional modifications

Characterization of Aspergillus terreus Accessory Conidia and Their Interactions With Murine Macrophages

All Aspergillus species form phialidic conidia (PC) when the mycelium is in contact with the air. These small, asexual spores are ideally suited for an airborne dissemination in the environment. Aspergillus terreus and a few closely related species from section Terrei can additionally generate accessory conidia (AC) that directly emerge from the hyphal surface. In this study, we have identified galactomannan as a major surface antigen on AC that is largely absent from the surface of PC. Galactomannan is homogeneously distributed over the entire surface of AC and even detectable on nascent AC present on the hyphal surface. In contrast, β-glucans are only accessible in distinct structures that occur after separation of the conidia from the hyphal surface. During germination, AC show a very limited isotropic growth that has no detectable impact on the distribution of galactomannan. The AC of the strain used in this study germinate much faster than the corresponding PC, and they are more sensitive to desiccation than PC. During infection of murine J774 macrophages, AC are readily engulfed and trigger a strong tumor necrosis factor-alpha (TNFα) response. Both processes are not hampered by the presence of laminarin, which indicates that β-glucans only play a minor role in these interactions. In the phagosome, we observed that galactomannan, but not β-glucan, is released from the conidial surface and translocates to the host cell cytoplasm. AC persist in phagolysosomes, and many of them initiate germination within 24 h. In conclusion, we have identified galactomannan as a novel and major antigen on AC that clearly distinguishes them from PC. The role of this fungal-specific carbohydrate in the interactions with the immune system remains an open issue that needs to be addressed in future research