Advantages Of Cainel Model Of Banks In Banks

The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions

Since the onset of the financial crisis 2008, the sovereign debt crisis in western economies and the new financial regulation with Basel III coming up, the financial industry faces the challenge of reinventing itself. The ring-fence for Commercial and Investment Banking, and new economic and regulatory capital requirements will determine the kinds of products banks will be able to distribute. It will have a huge impact in the Investment Banking business, which will suffer tough regulation and supervisory procedures. At the same time, credit risk models will be reviewed because they have failed to predict the crisis of 2008. The current financial and economic crisis doesn’t have any precedent in the past.

In addition new institutions spring up such as the World Bank, the European Union and the European CentralBank which requires still further constraints.Nowadays around a quarter of world trade are multinational corporations. However banking globalization does not mean leaving local, domestic market but “moving to provide banking services inside and outside, maintaining the national position and becoming more effective and active to ensure banking expansion…………it is a motivator of expansion. The job of the management in banks is to maximize the positive effects and minimize the negative ones. With globalization, banks become more at risks from within and from abroad. It becomes important to strengthen the Capital in order to guard against these

US Bank Corporation (USB) is a commercial bank which offers customers checking accounts, savings accounts, and time services contracts. The bank trades in financial securities but its main source of revenue is various types of loans. These loans range from residential and commercial real estate loans, industry loans, and other individual loans. In this analysis the overall strength of US Bank will be evaluated and will be compared with two similar financial institutions. The two institutions chosen for comparison are Wells Fargo (WFC) and Bank of America (BAC). To evaluate the overall strength the major

Recent studies have investigated the impact of the 2007-2009 financial crises on banks’ capital. Berger and Bouwman (2011) emphasised the importance of capital during financial crisis. Their empirical study concludes that banks with solid capital base have some benefits during the crisis than those that are poorly capitalised. Well capitalised banks are more able to withstand the shocks due to liquidity squeeze, and therefore had higher chances of surviving the crisis period. Other benefits accrued to well capitalised banks include increase in their market share and profitability, as customers withdrew their funds from less capitalised to a well-capitalised banks. This conclusion was also reinforced by a recent empirical study conducted Olivier de Bandt et al (2014) on a sample of large French banks over a period of 1993 – 2012. Similarly, Gambacorta and Marques-Ibanez (2011) demonstrate the existence of structural changes during the period of financial crisis. They conclude that banks with weaker core capital positions, greater dependence on market funding and on non-interest sources of income restricted the loan supply more strongly during the crisis period. Using a multi-country panel of banks, Demirgüç-Kunt, Detragiache and Merrouche (2010) find among others results, that during

The assessment rates divided every risk category into three parts in 2011 – the initial base assessment rate, unsecured debt adjustment, and brokered deposit adjustment. The total base assessment rate is the sum of these four parts. Table 1.4 reports the assessment rates for established institutions (insured for 5 or more years). Total annual assessment rates are set at 2.5 to 9; 9 to 24; 18 to 33; and 30 to 45 basis points for established institutions in classes I, II, III, and IV,

The greater proportion of capital to total funds, the greater the protection to depositors. Banks maintain much lower capital levels than other businesses; currently bank capital accounts for 10% of total funds. Bankers prefer to use high amounts of leverage because they understand the role of leverage in increasing ROE. Banks believe that long term profit maximization can be best achieved if their banks are highly leveraged. Regulators are more concerned about the risk of bank failure, rather than the profits of the individual banks; their concern is protecting the economy from widespread bank distress.

The primary measure used by regulators and analysts to measure a bank’s capital strength is the Tier 1 capital ratio. Analyzing this ratio indicates the strength and the bank’s ability to

A bank is an institution that facilitates financial transactions between the parties. Amongst its standard operations are accepting deposits from the customers, lending money as loan (cite). The major source of income for banks is interest income which is earned on loans given to the customers, business firms and corporations. This very nature of it makes banking institutions so crucial for economic development of any country. Strong banking operations and fundamentals paves the way for higher customer and investor confidence in the company.

Banks are required, unless APRA set higher levels, to maintain at level 1 and 2 as a minimum risk-weighted capital ratio of 4 % in Tier 1 and 8% for total capital at all times. APRA assess and takes into account the general risks and other circumstances relevant for the individual ADI. A ‘capital buffer’ could be added by ADI if the ADI is judged as being vulnerable more than normal volatility in its revenues and risks. In considering the required capital ratio, APRA considers all material risks, both on and off-balance sheet. Credit risks are placed into four

In commercial banking, capital adequacy ratio (CAR) is used to monitor a bank’s situation of capitalization by regulators and managers. CAR is calculated as the sum of tier 1 capital (equity and retained earnings) and tier 2 capital (subordinated debt and reserves) and dividing it by its risk-weighted assets. SDB’s CAR decreased from 10.6% in December 2001 to 9.5% in December in 2002, but still above the Chinese regulatory floor of 8%. It is particularly worth mentioning here that SBD’s CAR was 0.7% higher than the average CAR of other five joint-stock banks in 2002. Not all the time the CAR is good if high; a high CAR means that a bank’s large amount of money is stuck in

This report compares financial performance of two major banks of UK i.e. HSBC Bank Plc and Barclays Bank Plc on the basis of their Balance sheets and profit and loss accounts for the year 2009. This report also provides SWOT analysis of both banks i.e. HSBC and Barclays Bank Plc and provides an insight into their Banking Strategies.

Table 4 summarises descriptive statistics of RATE, the un-weighted (weighted) risk disclosure index (RDI) as well as SSB for all bank fiscal years, as well as for each of the eight firm years investigated, separately from 2006 to 2013. Table 4 shows a number of remarkable outcomes. First, it reports that there is a high amount of variation in ratings between banks. For instance, RATE ranges from a minimum of 1 (Default) to a maximum of 19 (AA- which mean very high credit quality) with the median RATE 14.12 (Good credit quality) that indicate most banks in MENA have good rating, but there has been a continuous decreases in ratings during 2008 and years after which reflects the impact of continues crises beginning with GFC in 2007 and credit crunch in 2010. For instance, the average banks ratings is 14.4, 14.29, 14.09, 13.77, 13.69 and 13.84 in 2008, 2009, 2010, 2011 and 2012, but RATE begin to increases in 2013 which indicates recovery in MENA banks from GFC crisis effects. Finally, there is evidence that the level of listed bank RATE before GFC is higher than during and after GFC.

Under BCBS’s approval, banks are expected to improve their own IRC models to calculate risks for individual positions or sets of positions (BCBS, 2009b). It means the Committee hopes banks will have their own choice of liquidity horizon which is appropriate with their business without any issued industry benchmarks or standards (Stretton, 2011). However, it leads to inconsistence within banking system. Furthermore, supervisors have to face with more difficulties in process of evaluating banks’ IRC model.

List of abbreviations List of tables Acknowledgements Abstract 1. 2. 3. 4. 5. 6. 7. 8. Introduction Problem statement Objectives and hypothesis of the study Literature review Structure and performance of the financial sector in