Others were FICO score and second lien or stated loan. Pointer 2 1. HSBC had sophisticated IS and analytical tools for predicting the risk presented by subprime mortgage applicants. Why did HSBC still run into trouble? HSBC has sophisticated IS and analytical tools, but they did not consider some of the risk factors like risk of second-lien and stated income loans.
This will finally mislead the new investors and the existing shareholders. 1.3. Consider what governance measures Securency and the reserved bank could and should have implemented to prevent or limit the opportunity for such false accounting and poor corporate governance. The governance measures that the two companies should have implemented are good documentation to prove that a certain transaction has taken place and also allow for reference in future records. Institutionalizing documents utilized for monetary exchanges, for example, solicitations, inner materials demands, stock receipts and travel cost reports, can keep up consistency in record keeping after some time.
In this respect Singal (2013) has conducted research on credit rating and its impact on firm performance. In Accordance with his study credit rating is projected to measure a solvency of firm and it depends on previous and current and expected future performance of firm. The study further illustrate that credit rating is appropriate measure for performance assessment and consequently credit rating measure should directly related with anticipated performance measures. Firms with highly capital-intensive and leveraged use credit rating as measuring tool to assess the financial condition of their firms. Certainly, a study has shown that credit rating changes straight away influence the stock prices and bond prices in the expected direction Holthausen and Leftwich (1986).
This will be defined the legal risk, however, it does not include strategic and reputational risk. Legal risk includes, but is not limited to, exposure to fines, penalties, or punitive damages resulting from supervisory actions, as well as private settlements (Van Greuning, & Brajovic-Bratanovic, 2009). Financial institutions may lose from its different types of operations because the operational risk is relevant to the sources of risk or events which will impact on the process of operations. The old-style bases and fundamentals of risk are: People; Processes;, Systems;
Introduction To explain the Risk Management Framework outlined by Kaplan & Mike, and to appreciate its relevance in modern banking requires a balanced view, illustrating the alternative and current practice that is in use throughout most of the world. It is the author’s intent to show that existing best practices are not sufficient to identify and determine management risks fully and to explore this theory in depth, this paper is composed of two sections: 1. An explanation of Risk Management with existing Risk Management Frameworks using Basel iii guidelines as an example and, 2. • An explanation of Operational Risk and Market Risk, • An explanation of Kaplan & Mikes Risk Management Framework highlighting how biases are detrimental and counter-productive
Improving the public policy contributes to an efficient transitional path of the banking system implemented by Unity banks and helps to move from a regulated focus to a more liberalized regime. it is equally important that unity banks take proper action to resolve the issues related to lending rate stipulations, evolution of a credit system and many
Recently, accounting standard-setting body such as the IASB have focused on the issue of how assets and liabilities should be measured (Penman, 2007, p.33). This issue is related to the fair market value accounting as an alternative method against historical cost accounting. The fair market value of an asset (liability) is the amount at which that asset (liability) could be bought or sold (incurred or settled) in a current transaction between willing parties. Historical cost accounting is based on actual transactions, the recorded amounts are reliable and verifiable. This paper describes this measurement concepts and compares them.
Thus, the aim of the competition policy is the maximization of social welfare by ensuring that markets are competitive and allocative and productive efficiencies as well as dynamic efficiency are achieved. In other words, competition policy aims to create and maintain an efficient market structure (Motta, 2004; Whish, 2005). Competition in the banking industry is developing
5.4. Compliance Department The Bank must strengthen its compliance activities through the compliance department which must be separated from the risk department but the two must be in partnership. The department must be responsible for: The supervision and oversight of the Bank’s activities by pro-actively supporting senior management in stressing compliance responsibilities, its design and the implementation of applicable controls. The department must convey consistent monitoring of the Bank’s operations to ensure proper compliance risk mitigation. This duty must first establish a clear understanding of the compliance risk facing the Bank.
Tools like stress testing, duration, modified duration, VaR etc. are being used effectively in managing risk in the Treasury operations. As an integral part of Risk Management System, bank has put in place a well-defined Loan Review Mechanism (LRM). This helps bring about qualitative improvements in credit administration. A separate Division known as Credit Audit & Review Division has been formed to ensure LRM