The International Standard of Banking Regulations with Basel II - Free Essay Example

Basel II is the international standard that banking regulators use when creating regulations on how much capital banks need to put aside to guard against financial and operational risks being faced. The Basel IIs main aim is to introduce a more comprehensive and risk-sensitive treatment of banking risks to ensure that regulatory capital bears a closer relationship to credit and other risk.(Source: Introduction to Banking by Barbara Casu,page 173). Meanwhile, to comply with the Basel II, banks need to implement credit rating techniques that represent the risk profile of their particular credit portfolios. The Internal Rating Based Approach (IRBA) of Basel II allows banks to use their own models for estimation of risk parameters. There are 3 key Basel II risk parameters: The Likelihood of a default by the counterparty-Probability of Default (PD). The absolute losses value under default- Exposure at Default (EAD). The share of the losses under the counterpa rtys default-Loss given Default (LGD). https://www.scorto.com/basel_2.htm The Basel II framework has faced intense criticism for the collapse of Lehman brothers, because large banks (Lehman brothers) were permitted to build capital adequacy framework, with minimal supervision from banking regulators. Credit risk for banks consists of the amounts owed by borrowers on loans for both interest payments and loan principal repayments, and also for customers debts on other transactions, such as swaps, letters of credit, performance bonds or forward rate agreements (FRAs). Lending is the principal business activity for most commercial banks. The loan portfolio is typically the largest asset and the predominate source of revenue. As such, it is one of the greatest sources of risk to a banks safety and soundness. Whether due to lax credit standards, poor portfolio risk management, or weakness in the economy, loan portfolio problems have historically been the major c ause of bank losses and failures. https://www.occ.treas.gov/handbook/lpm.pdf A bank as a financial institution that lends money to its customers is subject to a lot of risk and by so doing has to manage the risk of lending portfolios of which the banks are required to calculate the PD(Probability of default) ,EAD(Exposure at default) as well as LGD(Loss given default). The Probability of default (PD) is also known as the expected default frequency, which is derived from moodys analytics. It is the likelihood that a loan will not be repaid and will fall into default that is three (3) missed payments in 12 months. There are various methods of estimating the PD, usually it is derived from a historical data base of actual defaults using techniques like logistic regression, credit defaults swaps, bonds or option on common stock through the use of external rating agencies such as Fitch, moodys and standard and poor. Exposure at default (EAD): This is a measure used in the calc ulation of economic capital or regulatory capital under Basel II for a banking institution.EAD is seen as an estimation of the extent to which a bank is exposed to a counterparty in the event of and at the time of the counterpartys default. https://bis2information.org/content/Exposure_At_Default_EAD Simply the EAD means the total value that a bank is exposed to at the time of default. Each underlying exposure that a bank has is given an EAD value and is identified within the banks internal system. https://www.investopedia.com/terms/e/exposure_at_default.asp Example For retail bank exposures, any change of a facility (e.g. extending the life of a mortgage to reduce monthly payments) is regarded as a default. Also, loss Given Default (LGD): This is the actual total loss that is experienced by a bank when a debtor defaults on a loan from that bank. The loss given default is not always equal to the total amount of the loan. Example, if the debtor pledged collateral aga inst the loan, the bank could receive these assets, and their total loss would not be greater than the amount of the loan minus the value of the assets. https://www.investorwords.com/6858/loss_given_default.html Loss Given Default (LGD) is the magnitude of likely loss on the exposure and is expressed as a percentage of the exposure.LGD is determined in two ways: Foundation methodology: here the LGD is based upon the characteristics of the underlying transaction where the starting point proposed by the Committee is use of a 50% LGD value for most unsecured transaction. And for transactions with qualifying financial collateral, the LGD is scaled to the degree to which the transaction is secured. Advanced methodology: here the bank itself determines the appropriate Loss Given Default to be applied to each exposure, on the basis of robust data and analysis which is capable of being validated both internally and by supervisors. https://www.basel-ii-risk.com/Basel-II/Basel- II-Glossary/Loss-Given-Default.htm Basel II requires that, at a minimum, banks subject their credit portfolios in the banking book to stress tests. Stress testing empowers customers to attain compliance with Basel II requirements for retail credit risk management while improving reserve capital and credit portfolio management efficiency. https://www.scorto.com/basel_2.htm Banks use stress testing (which is a critical tool used) as part of their internal risk management and capital planning. The guidance sets out a comprehensive set of principles for the sound governance, design and implementation of stress testing programmes at banks. The principles address the weaknesses in such programmes that were highlighted by the financial crisis. Also, Stress testing also is a key component of the supervisory assessment process that assists supervisors in identifying vulnerabilities and evaluate banks capital adequacy. The principles therefore establish expectations for the role and responsibilities of supervisors when evaluating firms stress testing practices. https://www.bis.org/publ/bcbs155.htm Banks use stress testing because it gives a clear view of how a portfolio could be affected by unexpected events. https://findarticles.com/p/articles/mi_m0ITW/is_8_84/ai_n14897105/ Uses of Stress Testing Stress testing enables a bank to see how well it would be able to withstand the situations of expected losses, provisions, ratio of criticised loans to the whole book, ratio of nonperforming loans to provisions or the whole book. https://findarticles.com/p/articles/mi_m0ITW/is_8_84/ai_n14897105/ Preparing for contingencies: Through the critical review of all information of things that could happen if a given situation were to occur, by preparing for such a loss the experience of the loss will be limited. Stress test also enables the bank to see how well it would be able to withstand situations such as expected losses, provisions, ratio of criticised loans to the whole book, ratio of nonperforming loans to provisions or the whole book, economic capital. Definition of Basel II terms https://www.foreignbanks.org.uk/Members/simmons/simmons_and_sim www.foreignbanks.org.uk/Members/simmons/simmons_and_simmons_jargon_buster_for_baselII.doc There are various informations a lender needs, to access and use in order to assess and manage the risks of lending to its debtors (either to an individual consumer or a company). In the case of lending to an individual consumer, the lender can monitor the consumers behaviour by observing the ability of the consumer to manage his debts responsibly, to determine how risky it is to lend him money,i.e they want to know how creditworthy the individual is and to know this they need vital information on the individual which can be obtained from the credit application and credit bureau report. Assessing the risks of lending to an individual boils down to the creditworthiness of the individual which is based on the five Cs of credit, which are: Character or Credit reputation: Basically, this is to know if the borrower will pay back or not, how trustworthy is the borrower? Is the borrower the type that pays back debts as agreed and promptly? How the borrower handles financial obligation especially during periods of adversity is a significant indicator of character or credit reputation. Capacity: This pertains to the borrowers ability to make payment on time, it is determined by weighing the borrowers income (including the likelihood of continued earnings ability) against the amount of debt owed.i.e does the borrower have the capacity to repay the debt? Does he work and does he earn enough to pay back what he owes? Capital: Though capital is not expected to be a means of payment, however it is used as a measure of assurance that debts will be paid if a period of adversity arises.i.e. What assets or financial resources stand behind the borrower commitment to repay a debt? Savings in the bank or a property in the name of the borrower? Conditions: In assessing economic conditions, the lender looks at both national and local forecasts, such as inflation and unemployment that could affect the borrowers ability to repay. Collateral: This is a property or asset of value which the lender can take and sell in case of default ,by following legally mandated procedures(Note: only in the case of a secured loan is a collateral required). Other information a lender should have about an individual consumer is: the age, sex, financial health, income, length of credit history, payment history, outstanding debt and pursuit of new credit of the individual consumer. To asses and manage the risks of lending to a company, the lender should have information on the companys credit rating, credit reports

What Is Electrical Engineering Courses, Jobs, Salaries

Electrical engineering is an engineering field focused on electricity and electronics, from microscopic computer components to large power networks. Students who graduate with an electrical engineering majors will have job opportunities in wide-ranging fields, from telecommunications to the computer industry to the automotive industry. Key Takeaways: Electrical Engineering Electrical engineering is an engineering discipline focused on electricity, from microscopic computer components to large power networks.In college, electrical engineering majors will take a range of classes in mathematics and physics.Electrical engineers work in fields including the computer industry, automotive industry, and telecommunications. Specializations in Electrical Engineering Any product that uses or produces electricity was most likely designed by an electrical engineer. From large-scale power grids to microscopic computer components, electrical engineers work on a wide range of projects. Below are some of the most popular areas of specialization for electrical engineers. Communication: If youve ever used a telephone, watched television, or Skyped a friend, youve used a product that was designed by a communication engineer. Any task that involves the electronic transfer of information from one place to another falls into this electrical engineering specialty.Computers: The hardware side of computing—the power supplies, electronic components, sensors, drives, and storage devices—is all within the purview of electrical engineering. Electrical engineers create the devices that are then programmed by computer scientists and software engineers.Control: From the cruise control on your car to the electronics that stabilize a spacecraft, control systems play an important role in the 21st century. Control engineers design systems that constantly monitor a products performance and, through feedback systems, make necessary adjustments to ensure proper functioning.Electronics: An electronics engineer is an expert in all kinds of circuits, such as re sistors, diodes, capacitors, and transistors. Electronics are central components in everything from wind turbines to vacuum cleaners. Home electronics such as televisions and audio systems are also a major part of this area of specialization.Instrumentation: From the fuel gauge on a car to sensors on a satellite, instrumentation is a central component of most electronic devices. Given the development drones and self-driving vehicles, the field of instrumentation has plenty of growth potential in the coming decades.Microelectronics: Technological progress depends upon developing ever-smaller devices with increased speed and functionality. Experts in microelectronics are at the forefront of this progress as they work to create electronic components at microscopic scales. Materials science and chemistry are important areas of expertise for this specialty.Power Systems: Power engineers work on the large systems for generating, storing, and transmitting the electricity that runs our worl d. From generators in a dam to fields of solar panels to the transmission lines that cross the country, experts in power tend to work on large-scale projects. College Coursework for Electrical Engineers As with most STEM fields, electrical engineers must take foundation courses in math and the natural sciences, especially physics classes such as mechanics and electromagnetism. Some specializations, such as microelectronics, will also require significant coursework in chemistry and materials, whereas a field such as bioelectronics would require a strong grounding in the biological sciences. All electrical engineering majors, however, are likely to take the following courses: Calculus I, II, III and Differential EquationsDigital Logic DesignElectromagnetic Fields and WavesSignals and SystemsElectric CircuitsEmbedded SystemsMicroelectronicsProbabilistic MethodsCommunication SystemsComputer Organization Students who want to excel in an electrical engineering profession may choose to take additional courses related to communication and leadership skills. In addition, many electrical engineering programs have internship or co-op requirements, giving students hands-on experience solving real-world challenges. These research expectations are one reason why engineering fields often have a lower four-year graduation rate than many other majors. Five years is not an unusual time frame for earning a bachelors degree in electrical engineering. Best Schools for Electrical Engineering Majors Electrical engineering, like mechanical engineering, is an extremely popular branch of engineering, and most schools with engineering programs will offer an electrical engineering major. Many of the schools listed below are also considered some of the nations best engineering schools in general. California Institute of Technology (Caltech): Located in Pasadena, California, Caltech typically vies with MIT for the title of #1 engineering school in the U.S. Caltechs electrical engineering program is popular at both the undergraduate and graduate levels, but its not easy to get into: the overall undergraduate acceptance rate is 8%.Carnegie Mellon University: Electrical engineering is the most popular major at Carnegie Mellon, which is located in Pittsburgh, Pennsylvania. The university graduates over 150 electrical engineers a year. If you enjoy the arts as much as you enjoy STEM subjects, you might love CMU, as its well-known for its strong arts programs.Cornell University: Located in Ithaca, New York, this member of the Ivy League has a highly-regarded school of engineering. Electrical engineering is one of the schools most popular graduate programs. At the undergraduate level, about 80 students graduate with electrical engineering degrees each year.Georgia Tech: This public u niversity in Atlanta, Georgia, offers excellent value for in-state applicants. The robust electrical engineering program graduates about 250 students a year, and campus life is lively thanks to the schools urban location and Division I athletic programs.Massachusetts Institute of Technology (MIT): MIT often ranks #1 among all schools for electrical engineering, and the schools facilities and faculty are hard to beat. Like Caltech, however, getting that acceptance letter is a challenge. MIT has a 7% acceptance rate, and perfect scores on the math section of the SAT are common among admitted students.Stanford University: Located in Californias Bay Area, Stanfords 5% acceptance rate vies with Harvard for the most selective in the country. The schools engineering programs are also some of the best in the nation, but the university also has strengths that span the arts, humanities, social sciences, and sciences.University of California at Berkeley: UC Berkeley graduates nearly 1,000 engi neers each year, and electrical engineering accounts for over one third of those students. The UC system is more expensive than most public universities in the U.S., but Berkeley consistently ranks among the best engineering schools in the country.University of Illinois Urbana-Champaign: With over 48,000 students, UIUC is one of the largest schools on this list. Its engineering school is one of the best in the country. In-state tuition is a bargain, and students can also enjoy cheering on the schools NCAA Division I athletic teams.University of Michigan: Like UIUC, Michigan has a highly-regarded school of engineering housed within a large public university. It has the added advantage of being situated in one of the countrys best college towns. The school graduates over 100 electrical engineers annually.University of Texas at Austin: Electrical and mechanical engineering are two of the most popular majors at this school of over 51,000 students. The universitys Cockrell School of Engi neering consistently receives high rankings. Always keep in mind that best is a subjective term, and remember that the best school for your own personality, learning style, and professional goals may differ from the schools listed above. Average Salaries for Electrical Engineers Electrical engineering is one of the highest paying engineering fields. The Bureau of Labor Statistics states that the median pay for electrical engineers in 2017 was $97,970 per year. PayScale.com breaks down the numbers further to note that early career employees have a median salary of $69,900, while mid-career electrical engineers earn a median pay of $118,100. These salaries are a bit higher than those earned by mechanical engineers and civil engineers.

Racial Profiling Is A Special Case Of Discrimination

Racial Profiling According to a report conducted by Prejudice Institute (2001), â€Å"Racial Profiling,† racial profiling is a special case of discrimination. The concern with profiling began, and is primarily, focused, on police stopping motorists and searching their vehicles because of the driver s ethnicity. This is where the term â€Å"Driving while Black† came to light in 1989. Such actual unconventional policies exist in many police departments. Uncovering it often depends on the testimony of the officer. In New Jersey, Black and Hispanic state troopers have testified that they were forced to engage in profiling by their commanders (Prejudice Institute, 2001). Racial profiling often goes hand and hand with other practices by law enforcement, often the defining moments of the life or death situation for African-Americans. In three different studies analyzing the decision time to shoot or not to shoot conducted by Correll, all findings found â€Å"participants were quicker to shoot the armed African American than the armed White. Conversely the participants were quicker to â€Å"not shoot† the unarmed White. The most common errors were shooting the unarmed African American and not-shooting the armed White. All of these results are consistent with a Black-crime implicit bias and this bias was found in both African American and White participants. 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The term â€Å"racial profiling† which was introduced to criticize abusive police practices against people of different race, ethnicity or national origin. One must assess how to understand the practice, and how to keep it distinct from other issues. Racial profiling is defined as â€Å"any police-initiated action that relies on the race, ethnicity, or national origin, rather than the behavior of anRead MoreTerrorism and Racial Profiling Essay966 Words   |  4 Pages Before September 11 we had almost succeeded in eliminating racial profiling, After September 11, its a whole new world, says Michel Shehadeh of the American-Arab Anti-Discrimination Committee (ADC) in the western region. One thousand Arab Americans have already been detained and we dont know who they are or what charges have been brought against them. 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WhileRead MoreRacial Prejudice And Racial Discrimination Essay1347 Words   |  6 PagesRacial discrimination is one of many terms used to express the suppression of a race or many races, but more specifically, it refers to the ill-treatment a person or group receives as a result of differences in their race, color, descent, national, ethnic origin or immigrant status. (Australian Human Rights Commission, 2016). Racial discrimination can be perpetrated by individuals wi thin society, and corporate institutions such as schools, the work force and the government, all of which we have seenRead MoreRacial Profiling : A Strong History1587 Words   |  7 PagesRacial profiling has a strong history in these United States. First, what is racial profiling? Basically, racial profiling is an assumption about something solely based on a person’s race. It may also be a filter through one’s eye. For example, when a police officer decides to only stop African Americans, he is racially profiling; if he decides to exclude all African Americans from any stops he conducts, he is also racially profiling. Racial profiling is a form of discrimination people generally

4 Reasons Chinese Companies Ipo in America free essay sample

Reasons Chinese Companies IPO in America Why do so many good Chinese companies go public in foreign markets rather than let domestic investors share in the profits of growth? Chinese investors often complain about why would â€Å"good companies†, like Tencent (0700. HK), Baidu (NASDAQ: BIDU) and Sina (NASDAQ: SINA), choose to list in the US and Hong Kong instead of on the Chinese A-shares market. There are four main reasons: 1. If a ‘Chinese’ company takes foreign investment using a VIE structure, it can only list abroad 2. Many companies don’t meet the strict financial standards for a Chinese listing 3. China’s listing process takes a long period of time and not very transparent, a torturous examination compared with America’s speedy registration 4. China’s regulatory agencies perpetually overregulate, rather than letting the market decide 1) If a ‘Chinese’ company takes foreign investment using a VIE structure, it can only list abroad The core reason is simple. These companies aren’t at all eligible to listed on the Chinese A-Shares Market, which restrict the overseas-funded enterprises severely. To receive foreign investment, a great number of Chinese companies set up a corporate structure called the  VIE or Sina structure, because some industries such as internet info amp; services and financial services are restricted or even prohibited in foreign-funded investment. This structure is especially common for technology companies that raise financing early and often, frequently from foreign investors. State-owned enterprises aside, most ‘Chinese’ companies in the US are not legally Chinese at all. They’re Cayman Islands, British Virgin Islands, etc. ompanies that control Chinese entities. Chinese regulators have raised the idea of allowing foreign companies to list on the A-Shares Market, but at present that’s still speculative. A worry for foreign investors is that the entire VIE structure, which largely serves to circumvent Chinese laws barring foreign ownership, has been  called into question  by Chinese regulators  in recent months. 2) Ma ny companies don’t meet the strict financial standards for a Chinese listing In August 2005, when Baidu (NASDAQ: BIDU) listed in US, Chinese asked this very question. Let us review. Baidu didn’t reach profitability until 2003. When it went public, it had been profitable for just 2 years. The company’s profit was only $300,000 (2. 4 million RMB) in the quarter prior to its IPO. This is far from the minimum IPO criteria for the Chinese Small and Medium Cap A-Shares Market, where â€Å"net profit in the recent 3 fiscal years must be positive and the sum exceeds 30 million RMB; aggregate cash flow from operational activities in the recent 3 fiscal years exceeds 50 million RMB, or aggregate operating revenue in the recent 3 fiscal years exceeds 300 million RMB. Baidu didn’t even live up to the standards for listing on the Chinese Growth Enterprise Market: â€Å"Profitable for the previous 2 years, with aggregate net profits of not less than 10 million RMB and consistent growth† or â€Å"profitable in the previous year, with net profits of no less than 5 million RMB, revenues of no less than 50 million RMB, and a growth rate of revenues n o less than 30% over the last two years. † Nor may capital be less than 20 million in the year prior to the IPO. )  China’s listing process takes a long period of time and not very transparent, a  torturous  examination compared with America’s speedy registration Going public is like going through a round of torture. In the prolonged process of waiting for review, they have not only to be upset by countless uncertainties, but also incur high costs off the balance sheet. 4)  China’s regulatory agencies perpetually overregulate, rather than letting the market decide Chinese regulatory agencies are actually most concerned about investors. They fear that investors will buy low-quality stocks and they therefore spare no efforts to set up strict review processes for IPOs. They are also concerned about investors losing money in the secondary market and therefore set up â€Å"protection measures† like downward limits and upward limits and make adjustments to the â€Å"IPO rhythm† to stabilize the secondary market. But these ‘good intentions’ only end up leading everybody astray from the original  market intention. The quality of companies listed on the A-Shares Market is far from satisfactory, while most of the companies with the best growth potential and highest returns to investors list abroad. Moreover, the A-Shares Market remains one of the capital markets with the largest fluctuations in the world! The conclusion should be fairly simple: regulatory agencies should not and cannot be held responsible for a company’s quality through an IPO review. The operational risk of a company does not move in lock step with static indicators like financial data. Regulatory agencies should not and cannot be responsible for the luctuations in the secondary market. Fluctuations of the market can never be contained by up or downward limits, nor can the regulator effectively set the â€Å"IPO rhythm. † Chinese companies will continue to list abroad, despite sky-high A-Share Market valuations To be fair, under the elaborate care of regulatory agencies, A-Shares do have their own magic, that is, a super financing power. Especially in the fiery Growth Enterprise Market over the last year, PE ratios frequently shoot up to 100x. Every single listed company has been overjoyed to get more funds than planned. With such â€Å"stupid wealthy people† circumstances, will companies still want to list in foreign markets? I believe so. Again, there are many companies that will never meet the standards of the A-Shares Market. For growth companies that really desperately need funds, even the listing threshold of the Growth Companies that list abroad don’t have to worry that investors will criticize them for a broad definition of â€Å"misappropriation. † For them, going public is not just a one-time IPO sale, but also a sustainable financing platform. In Conclusion To sum up, the pre-IPO review and post-IPO trading have made A-Shares Market a different ecosystem from foreign markets. It is hard to say which is better. But companies themselves have preferences. Therefore, I don’t think fewer companies will list in foreign markets despite the high valuations of A-Shares. It’s hard to tell if â€Å"quality Chinese companies† will give A-Share investors a chance to invest. Article by Simon  Fong ( ),  Founder amp; President of Snowball Finance, iChinaStock’s parent company. The original Chinese article was published in the October edition of The Founder.