The most comprehensive educational resources for finance

Revised Core Principles for Effective Banking Supervision

The Basel Committee on Banking Supervision has revised the October 2006 Core Principles for effective banking supervisions. The revised set of twenty-nine Core Principles has also been reorganised to foster their implementation through a more logical structure, highlighting the difference between what supervisors do and what they expect banks to do: Principles 1 to 13

Credit in Times of Stress: Lessons from Latin America

The 2007-09 global financial crisis disrupted the provision of credit in Latin America less than previous crises. This review from BIS identifies key initial macroeconomic conditions that contributed to the higher resilience of real credit in Latin America during this episode. These relate to economies’ capacity to withstand an external financial shock and the scope

Regulatory Capital Vs. Economic Capital

Unlike a corporation, the role of capital within a bank is not that of an additional source of funding. Banks are primarily deposit taking institutions which then lend this money in the form of loans and other activities. To expand their exposure, it’s fairly easy for a bank to increase their deposit. Instead the capital

Who Really Benefits from Quantitative Easing

Quantitative easing as we know it is a kind of monetary policy use by the central bank of a country to stimulate the economy when other conventional methods are not working. This involves the central bank buying financial assets from the commercial banks using the money it creates newly. This is different from the otherwise

Margin Requirements for Non-centrally Cleared Derivatives

The G20 Leaders agreed in 2011 to add margin requirements on non-centrally-cleared derivatives to the reform programme for over-the-counter (OTC) derivatives markets. Margin requirements can further mitigate systemic risk in the derivatives markets. In addition, they can encourage standardisation and promote central clearing of derivatives by reflecting the generally higher risk of non-centrally-cleared derivatives. The

Effective Risk Data Aggregation and Risk Reporting

The recent financial crisis revealed that many banks, including global systemically important banks (G-SIBs), were unable to aggregate risk exposures fully and quickly. This meant that banks’ ability to take risk decisions in a timely fashion was seriously impaired with wide-ranging consequences for individual banks and the stability of the financial system as a whole.

Intraday Day Liquidity Management

Intraday liquidity refers to the funds available with the bank or a financial institution during the business day for the purpose of making payments in real time. The Basel Committee has been working on developing a set of monitoring indicators that will allow banking supervisors to monitor a bank’s intraday liquidity risk management. They have

The LIBOR Scandal

The London Inter-bank Offer Rate (LIBOR), as we know, is the average cost of borrowing at which the Britain’s banks lend money to each other. The LIBOR is calculated daily based on the information provided by these banks. The London Interbank Offered Rate (“LIBOR”) and the Euro Interbank Offered Rate (“EURIBOR”) are benchmark reference rates

Lecture 15: Tools of Monetary Policy

This lecture continues to discuss central banking and focuses on the determination of total reserves and tools of monetary policy. The lecture draws from the book Mystery of Banking.