Higher Capital Requirements Research Articles

Ethics, capital and talent competition in banking

We model optimal ethical standards, capital requirements and talent allocation in banking. Banks with varying safety-net protections, including depositories and shadow banks, innovate products and compete for talent. Managers dislike unethical behavior, but banks heed it only because detection imposes costs. We find: (i) higher capital induces higher ethical standards, but socially optimal capital requirements may tolerate some unethical behavior; (ii) managerial ethics fails to raise banks’ ethical standards; (iii) banks with lower ethical standards attract better talent and innovate more; and (iv) it is socially optimal to allocate better talent to shadow banks instead of depositories, and this allocation results in higher capital requirements and ethical standards for depositories. Consequently, with capital capacity constraints, the shadow banking sector is larger than the depository sector; talent competition induces a race to the bottom in ethical standards, and the regulator responds by setting capital requirements to magnify this size difference.

Structure, Conduct and Performance of Maize Marketing in Irewole Local Government Area, Osun State

The study analyzed the marketing of maize in Irewole Local Government Area of Osun State and describes the socio-economic characteristics of maize marketers by determining the marketing margin, marketing cost, markup, operational efficiency as well as constraints faced by maize marketers in the area. Data used for the study were generated through the administration of structured questionnaire. A total of 120 respondents comprising of 40 maize wholesalers and 80 retailers, were randomly sampled from three purposively selected major maize markets. Descriptive statistics, Concentration Ratio, Gini Coefficient and Operational Efficiency Model were the analytical tools adopted for the study. The findings of the study revealed that maize marketing was efficient and profitable; N900 and N1200 per 100 kg bag for wholesalers and retailers, respectively in the study area. There also exists variation in marketing cost, marketing margin, marketing profit, and markup for both wholesale and retail maize markets. Gini Coefficients of 0.319 and 0.312 were obtained for wholesaler and retailer, respectively indicating high level of competition in the industry. Major problems facing both wholesalers and retailers are price uncertainty, high perishability of maize and seasonal nature of maize. However, insecurity and high capital requirement are considered as major constraints. It is therefore recommended that the challenges be alleviated to improve efficiency of maize market in the area.

Higher Capital Requirements and Credit Supply: Evidence from Italy

Higher Capital Requirements and Credit Supply: Evidence from Italy

The impact of regulatory reforms for systemically important institutions, defined as “other” (O-SII)

This study examines the effects of the announcement of a prudential rule introducing the framework for other systemically important institutions (O-SII) in euro area countries. Following the announcement of the framework, there has been some slowdown in balance sheet expansion for O-SIIs relative to other banks. O-SII banks have altered their balance sheet structure, consistent with the incentive given by the O-SII buffer to reduce complexity and interconnectedness. This has been accompanied by somewhat weaker pricing power of O-SII banks, which along with higher capital requirements seem not to have led to higher risk-taking by O-SII banks. No discernible change in risk-taking strategies along with the reduction in the funding cost advantage may have contributed to a decline in profitability of O-SIIs. Overall, the introduction of the structural, non-cyclical higher capital buffers for the key nodes of the euro area banking sector seems to have helped strengthen the resilience of these banks, and, by extension, of the financial system.

Systemic risk measurement: bucketing global systemically important banks

The general consensus on the need to enhance the resilience of the financial system has led to the imposition of higher capital requirements for certain institutions, supposedly based on their contribution to systemic risk. Global Systemically Important Banks (G-SIBs) are divided into buckets based on their required additional capital buffers ranging from 1% to 3.5%. We measure the marginal contribution to systemic risk of 26 G-SIBs using the Distressed Insurance Premium methodology proposed by Huang et al. (J Bank Financ 33:2036–2049, 2009) and examine ranking consistency with that using the SRISK of Acharya et al. (Am Econ Rev 102:59–64, 2012). We then compare the bucketing using the two academic approaches and supervisory buckets. Because it leads to capital surcharges, bucketing should be consistent, irrespective of methodology. Instead, discrepancies in the allocation between buckets emerge and this suggests the complementary use of other methodologies.

Modelling Efficiency of Electric Utilities Using Three Stage Virtual Frontier Data Envelopment Analysis with Variable Selection by Loads Method

Electric utility regulators and policy makers implement incentive-based regulation to improve electric utilities efficiency or to manage the cost of electricity. However, poorly implemented regulation may produce undesired results such as low reliability or poor quality of service. Moreover, the competition within the electricity sector is likely to be low because of the high barriers to entry, vertically integrated electric utilities, and high capital requirements. Therefore, benchmarking exercises allow policy makers and regulators to gauge the relative efficiency of electric utilities and help them to reward or penalize the electric utilities accordingly. In this study, we examined the variables that significantly influence the efficiency of electric utilities and developed an optimum method to measure the efficiency of the electric utilities. The results of the efficiency measurement were then used to rank the electric utilities. The result of this study indicates that there are 13 variables that significantly affect the efficiency score of electric utilities and three stage virtual frontier data envelopment analysis (3S-VF-DEA) is the optimum method to measure the efficiency of the electric utilities.

Awareness On Application Of Artificial Intelligence In Medicine Among Dental Students - A Survey

Aim and introduction Artificial intelligence (AI) is one of the branches of computer science, which is capable of analyzing complex medical data. This technology is helpful in diagnosing disease, treatment, and predicting outcomes in many clinical scenarios. Artificial intelligence is nothing but a natural language processor and does repetitive jobs in a timely manner. Some disadvantages of AI technology are high initial capital requirement, potential for increased unemployment, which shows that this technology has the potential to replace physicians in future. The main aim of this survey is to assess the awareness on application of artificial intelligence in medicine among dental students. Materials and Method Self-administrated questionnaire was designed based on awareness. The questionnaire was distributed through an online Google forms link. The study population included dental students belonging to the 18 – 26 age group. Method of representation of each output variable was in pie charts and bar graphs. The statistics done using SPSS software, chi square test was done to check the association and a p value of 0.05 was said to be statistically significant. This survey has been completed in the month of may 2020. Result 56% of the participants were aware that artificial intelligence is the analysis of medical data without direct human input. From the survey it was evident that 57% of the participants feel that with the help of AI clinical decision and diagnosis can be revolutionized and also found that both male and female students were equally aware of the importance of application of artificial intelligence in medicine(p-value>0.05). Conclusion This study concludes that about 59% of the study participants were aware that Artificial Intelligence technology in medicine is beneficial to doctors and also found that both male and female students were equally aware of artificial intelligence. Since AI technology has the potential to develop into an innovative platform which is capable of analyzing more complex medical data, more awareness has to be created for better understanding and analysis of this technology.

The role of women in freshwater aquaculture development in Kenya

Abstract For many years, aquaculture has been erroneously viewed as a male-dominated sector, offering women inadequate opportunities partly due to the high capital investment requirement and or the technologies linked to the venture. Women work in all areas of the aquaculture value chain but their opportunities have not kept pace with aquaculture growth. Hence, they form a larger component of the poor, limiting their income-generating activities and asset building potential. Gender disaggregated statistics that could track women’s engagement in aquaculture activities in Kenya are scanty. Hence, women’s presence, influence and interests are invisible. All aquaculture labour practices should embrace the Sustainable Development Goals 5 that focus on gender equality and empowerment of all women and girls. To that end, gender equality must be mainstreamed into aquaculture planning, development, monitoring and evaluation. This will require concerted political efforts by sector leaders, advocates and gender champions, supported by new technical instruments for implementation. The study leverages on incorporating gender lens and making gender visible in every phenomenon, questioning if, how and why processes, opportunities and standards differ systematically for women and men and not solely for women. Finally, it proposes sections where women’s engagements can be strengthened to increase the importance of aquaculture production in Kenya.

Фінансове забезпечення підвищення ефективності судноплавного ринку

The crisis of shipping financing and financial management of maritime enterprises has become extremely important to ensure the efficient operation and survival of shipping companies around the world. The shipping industry is essentially capital-intensive and requires significant investments in new shipbuilding each year. High capital requirements for financing new construction programs and acquisitions on the secondary market have forced shipowners to seek financing outside their own private funds. European commercial banks have a long history of financing shipping assets. Bank debt financing remains the most important source of capital for the shipping industry today. The adoption of the shipping industry by the capital market, especially over the last decade, has opened the door to a much wider range of capital besides bank debt. Shipping companies today have many alternative financing options: from traditional mortgage loans to more complex financing structures, which may include: high-yield debt; sale and leaseback; mezzanine financing and other forms of debt related to share capital; private equity or open-ended financing, such as a parent limited liability company (MLP) and a special purpose vehicle (SPAC). Although a shipping company's ability to focus on market ups and downs depends primarily on the timing of its investment and chartering policy, the choice among all these alternative financing options may be equally important. Bank financing is the main source of capital for the shipping industry, providing flexible and low cost of capital for shipping companies. Banks are the most reliable and long-term providers of capital for the industry, which accounts for the largest majority of transport capital each year. From the banks' point of view, the shipping industry remains a favorable sector for doing business, despite volatility and relatively low margins. Banks are able to increase their profitability with low-margin financing, as vessels change hands regularly, leading to refinancing of loans until they are repaid. As world trade expands, the need for significant investment in larger and more complex assets will continue to grow, requiring more capital. During this course, shipping companies and capital suppliers will have to face the risks of extremely volatile operating cash flows and vessel prices, making risk management a central factor in any investment decision. Although bank debt financing is likely to remain the most important source of capital for the industry, shipping companies now have a wide range of alternatives available to them.

Potential nanomaterials application in wastewater treatment: Physical, chemical and biological approaches

Abstract The essential challenges in the 21st century are providing clean and affordable water to meet human needs that are mainly resulting from the rapidly increasing population, depleting water resources, and climate change. The development and implementation of advanced wastewater treatment technologies with high efficiency and low capital requirement is important in order to minimize the negative impacts of wastes on the environment. Nanotechnology offers a great potential for removal of pollutants and germs from waswater. High surface-to-volume ratio and photocatalytic properties of these nanomaterials introduced them as highly potent option for removal of heavy metal ions and organic dyes. This paper critically reviewed the application of nanomaterials as nano-adsorbent, nano-catalyst and nano-membrane in wastewater treatment. This review also provided an insight into a detailed description and application of these nanomaterials in chemical, physical and biological treatment for removal of pollutant from waswater. From the current review, it is evident that the nanomaterials possess exclusive properties, which can contribute to the high efficacy in treating high levels of different pollutants.

Risk aggregation in non-life insurance: Standard models vs. internal models

Standard models for capital requirements restrict the correlation between risk factors to the linear measure and disregard undertaking-specific parameters. We consider an alternative framework for risk aggregation in non-life insurance using vine copulas that allow non-linear dependence and are estimated with undertaking-specific parameters. We empirically compare our alternative risk model with three regulatory standard models (Korean risk-based capital, Solvency II, Swiss Solvency Test) and show that the standard models lead to more than 50% higher capital requirements on average. Half of the overestimation results from the uniform parameter selection imposed by regulations and the other half comes from the linear correlation assumption. The differences might distort competition when both standard models and internal risk models are used in a single market.

The transmission of bank capital requirements and monetary policy to bank lending in Germany

AbstractWe investigate the transmission of changes in bank capital requirements and monetary policy, and their interaction, on German banks’ corporate loan growth and lending rates. Our results show that increases in capital requirements are associated with an immediate decrease in total domestic and cross‐border bank lending. Changes in the euro area's monetary policy stance are positively related to corporate loan interest rates in general. Regarding the interacting effect of national bank capital requirements and euro area monetary policy, we observe that the transmission of accommodative euro area monetary policy to corporate lending rates can be attenuated by contemporaneous increases in bank capital requirements. Moreover, more strongly capitalized banks increase their loan growth in response to accommodative monetary policy whereas, for weaker banks, increasing capital requirements implies a decrease in their corporate loan growth. Our results confirm a tradeoff between higher capital requirements and accommodating monetary policy originating from banks’ capital constraints.

Financial Stability Implications of Stress Testing for Risk Taking and Credit Growth

This paper examined the literature on financial stability implication of stress testing for risk-taking and credit growth in banks.
 Macro prudential considered one of the most stress testing tools by Applying countercyclical Macro prudential tools to build up capital buffers in good times that can be run down during bad times. But to improve timing, monitories authorities may need to develop a comprehensive framework to monitor Macro prudential conditions and establish appropriate warning and trigger thresholds. Regarding scope, they examine the entire financial system. This entity contributes to fire sales whose default has follow-on effects, or which can exacerbate a credit crunch that is included. Liability Considerations contain a Scale of wholesale funding that is run-prone is paramount. Capital adequacy depends on the health of the overall financial system. For asset Considerations, the test indicates whether the financial system is vulnerable to deleveraging that might amplify adverse shocks, at the end authorities' development guidance about whether to close a bank and when to sell its assets to maximize taxpayer recovery. We have concluded that the financial stability implications of stress tests for risk-taking and credit growth among banks are the following: A reduction in credit is a feature on stress tests. Post-crisis reforms traded the expectation of lower credit growth for reducing the probability that the larger banks would fail. This has a high negative impact on the economy. Higher capital requirements for the larger banks have prompted a reduction in the supply of credit, especially to riskier borrowers. Smaller banks have increased their share of local market-wide lending, and larger businesses have seen quite generous credit availability in bond and leveraged loan markets. Consider the structure of the financial system and its complexity long the levels of economic integration and openness.

The Rise of Shadow Banking: Evidence from Capital Regulation

Abstract We investigate the connections between bank capital regulation and the prevalence of lightly regulated nonbanks (shadow banks) in the U.S. corporate loan market. For identification, we exploit a supervisory credit register of syndicated loans, loan-time fixed effects, and shocks to capital requirements arising from surprise features of the U.S. implementation of Basel III. We find that less-capitalized banks reduce loan retention, particularly among loans with higher capital requirements and at times when capital is scarce, and nonbanks step in. This reallocation is associated with important adverse effects during the 2008 crisis: loans funded by nonbanks with fragile liabilities are less likely to be rolled over and experience greater price volatility.

Copper Extraction Using Aluminum in Acidic Leachate Media

Copper is found in several minerals with varied elemental composition. For instance, copper minerals occur as chalcopyrite (CuFeS 2 ), bornite (Cu 5 FeS 4 ), chalcocite (Cu 2 S), covellite (CuS), cuprite oxide (Cu 2 O), and malachite (Cu 2 CO 3 (OH) 2 ) among many other minerals. In Kenya, extraction of valuable minerals like copper is hampered by high capital and technological investment requirements. Mineral ores found in Tharaka sub – county in Tharaka Nithi County in Kenya in particular contains significant concentrations of copper which are worth extraction. These minerals cannot be exploited due to financial and technological constraints. However, efficient and cheaper methods of extraction of copper with affordable technology are currently required. Electrolysis of copper leach solution after reaction of ground ore with acid has been done. Since the available methods involve the use of large amount of power for large scale production, alternative method for extraction has been investigated. The method involves dipping aluminum in acidic leach solution at room temperatures. The copper recovered was found to contain 80 to 90% purity depending with ore composition. Keywords: key copper extraction, aluminum half-cell reaction, displacement of copper using aluminum. DOI: 10.7176/CMR/12-7-06 Publication date: September 30 th 2020

The Forced Safety Effect: How Higher Capital Requirements Can Increase Bank Lending

ABSTRACTGovernment guarantees generate an implicit subsidy for banks. A capital requirement reduces this subsidy, through a simple liability composition effect. However, the guarantees also make a bank undervalue loans that generates surplus in states of the world in which it defaults. Raising the capital requirement makes the bank safer, which alleviates this problem. We refer to this mechanism, which we argue is empirically relevant, as the forced safety effect.

Are bank capital requirements optimally set? Evidence from researchers’ views

We survey 149 leading academic researchers on bank capital regulation. The median (average) respondent prefers a 10% (15%) minimum non-risk-weighted equity-to-assets ratio, which is considerably higher than the current requirement. North Americans prefer a significantly higher equity-to-assets ratio than Europeans. We find substantial support for the new forms of regulation introduced in Basel III, such as liquidity requirements. Views are most dispersed regarding the use of hybrid assets and bail-inable debt in capital regulation. 70% of experts would support an additional market-based capital requirement. When investigating factors driving capital requirement preferences, we find that the typical expert believes a five percentage points increase in capital requirements would “probably decrease” both the likelihood and social cost of a crisis with “minimal to no change” to loan volumes and economic activity. The best predictor of capital requirement preference is how strongly an expert believes that higher capital requirements would increase the cost of bank lending.

Bank capital requirements and lending in emerging markets: The role of bank characteristics and economic conditions

This paper offers novel evidence on the impact of raising bank capital requirements on lending in an emerging market and explores heterogeneous effects, depending on bank characteristics and economic conditions. Using quarterly bank-level data and exploiting the adoption of bank-specific capital buffers, we find that higher capital requirements are associated with lower credit growth in Peru. But the effect is short-lived and becomes insignificant in about half a year. The impact of capital requirements varies with economic conditions and bank characteristics. The effects is stronger during periods of lower economic growth. Weaker (less profitable, less capitalized and less liquid) banks react more to changes in capital requirements. Our findings are robust to estimating a variety of specification to address concerns about the endogeneity of capital requirements.

Techno-economics of Biochar and Biogas viability in Ghana

Biogas and voucher are technological solutions that deal with sanitation and other environmental problems. The technology for producing biogas from faeces is termed bio-toilet and production of biochar from the same human waste is by means of Sol-char toilet. The study evaluated economic benefits and costs of sol-char toilet and compared with empirical benefits and costs estimates of bio-toilet. Cost Benefit Analysis was used to judge welfare change attribution of investment into Sol Char Toilet and Bio Toilet. The pyrolysis plant was fed with 4000 tons of faeces for which Sol char toilet incurred Total capital cost of US$ 3,140,940.38, Net Present Value (NPV) of US$9,718,817.4788, Profitability Index (PI) of 4.0942381271 and 1.4 years payback period. Bio toilet values for a total of 4000 m3 (100 units of 40 m3 each) were; - Total capital cost of US$ 36,026.05, NPV of US$89,152.75, PI of 3.4746 and 3.46 years payback period. Sol char toilet is faced with high capital requirement challenges, compared with an advantage in smaller payback period and a marginal difference in PI. The study concluded that complementary roles of sol char toilet and bio toilet in the Ghanaian economy is preferred.Keywords: Biogas; Biochar; Cost Benefit Analysis; Profitability Index; Payback period.

Methods for alleviating the problem of Too big to fail in Germany

As a result of the last financial crisis, the problem of Too big to fail (TBTF) escalated in many countries, among which in Germany. The complexity and volume of the investment activity run by many banks caused liquidity problems which threaten their further operations. Therefore, in order to stabilize the financial market, the countries were forced to dedicate significant public resources to save the banks threatened with failure. Animated discussion on the TBTF banks made it necessary to seek regulatory solutions which would reduce the scale of TBTF problem. These solutions should be based on higher capital requirements, recovery and resolution of credit institutions, regulating derivatives and hedge funds as well as structural reforms of the banking sector in the spirit of the Glass–Steagall Act. The aim of this article is to present the structural reforms implemented in Germany under the so-called Trennbankengesetz and the assessment of their impact on reducing the scale of TBTF problem in Germany. The authors propose a research hypothesis stating that the structural reforms of banking sector implemented in Germany are too liberal to definitively solve the TBTF problem. That is why in the last part of this article, the authors have formulated their own proposals to reform the banking system in the spirit of Glass–Steagall Act, taking into consideration the universal model, typical of the German banking sector.