Category Financial Sector Assessment

Interest Rate Risk

Duration is a key indicator for the measurement of the direct interest rate risk. The prin­cipal usefulness of duration stems from the fact that it approximates the elasticity of the market values of assets and liabilities to the respective rates of return,15

&MrA) _-РлАгл AA(r, ) _ – D, Ar, A(rA) (! + /•„)’ A(rL) (1 + rJ


Подпись: (7)
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where A(rA) and L(rL) are market values of assets and liabilities of a banking system, and where rA and rL are annual interest rates on assets and liabilities. This feature of dura­tion can be used to summarize the effect of changes in interest rates on banks’ capital. In particular, we can define capital as A(rA) – L(rL), and can express it as a ratio to risk weighted assets...

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Bank Liquidation

In liquidation, an insolvent bank is dissolved after a liquidator assumes legal control of its estate, collects and realizes its assets, and distributes the proceeds to creditors—in full or partial satisfaction of their claims—in accordance with the principle of equal (pari passu) treatment of similarly situated creditors and the applicable rules on priority. Liquidation will be appropriate if the bank’s restructuring does not appear feasible or if the restructur­ing involves the spinning off of the viable operations of the bank, thus leaving only its residual, nonviable part with the original legal entity. On the commencement of liquida­tion and until the final act of dissolution, the bank will continue to exist as a legal entity but will no longer be a going concern...

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Indicators of Access to Financial Services

Financial institutions

Number of branches, or other banking service outlets, for each bank, NBFI, and DFI and for each province (state and local jurisdictions)

Number of ATMs for each bank, NBFI, and DFI and for each province

Size distribution of loans for banks, NBFIs, and DFIs; similar distribution data for deposits

Number of employees for each bank, NBFI, and DFI and for each province

Paymentsa

Percentages of households with transaction accounts, payment cards; total number of transaction accounts, payment cards in the system

Savingsa

Percentages of households with savings accounts; total number of savings and time deposit accounts

Allocation of fundsa

Percentage of households with residential mortgage; with other borrowings in last year (stock or flow)

Percentage of enterprises (includ...

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Case Against the Fully Unified Model

There is clear merit in the arguments stated in the case for a unified model, and there is a certain prima facie appeal to the concept of a unified prudential regulator. However, several reservations may be voiced about such an agency:

• One of the arguments in favor of a single prudential agency—that as financial firms have increasingly diversified, the traditional functional distinctions between institutions have been eroded—is not applicable in many countries. Although this lack of applicability is generally the case in industrial countries, it may not be true of all countries or even of all institutions in industrial countries. In very many countries, there remain—and will remain for the foreseeable future—major differ­ences among banks, securities firms, and insurance companies...

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The Process

System-focused stress testing is best seen as a process: part investigative, part diagnostic, part numerical, and part interpretive. Ideally, this process begins with the identification of specific vulnerabilities or areas of concern, followed by the construction of a scenario in the context of a consistent macroeconomic framework. The next step is to map the outputs of the scenario into a form that is usable for an analysis of financial institutions’
balance sheets and income statements, then performing the numerical analysis, consider­ing any second-round effects, and finally summarizing and interpreting the results. Each stage of the process is important to understanding the sensitivity of a financial system to a particular shock or vulnerability...

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Licensing Implication of Bank Insolvency

The law should clearly specify the relationship between the declaration of a bank’s insol­vency and its status as a licensed institution. In a number of countries, the withdrawal of an institution’s banking license automatically results in its placement in liquidation. Elsewhere, this approach is considered draconian and unwarranted to the extent that it could lead to the mandatory termination of institutions that are not marred by criminal­ity, that are otherwise solvent, and that could continue to operate as non-bank enter – prises.9 In some countries, it is the commencement of insolvency proceedings that triggers the automatic or discretionary withdrawal of the bank’s license...

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