Banka sermayesi ve risk
Bank kapital and risk
- Tez No: 82170
- Danışmanlar: PROF. DR. İLHAN ULUDAĞ
- Tez Türü: Yüksek Lisans
- Konular: Bankacılık, Banking
- Anahtar Kelimeler: Belirtilmemiş.
- Yıl: 1999
- Dil: Türkçe
- Üniversite: Marmara Üniversitesi
- Enstitü: Bankacılık ve Sigortacılık Enstitüsü
- Ana Bilim Dalı: Bankacılık Ana Bilim Dalı
- Bilim Dalı: Belirtilmemiş.
- Sayfa Sayısı: 120
Özet
Özet yok.
Özet (Çeviri)
SUMMARY Why do banks hold such large amounts of capital? This may seem a very banal question, but the answer is not as obvious as one might at first imagine. Until the late 1970s, banks were general highly regulated, and highly protected, entities; this protection was largely a result of the bitter memories of the Great Depression in the US as well as of the role whick uncontrolled inflation played in the political development in Europe during the 1930s. The activities banks were allowed to undertake were tightly restricted by national regulatorys, and is return banks were protected from competitive forces.The Bretton Woods agreements, established in the summer of 1944, put in place a system of exchange rate (and consequently interest rate) stability which ensured that banks had an easy time managing their exposures. This cosy relationship was intended to ensure stability of the banking system, and it succeeded in its goals throughout the reconstruction and growth phases which followed the Second World War. The system held up well until the early 1970s, when the colapse of the Bretton Woods agreement led to a substantial increase in exchange and interest rate volatility.This sudden increase in uncertainty was in turn exacerbated by the relaxation of exchange control regulations. Central banks were left with only one effective way to implement monetary policy: by exercising their influence over the supply of money to banks, and therefore over interest rates. The resulting strain on the banking system was enormous: bank were faced with an increasingly volatile environment, but at the same time had very inelastic pricing control over their assets and liabilities, which were still subject to both government regulation and protective cartel arrengements.The only solution was deregulation or, in other words, exposing the banks to the cold wind of competion. The only way to address this situation without increasing the competitive differences between countries was at the international level; a committee was > thus set up under the auspices of the Bank for International Settlements in Basle, to see what could be done. This committee, initially known as the Cooke Committee after its chairman, was subsequently renamed the Basle Committee on Banking Regulaton and Supervisory Practices, and is today often refered to simply as the BIS.datail often overlooked is that the Committee is hot actually part of the BIS - it simple meets under the umbrella of the BIS, which also provides administrative support.The Committee consists of representatives of the centralbanks and supervisory authorities of the G10 countries, and although its recom mendations have no legal force, the governments of the G10 countries are morally boun by the nature of their respective countries representation on the Committee to implement its recommendatios in national law. The introduction to the Basle Accord states that is objectives are twofold: firstly, to 'strengthen the soundness and stability of the international banking system' and, secondly, to 'diminish... an existing source of competitive inequality amoung international banks. The second aim is simply a reflection of the fact thet, without global harmonisation, there will be competitive imbalances in the system, with different banks subject to different standarts. This is important; as noted, the level of capital affects the return required by shareholders and a bank with a lower capital requirement would be able to price its products more keenly, as its threshold return would be lower. The first of the quoted goals gets close to what we are looking for: by forcing banks to hold a minimum capital level, there is less likelihood of bank failure, thus bringing grater stability to the system.Thus capital requirements can be said to have replaced the earlier system of regulated deposit rates, cartel agreements etc. which had protected the banks in the past. The Basle Accord makes this 'buffer1 role clear when discussing whether general loan provisions are to be included in the definition of capital.Such reserves are only admissible when they are not ascribed to partiular assets: 'where, however, provisions have been created against identified losses... they are not freely available to meet unidentified losses which may subsequently arise elsewhere in the portfolio and do not process an essential characterise of capital..' An essential element of capital is therefore its availability to absorb future, unidentified losses. Much confusion exists over what purposes bank capital serves.The traditional corporate finance view is that capital reduces the risk of failure by providing protection against operating and extraordinary losses.While this holds for nonfinancial firms that rely on long-term debt with relatively low fmmm leverage, it is less applicable to commercial banks. From the regulators' perspective, bank capital serves to pre insurance funds in the case of bank failures. When a bank fails, d either pay off insured depositors or arrange a purchase of the failde*5 healty bank.The greater a bank's capital, the lower is the cost of arranging a 1C YÜKSEKÖ?RETİM KUMULİ BQKUMAflTASYQN MERKEZEmerger or paying depositors.An additional benefit of minimum capital require ments is that the owners of equity and long-term debt impose market discipline on bank managers because they closely monitor bank performance. Excessive risk taking lowers stock prices and raises borrowing costs, which adversely affect the wealty ofthese monitoring parties. This function of bank capital is thus to reduce bank risk.lt does so in three basic ways. First, it provides a cushion for firms to absorb losses and remain solvent. Second, it provides ready access to financial markets and thus guards against liquidity problems caused by deposit outflows.Third, it constrains growth and limits risk taking. There are many different definitions of capital, starting from a very narrow 'equity plus stated reserves' through to something that encompasses subordinated debt.The Basle Accord uses a two-tier concept, where Tier One consists of share capital and disclosed reserves, and Tier Two includes such items as 'hidden' reserves, unrealised gains on investment securities, and medium - to long- term subordinated debt.The total of Tier Two capital is not allowed to exceed Tier One. Most banks now hold equity which is in excess of the regulatory minimum. So why is it that banks now hold more? There are many theories put forward as two why this is; perhaps management, with a much better understanding of the risks the bank really faces, considers that the regulatory minimum is insuffisient? Perhaps there are market forces which require this, such as pressure from rating agencies to maintain a certain excess in order to support a superior credit rating? Or perhaps it has happened almost by accident? It is very difficult to comment on the first of these hypotheses, as the managers of the banks are understandably reluctant to publish detail of how much capital they think they really need usually, they are happy to trumpet the excess over the regulatory minimum as some sort of achievement.This certainly may help to attract depositors, bur the shareholders migth not quite see it the same way, as it is their investment which is apparently lying idle. In general, it is advisable for banks to try and use debt for a|l|asj of their capital needs, as it is much more flexible; there is nothing for managers who are trying to improve the share price perpormaf left with a legacy of high equity and a lack of projects in which to corporate finance theory states that, if management cannot find projects whichearn at least the cost of equity, they should return the equity to the shareholders; this is much easier said than done in the case of banks. For example, in order to repay capital local rules may require that creditors permission be obtained, and since every depositor is in effect a creditor of the bank, this may imply obtaining the permission of literally millions of creditors. However, holdings of own shares are now permitted to a degree in many countries, allowing banks to reduce their equity by buying bac their own shares on the market. Bank supervision has reached the point where regulators now specify minimum amounts of equity and other qualifying capital that banks must obtain to continue operations.Historically, regulators stipulated minimum capital-to-asset ratios but did not wory about the quality of bank assets.While bank capital-to- asset ratios averaged near 20 percent at the turn of the century, comparable ratios today are closer to 8 percent. Clearly, the aggregate solvency risk of the banking system has increased over time because asset quality has not improved sufficiently to compensate for the percentages of capital. More importantly, under old capital regulation two banks of the same asset size would have to operate with the same amount of capital, independent of their risk profiles.Thus, a bank that held only Tresury securities needed the same capital as the same size bank that held speculative real estate loans. Does this seem reasonable? The answer depends on the role that capital is expected to serve and whether regulators what to control bank risk. In 1986, U.S. bank regulators proposed that U.S. banks be required to maintain capital that reflects the riskness of bank assets. By 1 988, the proposal had grown to include risk-based capital standarts for banks in 12 industrialized nations according to the terms of the Basle Agreement, U.S. bank regulators phased in the reguirement starting in 1990, with the regulations fully in place by the end of 1992. Importantly, savings and loans were also required to meet the same risk-based capital standards by 1992. While the terms varied between nations, primarily in terms of what^ constitutes capital, the agreement cantained several important elej; bank's minimum capital requirement is linked by formula to its cr| determined by the composition of assets.The grater the credit rijjg required capital. Second, stockholders equity is deemed to be thel type of capital. As such, each bank is expected to operate with a mîhi| of equity, based again on the amount of credit risk.Third, the minimum pSfSintage requirement increased to 8 percent for total capital. Finally, the capitalrequirements were approximately standardized between countries to“ level playing field”that is to remove competitive advantages that banks in one country might have over banks in other countries because of regulatory or accounting differences. To determine minimum capital requirements.bank managers follow a four- step process: - Classify assets into one of four risk categories; - Classify off-balance sheet commitments and guarantees into the appropriate risk categories; - Multiply the dollar amount of assets in each risk catogory by the appropriate risk weight; this equals risk-weighted assets; and - Multiply risk-weighted assets by the minimum capital percentages, currently either 4 percent or 8 percent. Minimum Regulatory Capital Ratios Tier 1 Tier 1 capital / Risk- weighed assets > 4% Total Capital Tier 1 + Tier 2 capital / Risk- weighted assets > 8% Leverage Capital : Tier 1 capital / Total Assets > 3% In 1989, Turkey regulators proposed that Turkish Banks be reqwGtJra^S. *-0>*' maintain capital that reflects the riskness of bank assets. In 1989.th.e4prop©sal *, ft.'^' o *' -v?Oı L *» i had grown to include risk-based capital standarts for Turkish banks'acdprdîı^g \ok I term of Basle Agreement.,^*-*53ti» y* ı'Three implications stand out. First, average capital ratios at banks of all sizes exceeded the regulatory minimum by a substantial amount. Second, capital ratios of small banks exceeded those of larger banks, on average.This reflects grater regulatory pressure on small banks, which presumably carry less- diversified asset portfolios. Finally capital ratios have increased sharply during the past ten years as banks have moved to strengthen their financial positions. According to accounting definition, capital or net worth equals the cumulative value of assets minus the cumulative value of liabilities, and represents ownership interest in a firm.lt is traditionally measured on a book value basis, where assets and liabilities are listed in terms of historical cost. In banking, the regulatory concept of bank capital differs substantially from accounting capital. Specifically, regulators include certain forms of debt when measuring capital adequacy.This policy raises numerous issues regarding bank capital's function and optimal mix. There are two fundamental weaknesses of the risk-based capital requirements. First, the formal standarts do not account for risks other than credit risk. Obviously, a bank that assumes exraordinary amounts of interest rate risk in volatile rate environments or high-liquidity risk with a heavy rekliance on Eurodollar or other purchased liabilities has an abnormal change of failing. But the bank's formal capital requirements is determined by its asset composition.While regulators plan to impose capital requirements for banks with excessive interest rate risk exposure, most managers do not believe that these standards will affect their bank.The regulators can, of course, identify risk takers and raise required capital above the minimum, except that this recognition rarely occurs prior to problems arising. Second, the book value of capital is not the most meoaning measure of soundness.Amoung other problems, it ignores changes in the market value of assets, the value of unrealized gains or losses on bank investments, the value of a bank charter, and the value of federal deposit insurance. The Basel Committee on Banking Supervision has decided to introduce a new capital adequacy framework to replace the 1998 Accord.The Committee seeks views on its proposed approachhes and on its plans for future wofk.; *“ *, This new capital framework consist of three pillars: minimum capital; requirements, a supervisory rewiew process, and effective use of market' '”discipline. With regard to minimum capital requirements, the Committee recognises that a modified version of the existing. Accord should remain the“ standardised”approach, but that for some sophisticated banks use of internal credit rating and, at a later stage, portfolio models could contribute to a more accurate assessment of a bank's capital requirement in relation to its particular risk profile.lt is also proposed that the Accord's scope of application be extended, so that it fully captures the banking group. This existing Accord specifies explicit capital charges only for credit and market risks. Other risks, including interest rate risk in the banking book and operational risk, are also an important feature of banking. The committee therefore proposes to develop a capital charge for interest rate in the banking book for banks where interest rate is significantly above average, and is proposing to develop capital charges for other risks, principally operational risk. The second pillar of the capital adequacy framework, the supervisory rewiew of capital adequacy, will seek to ensure that a bank's capital position is consistent with its overall risk profile and strategy and, as such, will encourage early supervisory intervention. Supervisors should have the ability to require banks to hold capital in excess of minimum regulatory capital ratios - a point underscored in the course of the Committee's discussions with supervisors from non-G-10 countries. Furthermore, the new framework stresses the importance of bank management developing an internal capital assessment process and setting targets for capital that are commensurate with the bank's particular risk profile and control environment.This internal process would then be subject to supervisory rewiew and intervention, where appropriate. The Committee's paper,“ Enchancing Bank Transparency”discusses how a bank that is perceived as safe and well-managed in the marketplace is likely to obtain more favourable terms and conditions in its relations with investors, creditors, depositors and other counterparties than a bank that is perceived as more risky. Bank counterparties will require higher risk premiums, addional collateral and other safety measures in transactions and contractual relation with a bank that presents more risk.These market pressures will encourage a bank to allocate its funds efficiently and will helps contain system-wide risks. ~. Effective market discipline requires reliable and timely information that enables counterparties to make well-founded risk assessments. Banks should publicly, and a timely fashion, disclose all key features of the capital held as a i cushion against losses, and the risk exposures that may give rise to suchlosseş.This will enable market participants to assess the bank's ability to remain solvent.This information should, at a minimum, be provided in annual financial reports and should include quantitative and qualitative details on the bank's financial condition and performance, business activities, risk profile, and risk management activities. The Committee wishes to develop a new Accord that will be as helpful as possible to all those concerned in promoting the safety and soundness of banking systems in the face of rapidly envolving financial markets and institutions.
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