Capital Requirements

A commodity exchange is a goods and financial market where different groups of participants trade commodities and commodity-linked contracts, with the underlying objective of transferring exposure to commodity price risks (UNCTAD). A commodity exchange that only trades goods is known as a physical or 'cash or forward' market, while the exchange that trades price derivatives is known as financial or 'futures and options' market (see Glossary for detailed definitions). Some agriculture commodity exchanges have both. Agricultural commodity exchanges date as far back as the early 18th century. Modern exchanges, notably the Chicago Board of Trade (CBOT) was created in 1848, recently merged with the Chicago Mercantile Exchange (CME), is one the oldest and most successful futures exchanges worldwide. Today several agricultural commodity exchanges exist throughout the Latin America and Caribbean (LAC) region. They facilitate trade and financial products in countries whose ec...

The Capital Conservation Buffer (CCoB) and the Countercyclical Capital Buffer (CCyB) are relatively new macroprudential instruments in the EU, aimed at improving the resilience of the banking sector in order to sustain the provision of credit to the real economy in periods of stress. The time-varying CCyB rate has a more complex setup and is used at the discretion of EU Member States compared to the non-cyclical, fixed requirement for the CCoB, which is harmonised at EU level. The EU legislative framework was amended in 2019 as part of a broader banking reform package, which made targeted improvements to certain macroprudential policy provisions. Directive (EU) 2019/878 (CRD V), inter alia, simplifies the CCyB notification process and expands the role of the European Systemic Risk Board (ESRB). The leading role in setting and implementing the CCyB still lies with the EU Member States and is now jointly exercised with the European Central Bank (ECB) in its capacity as macroprudential authority for the Member States covered by the Single Supervisory Mechanism (SSM).

How much capital and liquidity does a bank need -to support its risk taking activities? During the recent (and still ongoing) financial crisis, answers to this question using standard approaches, e.g. regulatory capital ratios, were no longer credible, and thus broad-based supervisory stress testing became the new tool. Bank balance sheets are notoriously opaque and are susceptible to asset substitution (easy swapping of high risk for low risk assets), so stress tests, tailored to the situation at hand, can provide clarity by openly disclosing details of the results and approaches taken, allowing trust to be regained. With that trust re-established, the cost-benefit of stress testing disclosures may tip away from bank-specific towards more aggregated information. This still provides the market with unique information (supervisors, after all, have access to proprietary bank data) without dis-incentivizing market participants from producing private information and trading on it -with ...

The policy framework on the countercyclical capital buffer (CCyB) and the capital conservation buffer (CCoB) is still in its early stages of implementation in the European Union (EU). Prior to the COVID-19 pandemic crisis, a general inaction bias prevailed among its Member States. The recent experience with emergency macroprudential relaxation measures in response to the pandemic shock highlighted the need for improved capital buffer usability. As the relevant framework heads towards a more mature phase, this paper discusses lessons learned from the use of buffers so far, recent findings regarding factors inhibiting their deployment and key suggestions on making the buffers fully usable in times of trouble, thus hoping to contribute to the macroprudential debate following the buffers' first stress event.

Changes in sovereign debt ratings and outlooks affect financial markets in emerging economies. They affect not only the instrument being rated (bonds) but also stocks. They directly impact the markets of the countries rated and generate cross country contagion. The effects of rating and outlook changes are stronger during crises, in nontransparent economies, and in neighboring countries. Upgrades tend to take place during market rallies, whereas downgrades occur during downturns, providing support to the idea that credit rating agencies contribute to the instability in emerging financial markets.

Lo scritto ha l’obiettivo di comprendere come la disciplina europea rela- tiva alle misure di concessione (cd. “forbearance measure”) e alle esposizioni che ne sono oggetto (cd. “forborne exposures”), si applichi alle misure di moratoria, di garanzia pubblica e di rifinanziamento previste dal Governo italiano a sostegno del- le imprese nel contesto della crisi economica causata dalla pandemia di Covid-19. Un’applicazione rigorosa delle regole citate rischierebbe di vanificare o comunque ridurre l’effetto benefico delle misure a sostegno delle imprese; d’alto canto, la loro totale disapplicazione comprometterebbe la sana e prudente gestione del rischio di credito. Le Autorità di vigilanza europee sono recentemente intervenute a riguardo cercando di bilanciare adeguatamente le diverse esigenze in gioco.

L’argomento di questa relazione

La relazione è focalizzata sui due principali modelli di associazione
delle banche di credito cooperativo nell’eurozona, ossia gli Institutional
Protection Schemes e i Gruppi Bancari Cooperativi, e sulle implicazioni della scelta dell’uno o dell’altro dal punto di vista della tutela della specificità del credito cooperativo.

This report describes the existing structure and activities of institutional investors in China. It identifies key principles for building a solid institutional investor base going forward. The nation's institutional investors are largely comprised of life insurance companies and pension and investment fund managers. In addition, trust and investment companies (TICS) and securities companies offer their clients discretionary asset management services. Overall, China's ratio of institutionally-managed assets is small compared to developed markets, representing around 11 percent of GDP. China has the potential to build one of the largest institutional investor bases worldwide. Promoting the emergence of competent institutional investors is an important complement to an overall capital markets development strategy. Since institutional investors tend to have longer-term investment time horizons, they provide an ideal source of funds for investment in longer-term government and i...

This paper focuses on the interaction between regulation and competition in an industrial organisation model. We analyze how capital requirements affect the profitability of two banks that compete as Cournot duopolists on a market for loans. Bank management of both banks choose optimal levels of loans provided, equity ratio and effort to reduce loan losses so as to maximize profits. From the regulator's point of view, the free market solution is not optimal as private banks do not take in to account the consumer surplus and the social cost of bankruptcy (financial stability aspects). It is show that capital requirements may improve welfare, even under conditions that both banks would ever default. Moreover, we find that higher capital requirements impose a higher burden on the inefficient bank than on the efficient one, even though the requirement may only be binding for the efficient bank. If the inefficient bank chooses a strategy that might result in bankruptcy, capital requi...