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The analysis of Basel III banking regulation in relationship to the banking sectors of EU countries
Mitrik, Lukáš ; Fleischmann, Luboš (advisor) ; Kábrt, Tomáš (referee)
This bachelor thesis describes the topic of banking regulation with emphasis on the most recent regulatory standard Basel 3. Planned outcome of this thesis is identification and evaluation of impact on European banking sector and also specifically on sectors of Czech Republic and Slovakia. The first thoretical part of this work simply explains basic principles and knowledge of overall regulation, organizational structure of European regulatory framework, shortcomings of Basel 2 and main focus is on Basel 3 and its three pillar structure. Second, more practical, part consists of analysis of impact studies issued by EBA and also national regulators (central banks) of both countries. Finally, according to available data coming from these documents, impact on banks is evaluated. Overall results show that Basel 3 has got positive impact on all analysed sectors. None of observed subjects shows problems with compliance with required criteria.
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Impact of the Basel III Liquidity Rules on EU Banks
Klímová, Dana ; Šopov, Boril (advisor) ; Džmuráňová, Hana (referee)
New liquidity rules introduced under the Basel III framework define the Net Stable Funding Ratio (NSFR) that requires banks to possess an adequate long-term liquidity. The NSFR will enter into force on January 1, 2018 and banks are concerned that this regulation will lower their profitability. In this thesis the Basel III liquidity rules are analysed. The research seeks to define characteristics and triggers of the NSFR, using a sample of 500 EU banks. We find that smaller banks (by asset size) are more likely to fulfil the NSFR requirements, so are the banks with higher non-interest share of income and lower capital ratio, among other characteristics. Further, the NSFR's impact on the banks' performance is assessed. It is found that a higher NSFR negatively impacts the return on average equity, although it does not seem to translate into lower returns on average assets nor net interest margin. JEL Classification E58, G21, G28, G32 Keywords NSFR, Basel III, liquidity, banks, EU, profitability, capital rules, regulation Author's e-mail 45724231@fsv.cuni.cz Supervisor's e-mail boril.sopov@gmail.com
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Regulatory Approaches to Credit Risk Quantification
Stará, Pavla ; Pečená, Magda (advisor) ; Hausenblas, Václav (referee)
Credit risk represents one of the most significant risks which a bank must face, and therefore, its intention is effectively manage and measure this risk. However, management and measurement methods are supervised and influenced by national regulators. Banking regulatory supervision plays a significant role among others in determining minimum capital requirements that serve as buffer against losses stemming from credit risk. This thesis provides theoretical foundation of regulatory approaches - standardized and internal rating based (IRB) approach - used for quantification of regulatory capital to credit risk as well as empirical application of such approaches on created portfolio of corporate loans. As a part of IRB method I suggested a model composed of financial ratios estimating probability of default using logistic regression. I founded out that rather the use of combination of financial ratios from different groups of ratios with slight dominance of profitability ratios forms final model. Therefore, superiority of solvency ratios in modelling cannot be proved on my portfolio. After estimating and determining necessary parameters I quantified the minimum regulatory capital requirements to credit risk under standardized and IRB approaches prescribed by Basel III. In the end, the results are...
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On Supervision of Financial Markets by Czech National Bank
Skácelík, David ; Marková, Hana (advisor) ; Kohajda, Michael (referee) ; Švarc, Zbyněk (referee)
1 Abstract This work deals with the performance of supervision over the financial market and the entities operating in the financial market. Part of the work is devoted to consumer protection in the financial market and compensation systems. Because of the fact that the Czech Republic became a member of the European Union in 2004, this work includes also legislation of regulation and supervision of this level, as this treatment significantly predetermines Czech adjustment. Following questions were examined as an example of protecting the interests of clients of supervised entities: - whether there are any tools to protect the client's interests at the level of supervised entities, - what kind of role the supervisory authority has or may have in relation between a supervised entity and its client, - how are the client's financial interests protected in the event of failure of the supervised entity and whether this protection is de lege lata sufficient. The theoretical part of the work briefly describes the institute of supervision, its assorting and forms. The authority of supervisor is discussed in the next part together with the regulations under which the supervision is conducted. Owing to the fact that the scope of supervisory activity of the Czech National Bank is quite extensive, and the objective of...
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Financial Stability Issues and Stress Testing of the Insurance Sector
Hauryliuk, Nadzeya ; Jakubík, Petr (advisor) ; Čech, František (referee)
The purpose of this thesis is to provide an overview of risk and vulnerabilities for financial stability of the European Insurance sector. The methods and principles of risk assessment are examined, as well as their application for the insurance sector. The current macroeconomic situation and its impact on insurers' financial stability is described. Downward changes of interest rates are identified as the biggest current risk. This results from a system-wide stress test conducted by EIOPA (European Insurance and Occupational Pensions Authority), analysis of sensitivities published by several big European Insurers published on a yearly basis and finally from an econometric analysis of the relationship between market data and changes in macroeconomic variables. Keywords financial stability, stress testing, insurance sector, insurance risks
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Regulatory rules issued by the Basel Committee on Banking Supervision
Beneš, Ondřej ; Dupáková, Lenka (advisor) ; Borkovec, Aleš (referee)
This thesis deals with the regulatory rules issued by the so-called. Basel Committee on Banking Supervision. It is an informal organization without legal personality, which operates at the Bank for International Settlements, and her published documents lack legally binding. This work has focused on two areas of activity of the Basel Committee - capital adequacy and corporate governance in the banking sector. Basel Committee on Banking Supervision is a leading authority in the field of banking regulation, which dates back to the mid-70s of the 20th century. The Basel Committee is composed of the governors of the central banks of the member states and organizations and currently represents a major authority in the banking, because the content of the documents of the Basel Committee incorporated into their legal systems for more than 100 countries worldwide. Basel Committee began issuing complex documents capital adequacy in July 1988, when the first document was posted under the abbreviated name of Basel I. Although it was a very imperfect adjustment and largely based on compromises rather than deeper analysis, Basel I meant the first major step towards supranational control of the capital adequacy of banks in order to eliminate the risks arising from their activities. Although, as with other...
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Stress testing of the banking sector
Procházková, Jana ; Jakubík, Petr (advisor) ; Todica, Doina (referee)
This bachelor thesis deals with stress testing of the banking sector. Stress testing as a risk measurement technique has attracted much attention especially in recent years due to the increased instabilities in financial markets. This work defines two objectives. The aim of theoretical section is to provide a complex survey of stress testing principles and methodologies and to contribute to a better understanding of why stress tests are employed. The empirical section focuses on the credit risk in the Czech Republic. It tries to estimate whether there is an empirical relationship between the quality of credit portfolio of the Czech banking system and the development in key macroeconomic variables. For this purpose the econometric model of vector autoregression has been applied.
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Relationship between the central bank and commercial banks
Haasová, Eva ; Bakeš, Milan (advisor) ; Kohajda, Michael (referee)
Relations of the Central bank to Commercial banks This thesis deals with the relations among the central bank and commercial banks laying emphasize on the situation in the Czech Republic. The aim of this thesis is to characterize and analyze relations among the Czech National Bank and commercial banks, to evaluate them and suggest possible legislative improvements to strengthen the stability of banking institutions and thus the entire economy. In the beginning of the thesis the basic terms are defined. Then the types of relations among the central bank and commercial banks are described. The thesis is due to the wide number of emerging relations among the central bank and commercial banks focused mainly on relations associated with entrance into the banking sector, on the proper functioning of banks and on the relations associated with their extinction. The main part of the thesis is logically divided into another three parts. The first part describes the mechanism of granting banking licenses and the possibility of foreign institutions's establishment in the Czech banking market. Huge attention is dedicated to the unique bank license concept. In the second part there are described the most important conditions that are necessary for the banking sector to run properly. Most of this section is...
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Implementation of Basel III: Impact on the Behaviour of the Banking Sector
Kreidl, Jan ; Rippel, Milan (advisor) ; Doležel, Pavel (referee)
This thesis focuses on consequences of the full implementation of Basel III regulations and what impact it will have on the banking sector. The purpose of Basel III is to replace Basel II as a global regulatory standard, because of its predecessor's flaws, such as the amplifying of banks' procyclicality, overreliance on credit rating agencies or the incentive to securitize its assets. The examination of Basel III regulations has shown that the most difficult task for banks would be to raise the capital for increased requirements and implementation of liquidity ratios. This will undoubtedly change the behaviour of banks. Using the panel data model, we will analyze the relationship between the changes in regulatory capital and our dependent variables, which consist of change in interest rates, change in the amount of loans granted and the change of stability of a bank, in countries from the Visegrad Four, the Czech Republic, Slovakia, Poland and Hungary. Using estimated coefficients from our regression, we examine whether there will be unintended negative effects of Basel III implementation and whether there will be an increase in a stability of banks.
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Capital adequacy of banks - grounds, development and prospects of its regulation
Nádvorník, Petr ; Kotáb, Petr (advisor) ; Dřevínek, Karel (referee)
xi Abstract This thesis aims to provide eclectic legal and economic insight into the history, current principles and possible future development of bank capital adequacy regulation. We have worked with a variety of legal and economic literature and official Basel Committee publications. Our goal was to explore the economic background behind the Basel standards and find its legal ramifications and the incentives they create. In the first chapter, we analyze the economic rationale for banking regulation, explain possible methods of bank capital regulation and juxtapose them with other means of regulatory measures in the field of banking. The first chapter also gives overview of the Basel I framework, its implementation process, describes its utilization of new regulatory techniques, as well as its weaknesses. Second chapter provides overview of Basel II approval process and discusses its transparency and institutionary framework. Problematic issues of CRD directive in the Czech Republic are discussed in contrast with norms of due legislation process. In the next chapter, we describe the mechanics of the Basel II framework. In greater detail, we focus on the issues of securitization, off-balance sheet exposures and methods of "promise-shifting" in the financial system. Examples are used to illustrate the...
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