Accounting for derivatives:an evaluation of reporting practice by UK banks

In 1998 the Accounting Standards Board (ASB) published FRS 13, ‘Derivatives and other Financial Instruments: Disclosures’. This laid down the requirements for disclosures of an entity’s policies, objectives and strategies in using financial instruments, their impact on its risk, performance and financial condition, and details of how risks are managed. FRS 13 became effective in March 1999, and this paper uses the 1999 annual reports of UK banks to evaluate the usefulness of disclosures from a user’s perspective. Usefulness is measured in terms of the criteria of materiality, relevance, reliability, comparability and understandability as defined in the ASB’s Statement of Principles (ASB, 1999). Our findings suggest that the narrative disclosures are generic in nature, the numerical data incomplete and not always comparable, and that it is difficult for the user to combine both narrative and numerical information in order to assess the banks’ risk profile. Our overall conclusion is therefore that current UK financial reporting practices are of limited help to users wishing to assess the scale of an institution’s financial risk exposure.

Market risk reporting by the world's top banks:evidence on the diversity of reporting practice and the implications for international accounting harmonisation

The increasing adoption of international accounting standards and global convergence of accounting regulations is frequently heralded as serving to reduce diversity in financial reporting practice. In a process said to be driven in large part by the interests of international business and global financial markets, one might expect the greatest degree of convergence to be found amongst the world’s largest multinational financial corporations. This paper challenges such claims and presumptions. Its content analysis of longitudinal data for the period 2000-2006 reveals substantial, on going diversity in the market risk disclosure practices, both numerical and narrative, of the world’s top-25 banks. The significance of such findings is reinforced by the sheer scale of the banking sector’s risk exposures that have been subsequently revealed in the current global financial crisis. The variations in disclosure practices documented in the paper apply both across and within national boundaries, leading to a firm conclusion that, at least in terms of market risk reporting, progress towards international harmonisation remains rather more apparent than real.

A new inverse DEA method for merging banks

This study suggests a novel application of Inverse Data Envelopment Analysis (InvDEA) in strategic decision making about mergers and acquisitions in banking. The conventional DEA assesses the efficiency of banks based on the information gathered about the quantities of inputs used to realize the observed level of outputs produced. The decision maker of a banking unit willing to merge/acquire another banking unit needs to decide about the inputs and/or outputs level if an efficiency target for the new banking unit is set. In this paper, a new InvDEA-based approach is developed to suggest the required level of the inputs and outputs for the merged bank to reach a predetermined efficiency target. This study illustrates the novelty of the proposed approach through the case of a bank considering merging with or acquiring one of its competitors to synergize and realize higher level of efficiency. A real data set of 42 banking units in Gulf Corporation Council countries is used to show the practicality of the proposed approach.

A Comparison of Anchor-Item Designs for the Concurrent Calibration of Large Banks of Likert-Type Items

Current interest in measuring quality of life is generating interest in the construction of computerized adaptive tests (CATs) with Likert-type items. Calibration of an item bank for use in CAT requires collecting responses to a large number of candidate items. However, the number is usually too large to administer to each subject in the calibration sample. The concurrent anchor-item design solves this problem by splitting the items into separate subtests, with some common items across subtests; then administering each subtest to a different sample; and finally running estimation algorithms once on the aggregated data array, from which a substantial number of responses are then missing. Although the use of anchor-item designs is widespread, the consequences of several configuration decisions on the accuracy of parameter estimates have never been studied in the polytomous case. The present study addresses this question by simulation, comparing the outcomes of several alternatives on the configuration of the anchor-item design. The factors defining variants of the anchor-item design are (a) subtest size, (b) balance of common and unique items per subtest, (c) characteristics of the common items, and (d) criteria for the distribution of unique items across subtests. The results of this study indicate that maximizing accuracy in item parameter recovery requires subtests of the largest possible number of items and the smallest possible number of common items; the characteristics of the common items and the criterion for distribution of unique items do not affect accuracy.

Annotated record of the detailed examination of Mn deposits on the coral banks of the continental shelf in the south-western coastal area of the Gulf of Mexico off Texas

During U.S. Department of Interior, Bureau of Land Management (BLM) public hearings held in 1973, 1974 and 1975 prior to Texas Outer Continental Shelf (OCS) oil and gas lease sales, concern was expressed by the National Marine Fisheries Service, scientists from Texas A&M and the University of Texas and private citizens over the possible environmental impact of oil and gas drilling and production operations on coral reefs and fishing banks in or adjacent to lease blocks to be sold. As a result, certain restrictive regulations concerning drilling operations in the vicinity of the well documented coral reefs and biostromal communities at the East and West Flower Gardens were established by BLM, and Signal Oil Company was required to provide a biological and geological baseline study of the less well known Stetson Bank before a drilling permit could be issued. Considering the almost total lack of knowledge of the geology and biotic communities associated with the South Texas OCS banks lying in or near lease blocks to be offered for sale in 1975, BLM contracted with Texas A&M University to provide the biological and geological baseline information required to facilitate judgments as to the extent and nature of restrictive regulations on drilling near these banks which might be required to insure their protection. In pursuit of this, scientists from Texas A&M University were to direct their attention toward assessments of ground fish populations, unique biological and geological features, substratum type and distribution, and the biotic and geologic relationships between these banks and those farther north.

Inter-industry differences in local banks' effect on new firm formation : A regional study of entrepreneurship in Sweden

Formation of new firms is important, since new firms create jobs and economic growth. When entrepreneurs lack the financial resources which are needed to start a firm, they often turn to banks to borrow money. Previous research has shown that relationships between banks and new business borrowers most often are local and that the dependence on banks differs across industries. In light of this, the purpose of this paper is to investigate if local access to banks has a stronger relationship with the rate of new firm formation in some industries than in others. Based on cross-sectional data on all Swedish municipalities in 2009, a series of OLS regressions are estimated to test if variables used to describe the bank market in a municipality are related with the new firm formation rate, both in total and in different industry categories. The results show that the number of bank branches per capita is positively related with the total new firm formation rate. In regards to the inter-industry differences, the findings indicate that local access to banks is more important for new firm formation in some industries than in others. 

High body mass index is not a barrier to physical activity: Analysis of international rugby players' anthropometric data

Recent data indicate that levels of overweight and obesity are increasing at an alarming rate throughout the world. At a population level (and commonly to assess individual health risk), the prevalence of overweight and obesity is calculated using cut-offs of the Body Mass Index (BMI) derived from height and weight. Similarly, the BMI is also used to classify individuals and to provide a notional indication of potential health risk. It is likely that epidemiologic surveys that are reliant on BMI as a measure of adiposity will overestimate the number of individuals in the overweight (and slightly obese) categories. This tendency to misclassify individuals may be more pronounced in athletic populations or groups in which the proportion of more active individuals is higher. This differential is most pronounced in sports where it is advantageous to have a high BMI (but not necessarily high fatness). To illustrate this point we calculated the BMIs of international professional rugby players from the four teams involved in the semi-finals of the 2003 Rugby Union World Cup. According to the World Health Organisation (WHO) cut-offs for BMI, approximately 65% of the players were classified as overweight and approximately 25% as obese. These findings demonstrate that a high BMI is commonplace (and a potentially desirable attribute for sport performance) in professional rugby players. An unanswered question is what proportion of the wider population, classified as overweight (or obese) according to the BMI, is misclassified according to both fatness and health risk? It is evident that being overweight should not be an obstacle to a physically active lifestyle. Similarly, a reliance on BMI alone may misclassify a number of individuals who might otherwise have been automatically considered fat and/or unfit.

A Petrov-Galerkin method for a singularly perturbed ordinary differential equation with non-smooth data

In this paper, a singularly perturbed ordinary differential equation with non-smooth data is considered. The numerical method is generated by means of a Petrov-Galerkin finite element method with the piecewise-exponential test function and the piecewise-linear trial function. At the discontinuous point of the coefficient, a special technique is used. The method is shown to be first-order accurate and singular perturbation parameter uniform convergence. Finally, numerical results are presented, which are in agreement with theoretical results.