Financial institutions, instruments and markets

Latest information, developments and statistics, with website addresses provided to allow students to access up to the minute, real-world data. Real-world examples throughout the text help students relate theory to pracical situations.

Privatization and performance : the case of four Australian financial institutions

This paper investigates the performance after privatization of institutions in Australian banking and insurance. Privatization was anticipated to improve firm performance in Australia and elsewhere, yet findings are mixed. A comparative institutional approach is taken to analyzing firm performance in the longer term which allows for further structural change. A CAMEL analysis of performance before and after privatization events is undertaken for four privatized institutions, two each from banking and insurance sectors. These are matched with private peer institutions. Privatized institutions are found to perform quite similarly to private peer institutions both before and after privatization.

Transfer pricing and multinational financial institutions : the case for replacing arm’s length price with a unitary approach

The international tax system, designed a century ago, has not kept pace with the modern multinational entity rendering it ineffective in taxing many modern businesses according to economic activity. One of those modern multinational entities is the multinational financial institution (MNFI). The recent global financial crisis provides a particularly relevant and significant example of the failure of the current system on a global scale. The modern MNFI is increasingly undertaking more globalised and complex trading operations. A primary reason for the globalisation of financial institutions is that they typically ‘follow-the-customer’ into jurisdictions where international capital and international investors are required. The International Monetary Fund (IMF) recently reported that from 1995-2009, foreign bank presence in developing countries grew by 122 per cent. The same study indicates that foreign banks have a 20 per cent market share in OECD countries and 50 per cent in emerging markets and developing countries. Hence, most significant is that fact that MNFIs are increasingly undertaking an intermediary role in developing economies where they are financing core business activities such as mining and tourism. IMF analysis also suggests that in the future, foreign bank expansion will be greatest in emerging economies. The difficulties for developing countries in applying current international tax rules, especially the current traditional transfer pricing regime, are particularly acute in relation to MNFIs, which are the biggest users of tax havens and offshore finance. This paper investigates whether a unitary taxation approach which reflects economic reality would more easily and effectively ensure that the profits of MNFIs are taxed in the jurisdictions which give rise to those profits. It has previously been argued that the uniqueness of MNFIs results in a failure of the current system to accurately allocate profits and that unitary tax as an alternative could provide a sounder allocation model for international tax purposes. This paper goes a step further, and examines the practicalities of the implementation of unitary taxation for MNFIs in terms of the key components of such a regime, along with their their implications. This paper adopts a two-step approach in considering the implications of unitary taxation as a means of improved corporate tax coordination which requires international acceptance and agreement. First, the definitional issues of the unitary MNFI are examined and second, an appropriate allocation formula for this sector is investigated. To achieve this, the paper asks first, how the financial sector should be defined for the purposes of unitary taxation and what should constitute a unitary business for that sector and second, what is the ‘best practice’ model of an allocation formula for the purposes of the apportionment of the profits of the unitary business of a financial institution.

Financial institutions using social media – do consumers perceive value?

Purpose The purpose of this paper is to examine consumer perceptions of value of financial institutions using social media to interact with consumers; if overall perceived value predicts a consumer’s intention to adopt, and if intention predicts self-reported adoption of social media to interact with a financial institution; and if perceptions of value in using social media to interact with a financial institution changes over time. Design/methodology/approach Self-administered surveys were run at two time points; 2010 and 2014. Data were analyzed using multiple and mediated regressions, and t-tests. Comparisons are made between the two time points. Findings Perceived usefulness, economic value, and social value predicted overall perceived value, which in turn predicted a consumer’s intention to adopt social media to interact with a financial institution. At Time 2, adoption intention predicted self-reported usage behavior. Finally, there were significant differences between perceptions across Time 1 and 2. Research limitations/implications The implications of the research highlight the importance of overall perceived value in the role of adoption intention, and that at Time 2, adoption intention predicted self-reported adoption to read and share content. A reduction in perceptions of value and intentions from Time 1 to Time 2 could be explained by perceptions of technology insecurity. In future studies, the authors recommend examining inhibitors to adoption including hedonic value. Practical implications The findings suggest that consumers will use social media if the sector creates and clearly articulates consumer value from using social media. The sector also needs to address technology security perceptions to increase usage of social media. Originality/value This paper is one of the first to investigate the consumer’s perspective in social media adoption by financial institutions, by exploring the role of value in consumer adoption and usage of social media.

Role of the state and financial institutions in financing the fishing industry

The experience of the Government in the recovery of loans for 28 foot mechanized vessels has been unsatisfactory. The author examines the various aspects which have contributed to this situation, and considers arrangements for financing purchase of such vessels. The risks associated with the investment in 38 foot vessels are high, and it seems that the reluctance of private investors to make the required contribution from personal funds is a result of fear of the unknown. Current incentives provided by the Government to the private sector for the purchase of 38 foot vessels are considered to be adequate.

Optimal Credit Rationing in Not-For-Profit Financial Institutions

We examine the dynamic optimization problem for not-for-profit financial institutions (NFPs) that maximize consumer surplus, not profits. We characterize the optimal dynamic policy and find that it involves credit rationing. Interest rates set by mature NFPs will typically be more favorable to customers than market rates, as any surplus is distributed in the form of interest rate subsidies, with credit rationing being required to prevent these subsidies from distorting loan volumes from their optimal levels. Rationing overcomes a fundamental problem in NFPs; it allows them to distribute the surplus without distorting the volume of activity from the efficient level.

Systemic risk for financial institutions in UK

Marginal Expected Shortfall (MES) is an approach used to measure the systemic risk financial institutions face. It estimates how significantly systemic events (poor market performance, out of 1.6 times Standard Deviation borders) are expected to affect market capitalization of a particular firm. The concept was developed in the late 2000s and is widely used for cross-country comparisons of financial firms. For the purposes of generalization of this technique it is often used with market data containing non-domestic currencies for some financial firms. That may lead to results having currency noise in them as it is shown for 77 UK financial firms in our analysis between 2001 and 2014.

Banco BPI SA financial institutions

Equity research report

Organizational change - the personnel perpective Case: Nordea - Financial Institutions

Tutkimuksen tavoite Tutkimuksen tavoite oli kerätä FI:n johdolle tietoa henkilöstön suhtautumisesta organisaatiomuutokseen. Tutkimus toimii pohjana muutosprosessin kriittiselle tarkastelulle ja mahdollisille muutoksille resurssien kohdentamisessa. Tutkimusmenetelmä Organisaatiomuutosta käsittelevä kirjallisuus muodosti tutkielman teoriapohjan. Tutkimuksen aineisto kerättiin kyselylomakkeella FI:n henkilöstölle ja neljällä haastattelulla henkilöstön ja johdon kanssa. Johtopäätökset Yleisesti tuloksista on nähtävissä, että vastaajat ovat aluksi vastustaneet muutosta, vaikka muutos itsessään onkin nähty positiivisena kehityksenä. Vastarintaa ovat aiheuttaneet pääasiallisesti muutoksen johtamisen tyyli ja tiedotuksen kokeminen riittämättömänä.

Measuring and testing for the systemically important financial institutions

This paper analyzes the measure of systemic importance ∆CoV aR proposed by Adrian and Brunnermeier (2009, 2010) within the context of a similar class of risk measures used in the risk management literature. In addition, we develop a series of testing procedures, based on ∆CoV aR, to identify and rank the systemically important institutions. We stress the importance of statistical testing in interpreting the measure of systemic importance. An empirical application illustrates the testing procedures, using equity data for three European banks.

Network externalities across financial institutions

We propose and estimate a financial distress model that explicitly accounts for the interactions or spill-over effects between financial institutions, through the use of a spatial continuity matrix that is build from financial network data of inter bank transactions. Such setup of the financial distress model allows for the empirical validation of the importance of network externalities in determining financial distress, in addition to institution specific and macroeconomic covariates. The relevance of such specification is that it incorporates simultaneously micro-prudential factors (Basel 2) as well as macro-prudential and systemic factors (Basel 3) as determinants of financial distress. Results indicate network externalities are an important determinant of financial health of a financial institutions. The parameter that measures the effect of network externalities is both economically and statistical significant and its inclusion as a risk factor reduces the importance of the firm specific variables such as the size or degree of leverage of the financial institution. In addition we analyze the policy implications of the network factor model for capital requirements and deposit insurance pricing.