Managers, Stakeholders and the Letter of the Law

Black History Month Creation and Overview

Black History Month Creation and Overview Black History Month is a month set aside to learn, honor, and celebrate the achievements of black men and women throughout history. Since its inception, Black History Month has always been celebrated in February. Find out how Black History Month originated, why February was chosen, and what the annual theme for Black History Month is for this year. Origins of Black History Month The origins of Black History Month can be traced back to a man named Carter G. Woodson (1875–1950). Woodson, the son of former slaves, was an amazing man in his own right. Since his family was too poor to send him to school as a child, he taught himself the basics of a school education. At age 20, Woodson was finally able to attend high school, which he completed in just two years. Woodson then went on to earn a bachelors and masters degree from the University of Chicago. In 1912, Woodson became only the second African American to earn a doctorate from Harvard University (W.E.B. Du Bois was the first). Woodson used his hard-earned education to teach. He taught both in public schools and at Howard University. Three years after earning his doctorate, Woodson made a trip that had a great impact on him. In 1915, he traveled to Chicago to participate in a three-week celebration of the 50th anniversary of the end of slavery. The excitement and enthusiasm generated by the events inspired Woodson to continue the study of black history year-round. Before leaving Chicago, Woodson and four others created the Association for the Study of Negro Life and History (ASNLH) on September 9, 1915. The following year, the ASNLH began publication of the Journal of Negro History. Woodson realized that most textbooks at the time ignored the history and achievements of blacks. Thus, in addition to the journal, he wanted to find a way to encourage interest and study of black history. In 1926, Woodson promoted the idea of a Negro History Week, which was to be held during the second week of February. The idea caught on quickly and Negro History Week was soon celebrated around the United States. With a high demand for study materials, the ASNLH began to produce pictures, posters, and lesson plans to help teachers bring Negro History Week into schools. In 1937, the ASNLH also began producing the Negro History Bulletin, which focused on an annual theme for Negro History Week. In 1976, the 50th anniversary of the beginning of Negro History Week and the bicentennial of the United States independence, Black History Week was expanded to Black History Month. Ever since then, Black History Month has been celebrated in February around the country. When Is Black History Month? Woodson chose the second week of February to celebrate Negro History Week because that week included the birthdays of two important men: President Abraham Lincoln (February 12) and Frederick Douglass (February 14). When Negro History Week turned into Black History Month in 1976, the celebrations during the second week of February expanded to the entire month of February. What Is the Theme for This Years Black History Month? Since its inception in 1926, Negro History Week and Black History Month have been given annual themes. The first annual theme was simply, The Negro in History, but since then the themes have grown more specific. Here is a list of the most current and future themes for Black History Month. 2014 - Civil Rights in America2015 - A Century of Black Life, History, and Culture2016 - Hallowed Grounds: Sites of African American Memory2017 - The Crisis in Black Education2018 - African Americans in Times of War2019 - Black Migrations

UK economy during 2008 recession Essay Example | Topics and Well Written Essays - 1000 words

UK economy during 2008 recession - Essay Example It is worth mentioning that decline in consumption has direct adverse impacts upon production, which then leads to closure of businesses followed by retrenchment and unemployment. Also, the subprime mortgage property crises in USA triggered closures, mergers and acquisitions of US financial institutions, but it also negatively affected UK investment, commercial banks and financial institutions as they were among the businesses that also made huge investments in US banking and property sectors. Finally, this led to a credit crunch like situation that sabotaged the financial position of UK banks, which were facing liquidity problems and were reluctant in sanctioning loans to borrowers. Finally, the expectations and forecasts that UK economy would contract by more than 2 – 2.5% in 2009 also aggravated the situation and interest rates were reduced to 3% from 4.5% by Federal Bank after instructions of UK government regarding formulation of new monetary policy to reduce business cos ts, to boost investors and consumers’ morale and to trigger greater purchase responses. Recall that economic theory argues that the greater the number of transactions and consumption level, the more employment and jobs opportunities will create due to multiple exchanges of money among people (Hetzel, 2009). As far as the fiscal policy is concerned, it should be pointed out that UK government announced financial bailout packages of ?12bn and ?18bn so that it could pump money in the economy to eradicate liquidity crises and trigger consumer purchase responses. In addition, the government also announced tax cuts (direct and indirect levies) so that businesses could ensure their survival in challenging external business environment. Had the above measures not been taken, the UK cumulative negative GDP growth rate had surpassed 3% due to credit crunch and rising debts (Wren-Lewis, 2010). 2. Explain UK monetary and fiscal policy during the crisis according to IS - LM model. It is w orthwhile to mention the fact that IS – LM model shows the relationship between real interest rate and output level. The IS curve shows the corresponding interest rate that clears the good market. The IS curve slopes downward because the aggregate output increases at low real interest rates and vice versa. Indeed, IS curve is derived from changes in desired investment and desired saving in an economy. The LM curve shows the real interest rate that clears the asset market. For instance, the LM curve is actually derived from changes in real money supply and real money demand. In addition, economic theory talks about Full Employment Line that shows the labour market equilibrium i-e employment and output are at Full employment level. As far as the UK economy is concerned, I would assume that the IS – LM had been in general equilibrium prior to recession i-e the goods, asset and labour market were in equilibrium simultaneously. Real interest IS LM Equilibrium point Output N ow when UK economy entered in recession, the UK government changed the monetary and fiscal policies that would cause shifts in IS and LM curves. For example, the reduction in nominal interest rate on money will reduce money demand, thereby reducing the real interest rate that clears asset market and causing a downward shift in LM curve. Similarly, increasing nominal money supply in market through stimulus package will reduce real interest rat

Studying Human Mobility through Photograph Geo-Tagging Research Paper

Studying Human Mobility through Photograph Geo-Tagging - Research Paper Example With 24 satellites and aided with two carrier signals, it can transmit signals accurately. However, to operate within buildings, it requires at least 4 of its satellites to have clear access to that specified area (Djuknic, & Richton, 2001). To overcome such a difficulty, assisted-GPS technology has come into limelight. It provides more accurate detail even from within buildings and also associated with it is a superior quality (Djuknic, & Richton, 2001). Georeferencing is one of the developing technologies, especially geotagging. An analysis on the research related to this field focuses on four major points: 1. Organization of georeferenced media sources 2. Data mining of organized knowledge 3. Identifying the world’s landmarks and 4. Identification of the photo location, geographically(Zheng et. al, 2011) The organized knowledge used for online data mining has two parts. 1. The knowledge stored in database is actually a collection of data provided by the society itself, obta ined from several social websites. 2. The stored knowledge and corresponding mining provides multi-modal information about the stored data. (Zheng et. al, 2011) There are several methods that are used as sources for collecting information that is geotagged. Collective geotagging is one of the important methods where publicly available information uploaded by the users are geotagged and collected. Here the term, â€Å"geotagged† means that some kind of location metadata is added to the object, say a photo. Some of the important information stored in the metadata includes latitude information and place names. This process can be done either by hardware method or software method. Hardware geotagging is done through the installed cameras in mobile phones which on clicking of a photo add that information to the picture. In terms of software, which is the most prevalent method of geotagging, several photo sharing sites like Flickr and Picasso add such information through map tools. Although they are less in accuracy, the provide results with maximum relevance. (Zheng et. al, 2011) Sharing of images in online communities is an upward trend. Especially for people who post their travelogues in blogs and communities with lots of pictures of their trip. Hao. Et. al (2009) created a process which picks up the keywords from the description, identifies the pictures associated with those words and prepared a document with the results of those pictures to create an automated travelogue. Georeferencing has improved on the above process by one step and provides a more coherent result. With many people uploading photos in public and social sites, travel and tracking human mobility has been given a fresh look. Human mobility Georeferencing is considered to be the best thing to have happened for people involved in human mobility studies and for tourists. (Girardian & Blat, 2008) conducted a research to indicate that the pictures and other such information presented by the p eople voluntarily can be used to identify human mobility, especially that of tourists. The first step in understanding the mobility of humans by the authors was to make use of the large amount of data available in the online community. After conducting detailed studies in several tourist parts like Rome, Barcelona and Italy, they were able to collect detailed information about urban tourism. (Girardian & Blat, 2008) The figure shown below shows heat maps which indicate the presence of tourists in Italy along with their

Stocks Perference Essay Example | Topics and Well Written Essays - 500 words

Stocks Perference - Essay Example Also, the company might find it difficult to pay out high interest, as the current global economic scenario is quite uncertain and might turn for worse any day. Once the management trainees are hired, we could decide on a sound strategy and growth pattern for the company and subsequently go in for the public issue after a period of three months at least. This time is required for the trainees to familiarize themselves with the working of the company and think about ways to improve the sales and profits. I would however not recommend having any of the new management grads on the board as the board members must be experienced people with excellent track records. Employee Stock Option is a wonderful tool to retain talented employees and keep them happy. No doubt, this perquisite could be offered to the employees, especially the management trainees who join the company in the next few weeks. â€Å"Technically, under ESOP, a company offers its employees the chance (or option) to purchase a certain number of shares at a future point in time. Generally, these shares are offered at a pre-determined price, which as per the company’s expectations would be lower than the market price at the time when the employee can exercise the option (choose to buy). Of course, the reverse could be true, in which case the options have no value at all.†[Sify Business] In case the employee chooses to leave the company before the vesting period, the stock option ceases to exist and the employee cannot benefit from it. We could keep the vesting period as five years to encourage the trainees to keep working with us. Another advantage with ESOP would be the tax benefit for the company. Since the stocks would be a part of the employee’s compensation package, the employee would have to pay the tax on the amount and we would be saving that amount. If a substantial part of the salary is offered as ESOP, we could be sure of the dedication of the

Pakistan Commercial Banks Risk Management

Pakistan Commercial Banks Risk Management ABSTRACT The agreement on international banking regulations dealing with how the banks handle the risk, the Basel Accord mainly focuses on the credit risk; according the Basel accord the bank assets divided into five main categories according to how they are risky. The five main categories are as (1) is assets without risk means 0% risk weighted, second one is 10% risk weighted, 3rd is 20% weighted, 4th is 50% weighted and last one is 100% weighted. When the banks perform international transactions they are required according the Basel Accord to hold assets minimum 8% aggregated risk according the Basel 1. The Basel 1 was written in 1988 by the Basel committee on banking supervision. All Banks of G-10 countries have try to implement this accord since the early 1990s. Now a days it is considered largely outdated and Basel committee working on Basel 1 to changing process in the shape of Basel II. This is also called Basel I accord. The document Basel I Capital Accord mainly designs to evaluate the capital in relation with the credit risk, and also the risk that can be a cause of losses in which the risk will occur if the party fail or unable to fulfill the obligations. It is mainly focus on the risk increasing modeling research process that is improvement toward the risk increasing research mode; however, it is over simplified calculations, and also classifications that have been simultaneously called for its disappearance, but the improvement in the shape of the Basel II Capital Accord and also other further agreements that are the sign for the continuously refinement for the risk and capital in the banking sector. Nevertheless, the document Basel I accords, will remain the first international instrument that evaluate the importance of risk with the relationship to capital, and also will remain as a milestone in the banking sector like finance and banking history. This study is mainly related to the risk management practices being followed by the commercial Banks in Pakistan. The questionnaire is used as a main tool to collect primary data and check the extent to which the risk management practices are being carried upon by the commercial banks in Pakistan. The six important aspects of risk management process are categorized as one dependent and five explanatory variables. This study aims to investigate the awareness about risk management practices within the banking sector of Pakistan. This study is comprised of data collected through both, primary as well as secondary sources. The purpose of using primary source data is to check the extent to which different risk management practices have been followed by the commercial banks in Pakistan. Primary data is collected through the use of a questionnaire. The questionnaire comprises a number of statements under one macro statement. It includes Risk Management Practices (RMP) as the dependent varia ble, and different aspects of risk management as the independent or explanatory variables. Whereas, the objective to use secondary data is to link the risk weighted Capital Adequacy Ratio to the different financial indicators of the commercial banks that are used to measure their soundness. CHAPTER 2 LITERATURE REVIEW Risk management practices by the Commercial Banks Within the last few years, a number of studies have provided the discipline into the practice of risk management within the corporate and banking sector. An insight of related studies is as follows: Amran, et al. (2009), this article mention the possible availability of risk exposà © in the annual reports of the Malaysian companies. The study was aimed to empirically test the characteristics of the sampled companies. And also the level of risk faced by Malaysian companies with the disclosure made was also assessed and compared. The findings of the research revealed that the strategic risk came on the top, followed by the operations and empowerment risks being disclosed by the selected companies. The regression analysis proved significantly that size of the companies did matter. The stakeholder theory explains well this finding by stating that As company grows bigger, it will have a large pool of stakeholders, who would be interested in knowing the affairs of the company. The extent of risk disclosure was also found to be influenced by the nature of industry. As explored within this study, infrastructure and technology industries influenced the companies to have more risk inform ation disclosed. Hassan, A. (2009), made a study Risk Management Practices of Islamic Banks of Brunei Darussalam to assess the degree to which the Islamic banks in Brunei Darussalam implemented risk management practices and carried them out thoroughly by using different techniques to deal with various kinds of risks. The results of the study showed that, like the conventional banking system, Islamic banking was also subjected to a variety of risks due to the unique range of offered products in addition to conventional products. The results showed that there was a remarkable understanding of risk and risk management by the staff working in the Islamic Banks of Brunei Darussalam, which showed their ability to pave their way towards successful risk management. The major risks that were faced by Brunei banks that was the Foreign exchange risk as well as credit risk and also operating risk. For the analysis regression model was used to explain the results which shown that the Risk Identification, or Risk Assessment and Analysis were also the most uncontrollable variables and the Islamic banks in Brunei needed to give more attention to those variables to make their Risk Management Practices more effective by understanding the true application of Basel-II Accord to improve the efficiency of Islamic Bank’s risk management systems. Al-Tamimi (2008) studied the relationship among the readiness of implementing Basel II Accord and resources needed for its implementation in UAE banks. Results of the research revealed that the banks in UAE were aware of the benefits, impact and challenges associated in the implementation of Basel II Accord. However, the research did not confirm any positive relationship between UAE banks readiness for the implementation of Basel II and impact of the implementation. The relationship between readiness and anticipated cost of implementation was also not confirmed. No significant difference was found in the level of Basel II Accord’s preparation between the UAE national and foreign banks. It was concluded that there was a significant difference in the level of the UAE banks Basel II based on employees education level. The results supported the importance of education level needed for the implementation of Basel II Accord. Al-Tamimi and Al- Mazrooei (2007) provide the comprehensive study relating of Bank’s Risk Management of UAE National and Foreign Banks. The outcome of this research is to find out that there are three most important types of risks facing the UAE commercial banks that were foreign exchange risk, 2nd one followed by credit risk and 3rd one is operating risk. And the result also found that the bank of UAE were also efficiently handle the risk; but the variables like as the risk identification, risk assessment and also analysis proved that the banks are more efficient in risk management process. Finally, the outcome of the result showed that there was a huge difference if we compare the UAE National banks and foreign Banks in the practicing the risk assessment and risk analysis as well as risk monitoring and risk controlling process. Koziol and Lawrenz (2008) provided a study in which they assessed the risk of bank failures. They said that assessing the risk related to bank failures is the paramount concern of bank regulations. They argued that in order to assess the default risk of a bank, it is important considering its financing decisions as an endogenous dynamic process. The research study provided a continuous-time model, where banks chose the deposit volume in order to trade off the benefits of earning deposit premiums against the costs that would occur at future capital structure adjustments. Major findings suggested that the dynamic endogenous financing decision introduced an important self-regulation mechanism. Basel Core Principles and Bank Risk: Does Compliance Matter? The recent financial crisis has sparked widespread calls for reforms of regulation and supervision. The initial reaction to the crisis was one of disbelief: how could such extensive financial distress emerge in countries where the supervision of financial risk had been thought to be the best in the world? Indeed, the regulatory standards and protocols of the advanced countries at the center of the financial storm were being emulated worldwide through the progressive adoption of the international Basel capital standards and the Basel Core Principles for Effective Bank Supervision (BCPs). The crisis exposed significant weaknesses in the financial system regulatory and supervisory framework worldwide, and has spawned a growing debate about the role these weaknesses may have played in causing and propagating the crisis. As a result, reform of regulation and supervision is a top priority for policymakers, and many countries are working to upgrade their frameworks. But what should the reforms focus on? What constitutes good regulation and supervision? Which elements are most important for ensuring bank soundness? What should be the scope of regulation? To date, the best practices in supervision and regulation have been embodied by the BCPs. These principles were issued in 1997 by the Basel Committee on Bank Supervision, comprising representatives from bank supervisory agencies from advanced countries. Since then, most countries in the world have stated their intent to adopt and comply with the BCPs, making them a global standard for bank regulators. Importantly, since 1999, the IMF and the World Bank have conducted evaluations of countries’ compliance with these principles, mainly within their joint Financial Sector Assessment program (FSAP). The assessments are conducted according to a standardized methodology developed by the Basel Committee and therefore provide a unique source of information about the quality of supervision and regulation around the world. Hence the international community has made significant investments in developing these principles, encouraging their wide-spread adoption, and assessing progress with their compliance. In light of the recent crisis and the resulting skepticism about the effectiveness of existing approaches to regulation and supervision, it is natural to ask if compliance with the global standard of good regulation is associated with bank soundness. Specifically, they test whether better compliance with BCPs is associated with safer banks. They also look at whether compliance with different elements of the BCP framework is more closely associated with bank soundness to identify if there are specific areas which would help prioritize reform efforts to improve supervision. The paper extends their previous work (Demirgà ¼Ãƒ §-Kunt, Detragiache and Tressel, 2008: henceforth DDT), in which they showed that banks receive more favorable financial strength ratings from Moody’s in countries with better compliance with BCPs related to information provision, while compliance with other principles does not affect ratings significantly. The policy message from this study was that countries should give priority to strengthening regulation and regulation in the area of information provision (both to the market and to supervisors) relative to other areas covered by the core principles. Using rating information to proxy bank risk significantly limited the sample size in that study, making it necessary to exclude many smaller banks and many banks from lower income countries. Furthermore, after the recent crisis, the credibility of credit ratings as indicators of bank risk has also diminished, questioning the merit of using these ratings in the analysis. In this paper, they explore whether BCP compliance affects bank soundness, but instead of using ratings they capture bank soundness using the Z-score, which is the number of standard deviations by which bank returns have to fall to wipe out bank equity (Boyd and Runkle, 1993). Because they can construct Z-scores using just accounting information, and because assessment data for additional countries have also become available, they can extend the sample size considerably relative to our earlier study, to over 3,000 banks from 86 countries (compared to 200 banks from 37 countries analyzed in DDT). This is not just a simple increase in sample size: the sample of rated banks was not a representative sample, because rated banks tend to be larger, more internationally active, and more likely to adhere to international accounting standards. From a policy point of view, they would like to investigate the effect of BCP compliance on all types of banks operating in different country circumstan ces, rather than a select subgroup. In this study, the richer sample allows us to explore whether the relationship between BCPs and bank soundness varies across different types of banks. All in all, they do not find support for the hypothesis that better compliance with BCPs results in sounder banks as measured by Z-scores. This result holds after controlling for the macroeconomic environment, institutional quality, and bank characteristics. They also fail to find a significant relationship when they consider different samples, such a sample of rated banks only, a sample including only commercial banks, and samples including only the largest financial institutions. In an additional test, they calculate aggregate Z-scores at the country level to try to capture the stability of the system as a while rather than that of individual banks, but also this measure of soundness is not significantly related to overall BCP compliance. When they explore the relationship between soundness and compliance with specific groups of principles, which refer to separate areas of prudential supervision and regulation, they continue to find no evidence that good compliance is related to im proved soundness. If anything, they find that stronger compliance with principles related to the power of supervisors to license banks and regulate market structure are associated with riskier banks. While these results cast doubts on whether international efforts to improve financial regulation and supervision should continue to place a strong emphasis on BCPs, a number of caveats are in order. First, insignificant results may simply indicate that accounting-based measures, such as Zscores, do not adequately capture bank soundness, especially for small banks and in low income countries, where accounting standards tend to be poor. They may also reflect low quality in the assessment of BCP compliance, especially in countries where laws and regulations on the books may carry little weight. It might be also argued that assessments are not comparable across countries, despite the best efforts of expert supervisors and internal reviewing teams at the IMF and the World Bank to ensure a uniform methodology and uniform standards. If their negative results arise because compliance assessments do not reflect reality or are not comparable across countries, then at a minimum they should lead us to question the value of these assessments in ensuring that supervision measures up to global standards. Review of related literature of this paper is as follows: Defining good regulatory and supervisory practices is a difficult and complicated task. Barth, Caprio, and Levine (2001, 2004, and 2006) were the first to compile and analyze an extensive database on banking sector laws and regulations using various surveys of regulators around the world, and to study the relationship between alternative regulatory strategies and outcomes. This research finds that regulatory approaches that facilitate private sector monitoring of banks (such as disclosure of reliable, comprehensive and timely information) and strengthen incentives for greater market monitoring (for example by limiting deposit insurance) improve bank performance and stability. In contrast, boosting official supervisory oversight and disciplinary powers and tightening capital standards does not lead to banking sector development, nor does it improve bank efficiency, reduce corruption in lending, or lower banking system fragility. They interpret their findings as a challenge to the Basel Committee’s influential approach to bank regulation which heavily emphasizes ca pital and official supervision. An important limitation of this type of survey is that it mainly captures rules and regulations that are on the books rather than actual implementation. IMF and the World Bank financial sector assessments have often found implementation to be lacking, particularly in low income countries, so that cross-country comparisons of what is on the books may hide substantial variation in the quality of supervision and regulation. BCP assessments have the advantage of taking into account implementation. Of course, assessing how rules and regulations are implemented and enforced in practice is not an exact science, and individual assessments may be influenced by factors such as the assessors’ experience and the regulatory culture they are most familiar with. Nevertheless, although it is difficult to eliminate subjectivity completely, assessments are based on a standardized methodology and are carried out by experienced international assessors with broad c ountry experience. Cihak and Tieman (2008) analyze the quality of financial sector regulation and supervision using both Barth, Caprio and Levine’s survey data and BCP assessments. They find that regulation and supervision in high-income countries is generally of higher quality than in lower income countries. They also note that the correlation between survey data and BCP data tend to be low, always less than 50 percent and in many cases in the 20-30 percent range, suggesting that taking into account implementation may indeed make an important difference. A number of papers also use BCP assessments to study bank regulation and performance. Sundararajan, Marston, and Basu (2001) use a sample of 25 countries to examine the relationship between an overall index of BCP compliance and two indicators of bank soundness: nonperforming loans (NPLs) and loan spreads. They find BCP compliance not to be a significant determinant of these measures of soundness. Podpiera (2004) extends the set of countries and finds that better BCP compliance lowers NPLs. Das et al. (2005) relates bank soundness to a broader concept of regulatory governance, which encompasses compliance with the BCPs as well as compliance with standards and codes for monetary and financial policies. Better regulatory governance is found to be associated with sounder banks, particularly in countries with better institutions. In this paper, as already discussed they rely on the Z-score to measure bank soundness. While the Z-score has its limitations, they believe it is an improvement over measures used in previous studies, namely NPLs, loan spreads, interest margins, and capital adequacy. Because different countries have different reporting rules, NPLs are notoriously difficult to compare across countries. On the other hand, loan spreads or interest margins and capitalization are affected by a variety of forces other than fragility, such as market structure, differences in risk-free interest rates and operating costs, and varying capital regulation. Thus, cross-country comparability is a serious issue. In contrast with ratings, Z-scores do not rely on the subjective judgment of rating agencies’ analysts. Results from the baseline regression, relating bank soundness measured by the Z-score to the degree of compliance with the BCPs. In the sample including all countries, the Zscore is higher, indicating a sounder bank, for banks with lower operating costs in countries with higher GDP per capita. Also, non-commercial banks tend to have higher Z-scores, while the other control variables are not significant. The coefficient of the BCP compliance index is positive but not significant. If they exclude Japanese banks, which account for over 20 percent of the sample, the fit of the model improves markedly (the R-squared increases from 10 percent to 19 percent) and the coefficients of many regressors change substantially.12 This suggests that the variables explaining the Z-score of Japanese banks may be somewhat different than for the rest of the sample, perhaps because of the lingering effects of Japan’s prolonged banking crisis on bank balance sheets. For example, in the sample excluding Japan inflation and the rule of law index are significant (with the expected coefficients), while GDP per capita is not (though the coefficient remains positive). Also, banks with a higher ratio of net loans to assets have higher Z-scores, perhaps because Basel regulation mandating minimum levels of risk-adjustment capital forces these banks to hold more equity. Also, in the sample excluding Japan larger banks have lower Z-scores, likely because they tend to hold less capital than smaller banks. Despite these differences, the coefficient of the BCP compliance index remains insignificantly different from zero also in the sample without Japanese banks. The same is true when they add to the regression additional macro controls, such as exchange rate appreciation, private credit, or the sovereign rating. In the regressions, they explore how the relationship between BCP compliance and bank soundness changes if they alter the sample composition to include various categories of financial institutions to explore whether BCP compliance may affect soundness for alternative types of banks. All these results refer to the sample excluding Japan, so that th e overrepresentation of Japanese banks does not distort the results. The first exercise is to examine the widest sample possible, i.e. one that includes investment banks/securities houses, medium and long-term credit banks, nonbank credit institutions, and specialized government credit institutions. These are institutions that in most countries are unlikely to fall under the perimeter of bank regulation and supervision, so they have excluded them from the baseline sample. When they include them, the sample size grows by 25 percent, but the main regression results are unchanged. In particular, bank soundness is not significantly affected by compliance with the BCPs. If they restrict the sample to commercial banks only, thereby losing about 300 banks compared to the baseline sample, once again they find that regression results remain very close to the baseline. When they focus only on banks rated by Moody’s, as in our earlier work, the sample shrinks considerably (to just over 300 banks), and the coefficient of the BCP compliance index becomes positive and significant, albeit only at the 10 percent confidence level. Thus, BCP compliance seems to have some positive effect on the soundness of this specific group of banks. To explore this issue further, they ask whether this result is driven by the fact that rated banks are larger banks. To do so, they consider two alternative samples: the first includes the largest 10 percent of banks within each country and the second includes the largest 20 percent of banks in the entire sample. In both cases, the BCP compliance index has an insignificant coefficient, as in the baseline sample. The BCP compliance index is the weighted sum of compliance scores for several individual chapters of the Core Principles. Could it be that, even though overall compliance does not seem to matter for bank soundness, some aspects of the Core Principles might be relevant? In fact, it may be possible that the overall index is not significant because of offsetting effects of its different components. In fact, in our previous study of Moody’s ratings, they found that, although overall compliance did not seem to matter, higher financial strength ratings were associated with better compliance with principles related to information provision to supervisors. They address this question by re-running the baseline regressions breaking down the compliance index into seven components, based on the standard grouping of principles used by the Basel Committee. An important caveat is that compliance scores are fairly strongly correlated, which may make it difficult to disentangle the effect of one set of principles from the others. They replicate the regression for different samples of banks to investigate the robustness of the results. There is only one component of the compliance index that has a fairly robust relationship with bank Z-scores, and that is compliance with Chapter 2 of the BCP, i.e. principles having to do with supervisors’ powers to regulate bank licensing and structure. Interestingly, this component of the index is negatively correlated with bank soundness, so that banks in countries were regulators have better defined powers to give out licenses and regulate bank activities tend to be riskier. This result holds in all th e samples except those including only the largest banks. This finding supports the contention that supervisory systems that tend to empower supervisors do not work well (Barth, Caprio, and Levine, 2001, 2004, 2006). So far, they have considered individual bank risk. In principle, bank supervision and regulation should be primarily concerned with systemic risk, rather than individual bank risk, although in practice it is not always easy to make this distinction. Could it be that BCP compliance, while not relevant to individual bank soundness, is important to ensure the stability of system as a whole? To address this question, it would be ideal to test whether BCP compliance reduces the probability of a financial crisis. However, since crises are rare events, this type of test requires a panel of data; since they have BCP compliance assessments only at a point in time, they are restricted to cross-sectional data. Nonetheless, to explore this question they compute a rough measure of systemic soundness as the aggregate equivalent of the individual bank Z-score. More specifically, they aggregate profits and equity of all the banks in the country (for which they have data), they compute the standard d eviation of aggregate profits, and then they compute an aggregate Z-score. This measure tells us by how many standard deviations banking system profits must fall to exhaust all the capital in the banking system. They then regress this measure on the BCP compliance score and a number of macroeconomic control variables. Their measure of systemic soundness is correlated with the macro variables as one might expect: higher growth, low inflation, low inflation volatility, appreciation of the currency, favorable sovereign ratings are all significantly associated with higher values of the aggregate Z-score. Once again, though, the BCP compliance index does not seem to be a significant determinant of banking system soundness. Though it is positive, the coefficient of the BCP index is small and not statistically significant in any specification. Remarks While the causes and consequences of the recent financial crisis will continue to be debated for years to come, there is emerging consensus that the crisis has revealed significant weaknesses in the regulatory and supervisory system. Resulting calls for reform have led to numerous proposals and policymakers in many countries are hard at work to upgrade their regulatory frameworks. This paper seeks to inform the on-going reform process by providing an analysis of how existing regulations and their application are associated with bank soundness. Specifically, they study whether compliance with Basel Core Principles for effective banking supervision (BCPs) is associated with lower bank risk, as measured Z-scores. They find no evidence of a robust statistical relationship linking better compliance with BCPs and improved bank soundness. The analysis of aggregate Z-scores to capture systemic stability issues yields similarly insignificant results. If anything, they find that compliance wit h a specific group of principles, those giving supervisors powers to regulate bank licensing and structure is associated with riskier banks, potentially suggesting that such powers may be misused in practice. While our results may reflect the difficulty of capturing bank risk using accounting measures, or the inability of assessors to carry out evaluations that are comparable across countries, nevertheless they raise questions about the relevance of the Basel Core Principles, the current emphasis on these principles as key to effective supervision, and the wisdom of carrying out costly periodic compliance reviews of BCP implementation in the IMF/World Bank Financial Sector Assessment Programs. Pakistan Commercial Banks Risk Management Pakistan Commercial Banks Risk Management ABSTRACT The agreement on international banking regulations dealing with how the banks handle the risk, the Basel Accord mainly focuses on the credit risk; according the Basel accord the bank assets divided into five main categories according to how they are risky. The five main categories are as (1) is assets without risk means 0% risk weighted, second one is 10% risk weighted, 3rd is 20% weighted, 4th is 50% weighted and last one is 100% weighted. When the banks perform international transactions they are required according the Basel Accord to hold assets minimum 8% aggregated risk according the Basel 1. The Basel 1 was written in 1988 by the Basel committee on banking supervision. All Banks of G-10 countries have try to implement this accord since the early 1990s. Now a days it is considered largely outdated and Basel committee working on Basel 1 to changing process in the shape of Basel II. This is also called Basel I accord. The document Basel I Capital Accord mainly designs to evaluate the capital in relation with the credit risk, and also the risk that can be a cause of losses in which the risk will occur if the party fail or unable to fulfill the obligations. It is mainly focus on the risk increasing modeling research process that is improvement toward the risk increasing research mode; however, it is over simplified calculations, and also classifications that have been simultaneously called for its disappearance, but the improvement in the shape of the Basel II Capital Accord and also other further agreements that are the sign for the continuously refinement for the risk and capital in the banking sector. Nevertheless, the document Basel I accords, will remain the first international instrument that evaluate the importance of risk with the relationship to capital, and also will remain as a milestone in the banking sector like finance and banking history. This study is mainly related to the risk management practices being followed by the commercial Banks in Pakistan. The questionnaire is used as a main tool to collect primary data and check the extent to which the risk management practices are being carried upon by the commercial banks in Pakistan. The six important aspects of risk management process are categorized as one dependent and five explanatory variables. This study aims to investigate the awareness about risk management practices within the banking sector of Pakistan. This study is comprised of data collected through both, primary as well as secondary sources. The purpose of using primary source data is to check the extent to which different risk management practices have been followed by the commercial banks in Pakistan. Primary data is collected through the use of a questionnaire. The questionnaire comprises a number of statements under one macro statement. It includes Risk Management Practices (RMP) as the dependent varia ble, and different aspects of risk management as the independent or explanatory variables. Whereas, the objective to use secondary data is to link the risk weighted Capital Adequacy Ratio to the different financial indicators of the commercial banks that are used to measure their soundness. CHAPTER 2 LITERATURE REVIEW Risk management practices by the Commercial Banks Within the last few years, a number of studies have provided the discipline into the practice of risk management within the corporate and banking sector. An insight of related studies is as follows: Amran, et al. (2009), this article mention the possible availability of risk exposà © in the annual reports of the Malaysian companies. The study was aimed to empirically test the characteristics of the sampled companies. And also the level of risk faced by Malaysian companies with the disclosure made was also assessed and compared. The findings of the research revealed that the strategic risk came on the top, followed by the operations and empowerment risks being disclosed by the selected companies. The regression analysis proved significantly that size of the companies did matter. The stakeholder theory explains well this finding by stating that As company grows bigger, it will have a large pool of stakeholders, who would be interested in knowing the affairs of the company. The extent of risk disclosure was also found to be influenced by the nature of industry. As explored within this study, infrastructure and technology industries influenced the companies to have more risk inform ation disclosed. Hassan, A. (2009), made a study Risk Management Practices of Islamic Banks of Brunei Darussalam to assess the degree to which the Islamic banks in Brunei Darussalam implemented risk management practices and carried them out thoroughly by using different techniques to deal with various kinds of risks. The results of the study showed that, like the conventional banking system, Islamic banking was also subjected to a variety of risks due to the unique range of offered products in addition to conventional products. The results showed that there was a remarkable understanding of risk and risk management by the staff working in the Islamic Banks of Brunei Darussalam, which showed their ability to pave their way towards successful risk management. The major risks that were faced by Brunei banks that was the Foreign exchange risk as well as credit risk and also operating risk. For the analysis regression model was used to explain the results which shown that the Risk Identification, or Risk Assessment and Analysis were also the most uncontrollable variables and the Islamic banks in Brunei needed to give more attention to those variables to make their Risk Management Practices more effective by understanding the true application of Basel-II Accord to improve the efficiency of Islamic Bank’s risk management systems. Al-Tamimi (2008) studied the relationship among the readiness of implementing Basel II Accord and resources needed for its implementation in UAE banks. Results of the research revealed that the banks in UAE were aware of the benefits, impact and challenges associated in the implementation of Basel II Accord. However, the research did not confirm any positive relationship between UAE banks readiness for the implementation of Basel II and impact of the implementation. The relationship between readiness and anticipated cost of implementation was also not confirmed. No significant difference was found in the level of Basel II Accord’s preparation between the UAE national and foreign banks. It was concluded that there was a significant difference in the level of the UAE banks Basel II based on employees education level. The results supported the importance of education level needed for the implementation of Basel II Accord. Al-Tamimi and Al- Mazrooei (2007) provide the comprehensive study relating of Bank’s Risk Management of UAE National and Foreign Banks. The outcome of this research is to find out that there are three most important types of risks facing the UAE commercial banks that were foreign exchange risk, 2nd one followed by credit risk and 3rd one is operating risk. And the result also found that the bank of UAE were also efficiently handle the risk; but the variables like as the risk identification, risk assessment and also analysis proved that the banks are more efficient in risk management process. Finally, the outcome of the result showed that there was a huge difference if we compare the UAE National banks and foreign Banks in the practicing the risk assessment and risk analysis as well as risk monitoring and risk controlling process. Koziol and Lawrenz (2008) provided a study in which they assessed the risk of bank failures. They said that assessing the risk related to bank failures is the paramount concern of bank regulations. They argued that in order to assess the default risk of a bank, it is important considering its financing decisions as an endogenous dynamic process. The research study provided a continuous-time model, where banks chose the deposit volume in order to trade off the benefits of earning deposit premiums against the costs that would occur at future capital structure adjustments. Major findings suggested that the dynamic endogenous financing decision introduced an important self-regulation mechanism. Basel Core Principles and Bank Risk: Does Compliance Matter? The recent financial crisis has sparked widespread calls for reforms of regulation and supervision. The initial reaction to the crisis was one of disbelief: how could such extensive financial distress emerge in countries where the supervision of financial risk had been thought to be the best in the world? Indeed, the regulatory standards and protocols of the advanced countries at the center of the financial storm were being emulated worldwide through the progressive adoption of the international Basel capital standards and the Basel Core Principles for Effective Bank Supervision (BCPs). The crisis exposed significant weaknesses in the financial system regulatory and supervisory framework worldwide, and has spawned a growing debate about the role these weaknesses may have played in causing and propagating the crisis. As a result, reform of regulation and supervision is a top priority for policymakers, and many countries are working to upgrade their frameworks. But what should the reforms focus on? What constitutes good regulation and supervision? Which elements are most important for ensuring bank soundness? What should be the scope of regulation? To date, the best practices in supervision and regulation have been embodied by the BCPs. These principles were issued in 1997 by the Basel Committee on Bank Supervision, comprising representatives from bank supervisory agencies from advanced countries. Since then, most countries in the world have stated their intent to adopt and comply with the BCPs, making them a global standard for bank regulators. Importantly, since 1999, the IMF and the World Bank have conducted evaluations of countries’ compliance with these principles, mainly within their joint Financial Sector Assessment program (FSAP). The assessments are conducted according to a standardized methodology developed by the Basel Committee and therefore provide a unique source of information about the quality of supervision and regulation around the world. Hence the international community has made significant investments in developing these principles, encouraging their wide-spread adoption, and assessing progress with their compliance. In light of the recent crisis and the resulting skepticism about the effectiveness of existing approaches to regulation and supervision, it is natural to ask if compliance with the global standard of good regulation is associated with bank soundness. Specifically, they test whether better compliance with BCPs is associated with safer banks. They also look at whether compliance with different elements of the BCP framework is more closely associated with bank soundness to identify if there are specific areas which would help prioritize reform efforts to improve supervision. The paper extends their previous work (Demirgà ¼Ãƒ §-Kunt, Detragiache and Tressel, 2008: henceforth DDT), in which they showed that banks receive more favorable financial strength ratings from Moody’s in countries with better compliance with BCPs related to information provision, while compliance with other principles does not affect ratings significantly. The policy message from this study was that countries should give priority to strengthening regulation and regulation in the area of information provision (both to the market and to supervisors) relative to other areas covered by the core principles. Using rating information to proxy bank risk significantly limited the sample size in that study, making it necessary to exclude many smaller banks and many banks from lower income countries. Furthermore, after the recent crisis, the credibility of credit ratings as indicators of bank risk has also diminished, questioning the merit of using these ratings in the analysis. In this paper, they explore whether BCP compliance affects bank soundness, but instead of using ratings they capture bank soundness using the Z-score, which is the number of standard deviations by which bank returns have to fall to wipe out bank equity (Boyd and Runkle, 1993). Because they can construct Z-scores using just accounting information, and because assessment data for additional countries have also become available, they can extend the sample size considerably relative to our earlier study, to over 3,000 banks from 86 countries (compared to 200 banks from 37 countries analyzed in DDT). This is not just a simple increase in sample size: the sample of rated banks was not a representative sample, because rated banks tend to be larger, more internationally active, and more likely to adhere to international accounting standards. From a policy point of view, they would like to investigate the effect of BCP compliance on all types of banks operating in different country circumstan ces, rather than a select subgroup. In this study, the richer sample allows us to explore whether the relationship between BCPs and bank soundness varies across different types of banks. All in all, they do not find support for the hypothesis that better compliance with BCPs results in sounder banks as measured by Z-scores. This result holds after controlling for the macroeconomic environment, institutional quality, and bank characteristics. They also fail to find a significant relationship when they consider different samples, such a sample of rated banks only, a sample including only commercial banks, and samples including only the largest financial institutions. In an additional test, they calculate aggregate Z-scores at the country level to try to capture the stability of the system as a while rather than that of individual banks, but also this measure of soundness is not significantly related to overall BCP compliance. When they explore the relationship between soundness and compliance with specific groups of principles, which refer to separate areas of prudential supervision and regulation, they continue to find no evidence that good compliance is related to im proved soundness. If anything, they find that stronger compliance with principles related to the power of supervisors to license banks and regulate market structure are associated with riskier banks. While these results cast doubts on whether international efforts to improve financial regulation and supervision should continue to place a strong emphasis on BCPs, a number of caveats are in order. First, insignificant results may simply indicate that accounting-based measures, such as Zscores, do not adequately capture bank soundness, especially for small banks and in low income countries, where accounting standards tend to be poor. They may also reflect low quality in the assessment of BCP compliance, especially in countries where laws and regulations on the books may carry little weight. It might be also argued that assessments are not comparable across countries, despite the best efforts of expert supervisors and internal reviewing teams at the IMF and the World Bank to ensure a uniform methodology and uniform standards. If their negative results arise because compliance assessments do not reflect reality or are not comparable across countries, then at a minimum they should lead us to question the value of these assessments in ensuring that supervision measures up to global standards. Review of related literature of this paper is as follows: Defining good regulatory and supervisory practices is a difficult and complicated task. Barth, Caprio, and Levine (2001, 2004, and 2006) were the first to compile and analyze an extensive database on banking sector laws and regulations using various surveys of regulators around the world, and to study the relationship between alternative regulatory strategies and outcomes. This research finds that regulatory approaches that facilitate private sector monitoring of banks (such as disclosure of reliable, comprehensive and timely information) and strengthen incentives for greater market monitoring (for example by limiting deposit insurance) improve bank performance and stability. In contrast, boosting official supervisory oversight and disciplinary powers and tightening capital standards does not lead to banking sector development, nor does it improve bank efficiency, reduce corruption in lending, or lower banking system fragility. They interpret their findings as a challenge to the Basel Committee’s influential approach to bank regulation which heavily emphasizes ca pital and official supervision. An important limitation of this type of survey is that it mainly captures rules and regulations that are on the books rather than actual implementation. IMF and the World Bank financial sector assessments have often found implementation to be lacking, particularly in low income countries, so that cross-country comparisons of what is on the books may hide substantial variation in the quality of supervision and regulation. BCP assessments have the advantage of taking into account implementation. Of course, assessing how rules and regulations are implemented and enforced in practice is not an exact science, and individual assessments may be influenced by factors such as the assessors’ experience and the regulatory culture they are most familiar with. Nevertheless, although it is difficult to eliminate subjectivity completely, assessments are based on a standardized methodology and are carried out by experienced international assessors with broad c ountry experience. Cihak and Tieman (2008) analyze the quality of financial sector regulation and supervision using both Barth, Caprio and Levine’s survey data and BCP assessments. They find that regulation and supervision in high-income countries is generally of higher quality than in lower income countries. They also note that the correlation between survey data and BCP data tend to be low, always less than 50 percent and in many cases in the 20-30 percent range, suggesting that taking into account implementation may indeed make an important difference. A number of papers also use BCP assessments to study bank regulation and performance. Sundararajan, Marston, and Basu (2001) use a sample of 25 countries to examine the relationship between an overall index of BCP compliance and two indicators of bank soundness: nonperforming loans (NPLs) and loan spreads. They find BCP compliance not to be a significant determinant of these measures of soundness. Podpiera (2004) extends the set of countries and finds that better BCP compliance lowers NPLs. Das et al. (2005) relates bank soundness to a broader concept of regulatory governance, which encompasses compliance with the BCPs as well as compliance with standards and codes for monetary and financial policies. Better regulatory governance is found to be associated with sounder banks, particularly in countries with better institutions. In this paper, as already discussed they rely on the Z-score to measure bank soundness. While the Z-score has its limitations, they believe it is an improvement over measures used in previous studies, namely NPLs, loan spreads, interest margins, and capital adequacy. Because different countries have different reporting rules, NPLs are notoriously difficult to compare across countries. On the other hand, loan spreads or interest margins and capitalization are affected by a variety of forces other than fragility, such as market structure, differences in risk-free interest rates and operating costs, and varying capital regulation. Thus, cross-country comparability is a serious issue. In contrast with ratings, Z-scores do not rely on the subjective judgment of rating agencies’ analysts. Results from the baseline regression, relating bank soundness measured by the Z-score to the degree of compliance with the BCPs. In the sample including all countries, the Zscore is higher, indicating a sounder bank, for banks with lower operating costs in countries with higher GDP per capita. Also, non-commercial banks tend to have higher Z-scores, while the other control variables are not significant. The coefficient of the BCP compliance index is positive but not significant. If they exclude Japanese banks, which account for over 20 percent of the sample, the fit of the model improves markedly (the R-squared increases from 10 percent to 19 percent) and the coefficients of many regressors change substantially.12 This suggests that the variables explaining the Z-score of Japanese banks may be somewhat different than for the rest of the sample, perhaps because of the lingering effects of Japan’s prolonged banking crisis on bank balance sheets. For example, in the sample excluding Japan inflation and the rule of law index are significant (with the expected coefficients), while GDP per capita is not (though the coefficient remains positive). Also, banks with a higher ratio of net loans to assets have higher Z-scores, perhaps because Basel regulation mandating minimum levels of risk-adjustment capital forces these banks to hold more equity. Also, in the sample excluding Japan larger banks have lower Z-scores, likely because they tend to hold less capital than smaller banks. Despite these differences, the coefficient of the BCP compliance index remains insignificantly different from zero also in the sample without Japanese banks. The same is true when they add to the regression additional macro controls, such as exchange rate appreciation, private credit, or the sovereign rating. In the regressions, they explore how the relationship between BCP compliance and bank soundness changes if they alter the sample composition to include various categories of financial institutions to explore whether BCP compliance may affect soundness for alternative types of banks. All these results refer to the sample excluding Japan, so that th e overrepresentation of Japanese banks does not distort the results. The first exercise is to examine the widest sample possible, i.e. one that includes investment banks/securities houses, medium and long-term credit banks, nonbank credit institutions, and specialized government credit institutions. These are institutions that in most countries are unlikely to fall under the perimeter of bank regulation and supervision, so they have excluded them from the baseline sample. When they include them, the sample size grows by 25 percent, but the main regression results are unchanged. In particular, bank soundness is not significantly affected by compliance with the BCPs. If they restrict the sample to commercial banks only, thereby losing about 300 banks compared to the baseline sample, once again they find that regression results remain very close to the baseline. When they focus only on banks rated by Moody’s, as in our earlier work, the sample shrinks considerably (to just over 300 banks), and the coefficient of the BCP compliance index becomes positive and significant, albeit only at the 10 percent confidence level. Thus, BCP compliance seems to have some positive effect on the soundness of this specific group of banks. To explore this issue further, they ask whether this result is driven by the fact that rated banks are larger banks. To do so, they consider two alternative samples: the first includes the largest 10 percent of banks within each country and the second includes the largest 20 percent of banks in the entire sample. In both cases, the BCP compliance index has an insignificant coefficient, as in the baseline sample. The BCP compliance index is the weighted sum of compliance scores for several individual chapters of the Core Principles. Could it be that, even though overall compliance does not seem to matter for bank soundness, some aspects of the Core Principles might be relevant? In fact, it may be possible that the overall index is not significant because of offsetting effects of its different components. In fact, in our previous study of Moody’s ratings, they found that, although overall compliance did not seem to matter, higher financial strength ratings were associated with better compliance with principles related to information provision to supervisors. They address this question by re-running the baseline regressions breaking down the compliance index into seven components, based on the standard grouping of principles used by the Basel Committee. An important caveat is that compliance scores are fairly strongly correlated, which may make it difficult to disentangle the effect of one set of principles from the others. They replicate the regression for different samples of banks to investigate the robustness of the results. There is only one component of the compliance index that has a fairly robust relationship with bank Z-scores, and that is compliance with Chapter 2 of the BCP, i.e. principles having to do with supervisors’ powers to regulate bank licensing and structure. Interestingly, this component of the index is negatively correlated with bank soundness, so that banks in countries were regulators have better defined powers to give out licenses and regulate bank activities tend to be riskier. This result holds in all th e samples except those including only the largest banks. This finding supports the contention that supervisory systems that tend to empower supervisors do not work well (Barth, Caprio, and Levine, 2001, 2004, 2006). So far, they have considered individual bank risk. In principle, bank supervision and regulation should be primarily concerned with systemic risk, rather than individual bank risk, although in practice it is not always easy to make this distinction. Could it be that BCP compliance, while not relevant to individual bank soundness, is important to ensure the stability of system as a whole? To address this question, it would be ideal to test whether BCP compliance reduces the probability of a financial crisis. However, since crises are rare events, this type of test requires a panel of data; since they have BCP compliance assessments only at a point in time, they are restricted to cross-sectional data. Nonetheless, to explore this question they compute a rough measure of systemic soundness as the aggregate equivalent of the individual bank Z-score. More specifically, they aggregate profits and equity of all the banks in the country (for which they have data), they compute the standard d eviation of aggregate profits, and then they compute an aggregate Z-score. This measure tells us by how many standard deviations banking system profits must fall to exhaust all the capital in the banking system. They then regress this measure on the BCP compliance score and a number of macroeconomic control variables. Their measure of systemic soundness is correlated with the macro variables as one might expect: higher growth, low inflation, low inflation volatility, appreciation of the currency, favorable sovereign ratings are all significantly associated with higher values of the aggregate Z-score. Once again, though, the BCP compliance index does not seem to be a significant determinant of banking system soundness. Though it is positive, the coefficient of the BCP index is small and not statistically significant in any specification. Remarks While the causes and consequences of the recent financial crisis will continue to be debated for years to come, there is emerging consensus that the crisis has revealed significant weaknesses in the regulatory and supervisory system. Resulting calls for reform have led to numerous proposals and policymakers in many countries are hard at work to upgrade their regulatory frameworks. This paper seeks to inform the on-going reform process by providing an analysis of how existing regulations and their application are associated with bank soundness. Specifically, they study whether compliance with Basel Core Principles for effective banking supervision (BCPs) is associated with lower bank risk, as measured Z-scores. They find no evidence of a robust statistical relationship linking better compliance with BCPs and improved bank soundness. The analysis of aggregate Z-scores to capture systemic stability issues yields similarly insignificant results. If anything, they find that compliance wit h a specific group of principles, those giving supervisors powers to regulate bank licensing and structure is associated with riskier banks, potentially suggesting that such powers may be misused in practice. While our results may reflect the difficulty of capturing bank risk using accounting measures, or the inability of assessors to carry out evaluations that are comparable across countries, nevertheless they raise questions about the relevance of the Basel Core Principles, the current emphasis on these principles as key to effective supervision, and the wisdom of carrying out costly periodic compliance reviews of BCP implementation in the IMF/World Bank Financial Sector Assessment Programs.

Police and Gratuities: The Slippery Slope Essay examples -- Ethics, L

Gratuity Something given voluntarily or beyond obligation usually for some service. (Dictionary, 2010) When does a cup of coffee become a gratuity for a police officer? What is acceptable and what is not acceptable? If a police officer takes a free cup of coffee or a half priced meal does that make him vulnerable to take more. Does that act make the officer a bad officer or a corrupt officer? Does the person giving the gratuity expect something in return or is it just a gesture for the work the officer is doing? Almost every police department has a policy on the acceptance of gifts and gratuities for the officers and the department. Some police departments allow no gifts or gratuities and some may have a policy that states as long as one person is not the recipient and it is available to the whole department then it is acceptable. How does a police department come up with a policy the does not create animosity toward the department from the public that wants to give to them for the services that they provide with no strings attached. You have some business that want to give money to a police department that needs to buy equipment for the officer on the street. Do you tell the business person that you can’t accept the money and that the officer will have to do the best that they can. No, I think when it comes to a safety issue and the gift is not for just one person the department will come out in the good end. Agencies can develop a gratuity policy by seeking the help of many officers and local business owners and by reviewing established policies in other jurisdictions. Such a policy should tie directly with modern law enforcement's strict code of ethics regarding financial gains or rewards. (Sewell, 2007) The slippery... ...cal issue? The caliber of officers that are coming out of the police academies these days are top notch and most police departments have the safe guards in place to keep officers from sliding down the slippery slope that would damage the confidence that the public has in the department. In the end gratuities, gifts and corruption will be a part of the police world as it has been from the beginning of the police community. It is incumbent upon the officers and the administration to keep the checks and balances in place so as not to damage the imagine of the police department and the city. Works Cited Dictionary, M.-W. O. (2010, June 16). Merriam-Webster Online Dictionary. Kleinig, J. (1996). The Ethics of Policing . Cambridge, UK: Cambridge University Press, ). Sewell, C. (2007, Apri). Gratuities. FBI Law Enforcement Bulletin, 76(4) , pp. 8-12.

Behavioral Influences Essay

Expectancy theory is related to the motivation of the employees which is dependent upon the employees’ behavior and incentives given by the management. If the management is able to motivate its employees they will put in more effort while working, which means efficiency higher returns for the company. The three components of the expectancy theory are expectancy, valence and instrumentality (Vroom, 1964). All of these three variables are required if an employee needs to be motivated positively. The expectancy component is the belief that increase in efforts will accounts for better performance and vice versa. This means that a person is motivated if there is a positive relationship between efforts and performance given that he has proper training, resources and direction to perform the job. Expectancy is also affected by the confidence the employee has about on his capabilities. Valence component in the expectancy theory refers to the value people place on the expected outcome or rewards of their efforts. If a person is motivated mainly by money, he might not value free insurance given by the company. Valence is the intensity of the desire of a worker for extrinsic and intrinsic rewards such as promotion, fringe benefits, bonuses, overtime and satisfaction (Droar, 2003). Instrumentality, the third component of expectancy theory is the confidence on the higher authorities that if the performance is well, the desired or promised reward will be received (Vroom, 1964). Instrumentality will be affected by the trust in people who make decisions of the outcomes and degree of biasness of the process of getting an outcome. Therefore the theory tells us that the relationship between the effort and performance is positive, which means that increase in effort will enhance performance (Vroom, 1964). According to the theory the relationship between performance and rewards is also positive, which implies that better performance will result in more rewards. In the given scenario, Supervisor A’s employees are facing difficulty in coping up with the new production process. The main reason for this is that the employees are not being compensated for their work. Those who achieve their goals are not given enough compensation therefore they feel unmotivated. When employees are not motivated, they do not put in enough effort to achieve their goals and hence their performance is not fine. The employees who have mastered the production process are not worried about accomplishing their goals because they know that even with added effort if they attain their goals, the compensation they will get is not worth the effort. Other employees, who have not mastered it, are not putting in enough effort because they think they are not capable of doing so. Therefore there is a dire need for motivation of the employees who are under Supervisor A. The supervisor should find out what resources, training or management of employees is needed to motivate the employees; this is the expectancy component of the expectancy theory. The supervisor should also find out what do the employees value, their bonuses and salaries should be increased according to their performance; this is the valence part of the expectancy theory. Supervisor also has to make sure that the perception of the employees about their supervisor’s promises is correct, they should be compensated as promised; this is the instrumentality component. In the scenario, the employees’ salaries are not being increased as promised by the supervisor; their bonuses after withholding tax are very small. Thus if the supervisor is able to fill the gaps in all of these three components, he will be able to motivate the employees to increase effort and hence performance and the goals will be achieved. Task 2 The leadership style of Leader B is transactional, Leader C is transformational and Executive has a â€Å"Level 5† leadership style. Transactional leadership focuses on setting specific goals for each team member and encourage them to meet the agreed upon goals (Bryant, 2003). In the scenario it is given that Leader B establishes clear goals by clarifying role and task requirements and continually guiding subordinates in the direction of these goals, and therefore it is a characteristic of transactional leadership. In transactional leadership, the team members are awarded when they are able to achieve their goals on time and punished when agreed upon goals are not achieved or are not achieved on time (Iain, 2007). In the scenario given, Leader B considers the team member to be personally at fault if the delegated task is not completed and issues punishments for failures. Transactional leadership recognizes accomplishments of individual subordinates and they are rewarded for achieving the objectives agreed upon (Iain, 2007). In the scenario given, Leader B believes in a clear chain of commands and in rewarding good performance and recognizing employee accomplishments. Leader B also rewards subordinates for their successes. Leader B’s transactional leadership style has been justified now by including the examples from the given text. Transformational leadership depends more on personal relationship with subordinates and is supported by trust rather than committing to contracts (Jung & Avolio, 1999). In the scenario it is given that Leader C tried to remember his team members’ birthdays and makes an effort to work with them as their coach instead of their manager. Transformational leadership also tries to satisfy its followers’ self-interest and encourages the followers to replace these interests with the interests of the team. In the scenario, Leader C encourages the group to surpass their own self-interest for the betterment of the organization. This type of leadership also focuses on organizational change through stress on new values and different vision of the future which transcends the status quo (Gellis, 2001). Leader C in the scenario also believes that the group can have great success when they are passionate and enthusiastic about a vision. Transformational leaders motivate its followers to achieve their goals through nurturing their individual skills and capabilities (Barbuto, 2005). Leader C in the scenario sets high hopes for subordinates, instills individualism of employees for the benefit of organization and takes a rational problem-solving approach. The Level 5 leadership is described as being hesitant and unruly, shy and fearless and modest with a stern commitment to high standards (Jon Jenkins and Gerrit Visser, 2001). This type of leadership takes struggling organizations from being fine to great and produces other fine leaders within the organizations for future. The Level 5 leadership takes responsibility for the failures and accredits other leaders for accomplishments (Jon Jenkins and Gerrit Visser, 2001). This leadership also establishes unique ideas, long-term vision and values for the organization. In the scenario, Executive A is clearly a level 5 leader as he shies away from attention and accredits others for achievements. He accepts responsibility for failures and poor results; and feels delighted to produce strong leadership within the organization. Therefore it is apparent that Executive A is a Level 5 leader as he took the struggling organization into hands and reshaped the stock prices and company profits into eye-catching ones and he also shares his long-term vision, ideas and values with other leaders of the company. When the Executive A retires and if Leader B is appointed as the CEO, then most of the employees in the organization will start working for their own interest as they will be held responsible for their failures and accomplishments and will be compensated accordingly. Supervision of the employees will become an integral part of managers’ routine as they may use organization’s resources for their personal interests. Transactional leadership is successful in stable organizations because it helps to improve control over employees and reinforces constructive administrative actions through rewards and punishments. Therefore Leader B may find his style appropriate in the organization. Transformational leadership maintains employees’ performance through loyalty to organization, trust in the leader and changes in values and standards of the organization. Leader C has this style of leadership, and if appointed the CEO, the employees will surely have higher motivation and self-confidence; they will get chances and supervision to improve their skills and capabilities. Through self-realization of employees and personal relationships with them, Leader C will be able to make them feel an integral part of the organization and increase their performance beyond expectations. Task 3 Individuals often take one of the bases of power in an organization in which they are employed. There are five bases of power which act as a source of organization; they will be discussed one by one. The first one is Position in Hierarchy (Woldring, 2001), that is the rank of the individual in an organization. The higher the individual’s place in the organizational rank structure, the greater the power he will have. In the given scenario, Employee 1 is using position in hierarchy as the source of his power. He has worked in the marketing department for 12 years and he frequently comes to the office on weekends or stays late to make sure smooth running of tasks. The second base of power is Referent Power (Woldring, 2001); this is the personal relation of an individual with others who are higher in the organizational hierarchy. It only exists if the individual can actually reference the authenticity of relationship so that it can act as a basis of power. Employee 2 has this power as he negotiated with his manager to work four days a week and is the only person who is allowed to have a shorter work week. Third type of power is Reward Power (Raven, 1959); individuals who have a greater degree of control over resources of organization, have greater power. Individuals even lower in the organizational hierarchy can have greater controller over resources of the organization (Woldring, 2001). This power is based on the ability to give valuable reward to others who perform well (Raven, 1959). In the scenario given, Employee 1 has this power as he is controlling the resources of his department to get the large bonus at the year end, and he will spend this bonus on his vacations. The fourth base of power is Demonstrated Expertise (Woldring, 2001); an individual who has an exceptional capability or special knowledge that no other has in the organization. Only having expertise is not sufficient, others should know about the importance of this person’s expertise and its value. Employee 2 has this power as he is the only company employee who can prepare financial statements. The fifth and final source of power is Personality Power or Coercive Power (Woldring, 2001); the perceived personality of the individual is the power here. If the person has strong interpersonal skills, charming and attractive personality, then he will be able to influence others to conform to his ideas or demands (Raven, 1959). This is the case with Employee 3, who has been in the organization for just a year, but because of his personality power, he was able to change entire department’s beliefs. Relationship between Bases of Power and Dependency: The Bases of Power use the concept of Dependency. An employee can only use its base of power on another employee if the other one is dependent on him. As Emerson (1962, p. 32) argues that â€Å"power resides implicitly in the other‘s dependency† and that â€Å"the power of A over B is equal to, and based upon, the dependence of B upon A†. Therefore if a person B is dependent of another person A, only then the power of A exists. The level of power of person A depends upon the degree of dependence of person B on person A and the alternatives available to person B. If there is no dependence then power over another person does not exists. The accounting manager in the given scenario is the person who is dependent upon Employee 2 because of the Expertise power of Employee 2. Employee 2 is the only person in the organization who can prepare the financial statements and so the manager is dependent upon him to prepare it. Employee 1 is dependent upon marketing manager for the award he wants, that is why he stays late in the office to make sure of the completion and accuracy of the work and he often come to office on weekends. Employee 3 was selected as the leader of the team working on new project; all others related to the project are dependent upon him because of his Coercive power. Task 4 The first problem with the company’s current evaluation form is that the rating scales in the form mostly focus on relationships with other employees and on the personality; it is more of a personality test rather than performance and skills evaluation. Instead of evaluating the neatness of the workplace, relationships with peers, attitude with others and friendliness, the questions should be more specific to the performance and quality of work. Performance factors such as knowledge, skills, abilities, quality and timeliness of work, efforts of the employee, works habits, supervisory factors, cooperation, adaptability and effectiveness of communication should be evaluated. The second concern in the evaluation form is that the rating scales are not specific and measurable. The scale being used is to rate an attribute is not numeric or scalar, high, low-medium, medium are being used to score against the attribute. A better approach of scoring will be to use a scale with numeric scale, the highest described as â€Å"Superior† and lowest as â€Å"Unsatisfactory†. Another option of â€Å"Not Applicable† should also be present with all attributes. The use of measurable scale will ease the work for evaluator and he will be able to rate the employee’s attributes more accurately. The third concern in the evaluation form is that the performance factors are not specific. When the manager had to give rating on the engineer’s attitudes, he had to take in to account the engineer’s attitudes towards his job and tasks that he is assigned to do and also his attitudes towards co-workers and manager. The factors should be more specific so that the evaluator can give the ratings to specific attribute and every attribute is taken into account. In the scenario, the manager gave engineer a low rating in the attitude factor although his attitude towards work was very serious and he completed his tasks in a very well manner. He got a low rating because of his poor attitude towards the peers and manager. The 360-degree approach to employee evaluation involves supervisor, peers, and subordinates into the evaluation of an individual. This approach has its own pros and cons. Many people participate in evaluating a person so it gives complete view of the performance of the person. The performance view is captured from the supervisor, peers and the subordinates, they respond as they see the person’s performance. It reduces the bias of the supervisor or the manager towards an employee. It the supervisor does not likes the attitude of appearance of the employee, and then he might rate the employee with a lower score. If the employee’s attitude with the supervisor is not favorable but the peers and subordinates like the attitude of the employee, then this can be captured in the evaluation process. Many people participate in the evaluation process, so the score becomes more reliable and more accurate. The supervisor may not have a personal relation with the employee and may not know him too well to rate his personality and attitude towards work. It is also possible that the employee have had some kind of incident with the supervisor in the past and since then the attitude towards the employee had become unfavorable. Then the supervisor would obviously rate him low in the performance factors. Most of the times in an organization, peers and co-workers know the employee better than the supervisor; so when the peers will evaluate the employee, they will be able to give the ratings more accurately and their ratings will be more reliable than any others. The attitude of a person towards his sub-ordinates is also very important, this attitude can be recorded when sub-ordinates will take part in the evaluation process of the employee. And then after the evaluation, the employee can leverage his strengths according to others’ perception of his performance and personality. So, 360-degree approach to performance evaluation helps in evaluating the employee from many views and in recording reliable and more accurate information then the traditional forms of evaluations and is not only helpful to the management to make important decisions but also is useful to the person being evaluated . There are some disadvantages too of including the supervisor, peers and subordinates in the evaluation process. One of the main disadvantages is that all the peers and subordinates may not like the personality of the employee being evaluated and may rate him very low based on his attitude and personality. The main purpose of evaluating an employee is to evaluate the performance and skills and attitude towards the work and tasks assigned to him. The co-workers and subordinates may have issues with employee being evaluated because of personality clash, and although his work is up to the mark and performance is well, but still the peers, supervisor and subordinates might give him low score on performance. There are a handful of employee performance evaluation methods; three of them are top-down, peer-to-peer and 360-degree. Top-down is the most commonly used in the organizations today. It involves the direct manager of the employee in the evaluation process and is only useful if the manager knows his employee well enough. Peer-to-peer entails the employees of the same levels to review each other. Nobody knows the capabilities and performance of an employee better than his peer or co-worker. While it can be effective method, it can also be very unsuccessful at times. If there is jealousy among the co-workers or if there is competition then it is obvious that they will not rate each others in a reliable manner. When there are multiple managers or multiple peers of an employee then these methods prove successful. The third method is 360-degree evaluation which takes into account the reviews of peers, subordinates and the managers or supervisors. In some organizations even suppliers and customers are involved in the evaluation process. While the advantage of multiple points of views is clear, it poses some threats also. Sometimes the subordinates may not give the true feedback of their managers because of the fear that manager will get to know about it. The following are the errors and biases that commonly affect the accuracy of performance evaluation. The first one is that the employees may favor the evaluation questions of their manager as they will fear that the manager will find out and so their review will not be true. The second is that the peers might not be mature enough or experienced enough to evaluate each other and they may form a cartel and rate each other well. The third example is that the manager does not the performance of his employee whom he is to evaluate because of no interaction with him, and he might just do the evaluation providing inaccurate information. In the given scenario, the evaluation form should be made more reliable and bias free and should be more oriented towards the performance of the employee rather than the friendliness and the attitude towards the co-workers. The scale used should be numeric with the highest being the best and lowest being the most poor. Customers, subordinates, and co-workers should also be included in the evaluation process to make it fairer. References Online Journal Iain, Ph. D. Hay. (2007 ). Transactional and Transformational Leaderships Compared. Leadership of Stability and leadership of vola tility, Volume 4, Issue 4. Retrieved 04 16, 2009, from Academic Leadership database. Website Organization/Website/Author name. (Year, Month Day). Title. Retrieved Month Day, Year, from www. url. com Value Based Management. net/Victor Vroom. (2009, 03 23). Motivation and Management Vroom’s Expectancy Theory. Retrieved 04 14, 2009, from http://www. valuebasedmanagement. net/methods_vroom_expectancy_theory. html Arrod. co. uk/Dave Droar. (2006, 12 31). Expectancy theory of motivation. Retrieved 04 14, 2009, from http://www. arrod. co. uk/archive/concept_vroom. php Imaginal Training/Jon Jenkins and Gerrit Visser. (2001). Level 5 Leadership. Retrieved 04 14, 2009, from http://www. imaginal. nl/articleLevel5Leadership. htm Workplace Competence International Limited/Roelf Woldring. (2001). Power in Organizations: A way of Thinking About What You’ve Got, and How to Use It. Retrieved 04 16, 2009, from http://www. wciltd. com/pdfquark/powerorgv2. pdf

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buy custom Characteristics of the U.S. Health Care System essay Both health care delivery and health services refer to the act of providing health care services to the affected citizens. The United States being one of the developed countries has a unique system, whereby they have national health insurance programs chaired by the government and financed by the general taxes collected. Each citizen to receive health care services what is referred to as the universal access but not routine basic health care services. On the other hand though the county has evolved in terms of cost it has not been able to provide these services at an affordable cost. External factors such as political climate, level of economic development, technological advances, social cultural values, physical environment, demographic factors, and the shape which the health has been taking for the last previous years. Characteristics of the U.S. health care system No central governing agency and little integration and coordination The U.S. system lack centrally controlled having variety of payments, insurance, and delivery of health care is financed both privately which predominantly hold much of the country employment with the larger percentage of 55% leaving the rest 45% to the public. Technology-driven delivery system focusing an acute care Growth of science and technology make patients assume that the best has best care and the p Factors which have served to shape the U.S. Health Care System physicians want to try the latest gadgets. Also hospitals compete for the latest modern equipment which are more expensive and consequently lead to high cost in providing the health care services. Workers lack over time extension on insurance, forcing the insurance companies to lower their premiums. Due to the limited resources to invest in the health sectors before investing in high technology should be evaluated. The investment should be done in both low and high technological meicine. High cost, unequal in access, average in outcome. More than any developed country U.S. spend so much on health care ( 13%) of the nations gross domestic products but population do not get access to the health care services. One has to have health insurance through their employers, covered by under a government health care program, can afford to buy insurance with their finances, and is able to pay their bills privately. If one is not able to meet any of the above conditions waits until the condition gets worse where one can get treatment free in hospital emergency department. Delivery of health care under imperfect market condition In the United States provision of health care services do not meet basis of a free market where buyers (patients) and sellers (providers) act independently. Patients should be able to choose their providers based on the quality of the services they offer. There must be also competition in the provision of the health services but since the power of health sector is the hands of the private hands they try to maximize profits rather than the provision of the good health care services. Patients should be aware of the costs which will be incurred in their treatment ahead of time, if this is not disclosed patients are not aware of the costs to be incurred leading to poor budgeting. Legal risks influence practice behaviors In the United States unlike other developed countries health care services are dominated private sectors. This reliance of individual of individual limits the power to the national government and the only role left to it is just filling the gaps which have been left by the private investors. This could be issues such as environmental protections care for the poor citizens, support in training and research. Market justice vs. Social justice: conflict throughout health care Market justice places the responsibility for the fair distribution of health care on the market forces in a free economy where medical care is provided on willingness and the ability to pay by the people. On the other hand, social justice is concern with the well-being of the society other than that of individual hence failure to get treatment for lack of resources is unjust. Distribution of the resources should always be based on the need other than the ability to buy them in the market. Market justice consequently should be based to unequal allocation of the health care services, leaving out the critical humans. Multiple players and balances of power In the many players; physicians, administrators of health, service institutions, insurance, large companies, large employers and the government. Among all these players each has got its own self-interests which are often not in line bringing conflict in the system. Its only advantage is that these players protect any of the above to dominate the system. Quest for integration and accountability Today, in the United States there has been the call for organizing the switch to continuous and coordinated health services which review the patient-provider relationship and how health of each individual can be improved strengthening the entire population. It have gained its popularity through the expansion of well managed care but slowed down before reaching its full purpose. Conclusion As some of the characteristics of the health care services in the United States, has led to the system being unsuitable to some citizens and some making the system look bearable to even the less fortunate citizens. In comparison to other developed countries, the United States is lagging behind since it has been left to the hands of private sectors that are most centered in maximizing of profits other than provision of better and affordable services. 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