Siqiwen Li

The “Smart” Regulatory Features of Basel II and Basel III

This chapter explores the regulatory attributes of Basel II and Basel III. It demonstrates that the frameworks of Basel II and Basel III possess each of the benchmark attributes of the “third-way” regulatory approach to financial regulation. Owing to the demonstrated congruence between Basel II and Basel III and the benchmark attributes, this chapter concludes that Basel II and Basel III can clearly be viewed as an example of ‘smart’ financial regulation in the field of banking prudential control.

Emerging Trends in Smart Banking: risk management under Basel II and III

The 2008 global financial crisis has illustrated the need for tighter regulations and management of banking institutions, approaching banking and money lending in a more intelligent, directed fashion. Emerging Trends in Smart Banking: Risk Management Under Basel II and III discusses some of the latest developments in banking regulations and safeguards to ensure the mitigation of risk and economic collapse. This book is a critical reference in the exploration of business frameworks to identify areas of strength and potential weaknesses, insight that will be of use to business leaders, professionals in the banking industry, and researchers and scholars in all aspects of business and accounting.

Coherent Risk Measures

Abstract: A fundamental problem in financial mathematics is to quantify the risk of a financial position. The so-called “Value at Risk” (VaR) is a widely used risk measure that serves this role. In the early 1990s this measure was the common choice for reporting firmwide risk. In 1994, J. P. Morgan, published their methodology and for the first time VaR had been exposed beyond a relatively small group of quants. Since then, VaR was always controversial among academics and practitioners. For instance, it is believed that VaR played a crucial role in the financial crisis of 2007-2008. A common criticism about VaR is that it is not a sub-additive measure. This motivated academics to develop the theory of coherent risk measures, where by default the sub-additivity property is satisfied. This theory has significant industrial impact. In particular, many firms are currently using coherent alternatives to VaR. This talk is a gentle introduction to the theory of coherent risk measures and the current research on this area.

Financial fragility and securitisation: the discussions with Australian regulators and bank risk managers

Among divergent approaches to understand the global financial crisis, Minskys Financial Instability Hypothesis has gained increased attention. In part, the chapter draws upon Minskys notion that the seeds of instability are sown when banks, households, and firms move from hedge to speculative and then into Ponzi financial positions. Financial innovations such as securitisation contribute to this transformation. In addition, the paper will discuss the findings arising from an analysis of interviews that focus on securitisation related issues after the sub-prime crisis with practitioners who were closely involved in regulation and risk-management. The paper highlights the need for fundamental reform in the financial sector with a more consistent regulatory platform and enhanced supervision, to facilitate rapid healing from the damage arising from the financial crisis in Australia.