...The ECB’s monetary policy in the crisis * In 1763, Amsterdam was the centre of a deep financial crisis. Highly leveraged investors were faced with a situation of falling asset prices. The liquidity crisis became severe and Amsterdam bank houses went bankrupt. * Similarly liquidity was an issue in the modern day financial crisis. Money markets seized up and several market participants found themselves unable to roll-over funding positions. * Finally, at the beginning of 2010 the latest turn: several euro area countries’ debt and deficit levels were found to be unsustainable. * Differently from the crisis in 1763, the determined actions of central banks prevented deleveraging, fire sales and ultimately deflation. * The ECB, and indeed all major central banks, reduced its policy rates to unprecedented lows and implemented various measures to restore monetary policy transmission to support credit flows to the real economy. * Liquidity support gives banks unlimited access to central bank money at a fixed price against adequate collateral for banks to liquefy their assets at times of stress by expanding the set of eligible assets used as collateral. * Also extending the maturity of lending so that the longest maturity of our long-term refinancing operations (LTROs) has been raised from the standard 3 months before the crisis to 6 months after. * The Outright Monetary Transactions (OMTs), eliminate the pricing of un-warranted tail risks in the bond...
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...ABSTRACT Recent reports on banking sector often indicate that India is slowly but surely moving from a regime of `large number of small banks' to `small number of large banks'. The aim of this paper is to probe into the various motivations for mergers and acquisitions in the Indian Banking sector. Thus, literature is reviewed to look into the various motivations behind a banks’ merger/ acquisition event. The paper also takes us through the international mergers & acquisitions scenario comparing it with the Indian scene. Given the increasing role of the economic power in the turf war of nations, the paper looks at the significant role of the state and the central bank in protecting customer’s interests vis-à-vis creating players of international size. While, gazing at the mergers & acquisitions in the Indian Banking Sector both from an opportunity and as imperative perspectives, the paper also glances at the large implications for the nation. INTRODUCTION Generally speaking a bank is an institution dealing in money. The origin of the word bank is traced to the Italian ‘banca’, ‘banc’ or ‘banque’, which means a bench. It is stated that in Middle Ages the European money changers and moneylenders displayed their coins on their benches and conducted their business. Hence the term bank refers to the bench on which the business of money changing and money lending was conducted. Hence, the term banking is defined as accepting for the purpose of lending or investment, of...
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...EUROZONE CRISIS The Eurozone in 2012 EUROZONE CRISIS: Eurozone fracture in 2012 This paper outlines a plausible scenario in which the Eurozone fractures in 2012. Events are unlikely to follow the path precisely as described, given the complexity of the problem and the number of variables which are continually changing. That said, we feel 2012 is unlikely to end with all the current members still being part of the Eurozone. Mapping a ‘break-up’ scenario should help readers understand how fragmentation could occur and therefore assist businesses’ contingency planning. To this end the paper highlights some key events and when they are due to take place. It also identifies some key indicators to monitor which are likely to dictate how the crisis will unfold. EXECUTIVE SUMMARY A plausible scenario for Eurozone fragmentation in 2012 would see elections in Greece, France, Finland and probably Italy changing the terms of the debate to reflect frustration with economies in recession, rising unemployment and hostility to proposed or actual austerity measures. In this scenario, Greece receives an irregular rescue from the European Financial Stability Facility (EFSF) and negotiates a rescheduling of its debt in March. But once its April elections are over, the new Greek government is unable to secure bailout funds having missed austerity and reform targets, prompting a formal sovereign default. Greece announces its withdrawal from the Eurozone, closing its banking...
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...High-Frequency Trading Peter Gomber, Björn Arndt, Marco Lutat, Tim Uhle Chair of Business Administration, especially e-Finance E-Finance Lab Prof. Dr. Peter Gomber Campus Westend • RuW P.O. Box 69 • D-60629 Frankfurt/Main Commissioned by Executive Summary High-frequency trading (HFT) has recently drawn massive public attention fuelled by the U.S. May 6, 2010 flash crash and the tremendous increases in trading volumes of HFT strategies. Indisputably, HFT is an important factor in markets that are driven by sophisticated technology on all layers of the trading value chain. However, discussions on this topic often lack sufficient and precise information. A remarkable gap between the results of academic research on HFT and its perceived impact on markets in the public, media and regulatory discussions can be observed. The research at hand aims to provide up-to-date background information on HFT. This includes definitions, drivers, strategies, academic research and current regulatory discussions. It analyzes HFT and thus contributes to the ongoing discussions by evaluating certain proposed regulatory measures, trying to offer new perspectives and deliver solution proposals. Our main results are: HFT is a technical means to implement established trading strategies. HFT is not a trading strategy as such but applies the latest technological advances in market access, market data access and order routing to maximize the returns of established trading strategies. Therefore...
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...WP/04/12 The Late 1990s Financial Crisis in Ecuador: Institutional Weaknesses, Fiscal Rigidities, and Financial Dollarization at Work Luis I. Jacome H. © 2004 International Monetary Fund WP/04/12 IMF Working Paper Monetary and Financial Systems Department The Late 1990s Financial Crisis in Ecuador: Institutional Weaknesses, Fiscal Rigidities, and Financial Dollarization at Work Prepared by Luis I. Jácome H.1 Authorized for distribution by Mark Swinburne January 2004 Abstract This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper stresses three factors that amplified the 1990s financial crisis in Ecuador, namely institutional weaknesses, rigidities in public finances, and high financial dollarization. Institutional factors restricted the government’s ability to respond in a timely manner and efficiently enough to prevent the escalation of the banking crisis and spurred the adoption of suboptimal policy decisions. Public finance rigidities limited the government’s capacity to correct existing imbalances and the deteriorating fiscal stance associated with the costs of the financial crisis. Financial dollarization increasingly reduced the effectiveness of financial ...
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...Gender Equality and Finance Name Institution Course Date This essay breakdown gender heights of international finance that underlie the engagement of the female’s movement with monetary markets and monetary rules. These gender heights happen at all stages: the micro stage (as well as the intra-family stage); the meso stage (manufacturing, banking, state organizations, taxation); and the macro stage (countrywide including internationally). The micro, meso, and macro stages of money have turned to be further inter-associated with internationalization. For instance, credits to growing nations from the International Monetary Fund (IMF) and the World Bank increase to the home supply of finance, causing high government spending and venture and/ or lowered foreign exchange deficits. Bilateral growth co-operation and World Bank lending always promote home credit organizations and schedules in growing nations. Through this manner, the 8-10 million families that take credit from micro-credit schedules are not directly reliant on international sources of money. Remittances from migrant employees create a considerable basis of foreign exchange in nations such as Philippines and Bangladesh. Accepting this appreciating of international fund like a firmly woven mesh of macro, meso, and micro stipulations, this essay studies the way international fund affects, and is affected through the distinguished economic ranks of women and men (The World Bank Group, 2013). In this essay, four sex biases...
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...Commercial Banks in Bulgaria under Currency Board | | | | 1997 – a crucial year for the Bulgarian banking system The real reforms in the Bulgarian banking sector started in 1997, after the introduction of the currency board in the country. Bulgaria's macroeconomic performance between the fall of communism and early 1997 was especially poor. The decent economic performance in the beginning later deteriorated into hyperinflation and negative growth of GDP. Hyperinflation reached almost 500 % in January 1997 and more than 2,000 % in March 1997. An extremely severe economic crisis began in May 1996 and reached its zenith in February 1997. The Bulgarian currency started falling and finally collapsed in February 1997 when it reached unprecedented levels of about 3000 Leva per dollar in February 1997, while foreign exchange reserves dried out. The average monthly wage plunged from over $127 in 1995 to under $25 in 1997. Currency Board Adoption The IMF started to press the Bulgarian authorities to introduce a CBA. With the worsening of the crisis by the spring of 1997, this plan was finally accepted and CBA was implemented on the 1st of July 1997 and actually brought hyperinflation down to around 5%. The Bulgarian currency was fixed to the DeutscheMark, the volume of currency circulation was linked to the hard currency reserves, and the currency board undertook the monetary policy management. A new stage of banking sector reform started: entirely new laws on BNB and commercial...
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...brand, built partnerships and signed long-term agreements. Therefore, Stolt Offshore benefited from a strong reputation of its conglomerate parent, specialization, balance sheet, clients and strong brand. * Market Position: Stolt improved its market position by riding the growth on the Oil & Gas services sector and by providing complementary services through acquisitive growth. Since 1970s that global GDP has been raising rapidly, appendix 2, and research has found that there is a casual relationship between GDP growth and energy consumption. Therefore, GDP growth contributed to the higher demand of oil & gas throughout the 70s/80s/90s. Not only the Oil & Gas sector was growing but it also faced structural changes: more fragmentation in exploration’s rights...
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...For example, a manufacturing company has a few projects for year 2015. However, the company allocate most of its resources for project X that promised substantial gain. When there is opportunity to gain more on its other projects, the company is unable to grab the chance as it over focus on project X. Likewise, if any of the projects are facing losses, the company does not possess sufficient capital to support the risk being taken on these projects. b) Relying on risks in the register without prioritizing them or considering the extent to which they may be correlated with each other. The second ways of risk management failure is overlooking identified risks. Many organisations cope with risks, such as credit risk and liquidity risk, in isolation but somehow ignoring correlations and associations among these risks that help to achieve risk transfer. Prioritizing can drive more efficient and objective resource allocation to support appropriate risk-taking and achievement of strategic objectives. For instance, using an index to hedge against cost increase. If the index lags from current market, unexpected supply or demand or any other disruptions will cause the cost to fluctuate up and down. c) Failing to understand that the ultimate risks of not meeting the business objectives or realizing the business benefits cannot be transferred...
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...the publically traded shares of the Dutch East India Company. Financial transactions had taken place since the dawn of civilization, but 1610 was a milestone towards the development of the equity markets we know today. Because equity securities represent transferable ownership interests in corporations, dividing business organizations into small, affordable pieces made it easier for entrepreneurs to raise capital from multiple sources. At the same time, limited liability allowed investors to diversify their investments without fear of incurring risk of personal accountability. Enhanced liquidity also eased transfer of ownership. Secondary markets for the securities of public firms quickly developed as the number of companies increased. Merchants and traders bought and sold securities just like other commodities, and specialization soon flourished. Stock exchanges were developed to enhance liquidity, transaction settlement, and protect broker commissions. The New York Stock Exchange(NYSE) originated out of the famous Buttonwood Agreement of 1792, in which a group of 24 brokers agreed to exclusively trade amongst themselves and fix commissions at a minimum of 0.25%; this system of fixed commissions lasted until 1975. Technology has always played a...
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...The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non-scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). These banks have over 67,000 branches spread across the country. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as “priority sectors”. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980. Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eight-fold. After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first...
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...Optical Distortion, Inc. (ODI) is the world’s first company to introduce contact lenses for chickens. These lenses offer farmers a unique cost saving opportunity and are more humane and efficient than the current de-beaking method. ODI, with help from New World Plastics has developed this commercially viable technology to reduce cannibalism by inducing astigmatism. With a patent holding off competition for at least three years, ODI needs to decide how to price contact lenses to ensure high adoption and profitability which will fuel ODI’s ability to circumvent competition through further investment in R&D – a key requirement to be able to establish themselves as a multiproduct, multimarket company which can provide effective service anywhere in the country. ODI should initially target Large Farms with 100,000+ birds with this product at a price of $0.16/pair because this contact lens technology yields the following superior results versus current debeaking method: greater reduction in cannibalism by 4.5%, zero chicken traumas, no risk versus medium risk with de-beaking, and a reduction in feed costs. There are several segments within the poultry industry – Small, Medium, and Large farms characterized by 10,000 or less birds, 10,000-50,000 birds, and 50,000+ birds, respectively. Based on the case data, the US Poultry industry is consolidating at a rapid rate. For instance, in 1964, 1.2M farms represented 38.3% of the entire chicken industry and managed 343M birds. Five years...
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...FIN 3103 FINANCIAL MARKETS AND INSTITUTIONS– SECTION 1A AN INTRODUCTION TO THE ASIAN EQUITY MARKET & ITS EXCHANGES SAMUEL TOW WEE YAP (A0102724U) LIEW KUANG CHEN JOEL (A0004624U) ANG CHUAN HWEN JEREMY (A0080928X) LIAW YIH HANG (A0091535E) WU GUIYAN (A0100395N) ZHAO CHUANYI (A0105563L) Contents 1. Introduction ..................................................................................................................................................................................................... 4 2. Objectives of the Stock Market ................................................................................................................................................................. 4 2.1 Capital Formation ......................................................................................................................................................................................... 4 2.2 Connecting Traders ...................................................................................................................................................................................... 4 2.3 Security............................................................................................................................................................................................................. 4 2.4 Economic Indicator ...................................................................................................
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...share in the world economy is set to grow further. Despite the recent decline in the current account surplus, some imbalances remain, notably an overly high national saving rate, but ongoing reforms can be expected to help alleviate them over time. Structural reform has continued on a broad front in recent years, with an increasing focus on the need for social cohesion. Even so, efforts are under way or still needed in a number of areas to sustain improvements in living standards over the longer run. Further upgrading the monetary policy framework. China’s monetary policy framework has gradually become more market-based, with money growth as the main intermediate target. Going forward, it will need to place less emphasis on quantity-based liquidity controls and more on interest rate changes. Allowing greater exchange rate flexibility and putting more weight on an inflation objective would offer greater scope to tailor monetary policy to domestic macroeconomic conditions. Continuing financial market opening. Chinese financial institutions are now generally stronger and better...
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...Why do flash crashes happen In May 2010, the stock market lost and regained almost 10% of its value within minutes. This behavior suggests that the markets are unhealthy. Markets are generally considered to accurately determine the underlying value of assets in the real world. During a flash crash, the price is determined by the dynamics of the market rather than by real-world value. Fig. 1 Fig. 2 Fig. 3 Flash crashes can be understood by looking at how trades occur in the market. Figure 1 shows the standing buy and sell orders ("limit orders") at a particular time in the market. Each order is shown at the price it is offered. The shape of the buy order curve shows that at lower prices, traders want to buy more shares. But there are no orders at very low prices because nobody expects the price to drop that far. The reverse is true for sell orders: the number of orders increases as we go to higher prices and then disappears at still higher prices. In Figure 1, no trading would occur because there is no price with both a buy order and a sell order. Trades happen when someone enters an order to buy or sell at the current market price (a "market order"). Figure 2 shows the order book after a market sell order. The seller's shares go to the traders with the highest-priced standing buy orders. The executed buy orders disappear from the order book. The price drops to where the trade was executed. This is how selling a stock decreases its price. From this we can understand...
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