Inflated Credit Ratings, Regulatory Arbitrage and Capital Requirements: Do Investors Strategically Allocate Bond Portfolios?

2020 ◽  
Author(s):  
Martijn Adriaan Boermans ◽  
Bram van der Kroft
Keyword(s):  
Credit Ratings ◽  
Capital Requirements ◽  
Regulatory Arbitrage ◽  
Bond Portfolios

Corporate Bond Markets

2019 ◽  
pp. 113-130
Author(s):  
Kelly E. Carter
Keyword(s):  
Interest Rates ◽  
Credit Ratings ◽  
Corporate Bonds ◽  
Corporate Bond ◽  
Bond Markets ◽  
Bond Prices ◽  
Wall Street ◽  
Yield Curves ◽  
Bond Portfolios ◽  
The Impact

This chapter covers the fundamentals of corporate bond markets. It begins by highlighting the size and importance of these markets, followed by a discussion of the major types of corporate bonds and the process of issuing bonds. Next, the chapter provides a discussion of important relationships between a bond’s price and market interest rates, including the key observation that bond prices move opposite market interest rates. The next topic focuses on duration and convexity, which are techniques to estimate the dollar and percent changes in bond prices for a given change in market interest rates, followed by a discussion of bond immunization, which is a technique used to protect the value of bond portfolios from adverse changes in market interest rates. The final topics covered concern yield curves, credit ratings, and the impact of the Dodd-Frank Wall Street Reform Act of 2010 on corporate bond markets.

scholarly journals THE VAR AT RISK

2010 ◽  
Vol 13 (04) ◽  
pp. 503-506 ◽  
Author(s):  
ALFRED GALICHON
Keyword(s):  
At Risk ◽  
Value At Risk ◽  
Capital Requirements ◽  
Regulatory Capital ◽  
Regulatory Arbitrage ◽  
Risk Budgeting ◽  
Holding Company

I show that the structure of the firm is not neutral with respect to regulatory capital budgeted under rules which are based on the Value-at-Risk. Indeed, when a holding company has the liberty to divide its risk into as many subsidiaries as needed, and when the subsidiaries are subject to capital requirements according to the Value-at-Risk budgeting rule, then there is an optimal way to divide risk which is such that the total amount of capital to be budgeted by the shareholder is zero. This result may lead to regulatory arbitrage by some firms.

scholarly journals The Illusion of Motion: Corporate (Im)Mobility and the Failed Promise of Centros

2019 ◽  
Vol 20 (3) ◽  
pp. 425-465 ◽  
Author(s):  
Carsten Gerner-Beuerle ◽  
Federico Mucciarelli ◽  
Edmund Schuster ◽  
Mathias Siems
Keyword(s):  
Economic Incentives ◽  
Capital Requirements ◽  
Company Law ◽  
The Body ◽  
Regulatory Competition ◽  
Corporate Structure ◽  
Regulatory Arbitrage ◽  
Minimum Capital ◽  
European Court ◽  
Real Seat

Abstract The European Court of Justice’s landmark decision in Centros was heralded as creating the preconditions for a vibrant market for incorporations in the EU. In practice, however, today’s corporate landscape in Europe differs little from that of the late 1990s. Very few large companies have made use of their ability to subject themselves to the company law of a Member State in which they are not also headquartered, and there are few signs suggesting that a ‘European Delaware’ will emerge in the near future. To the extent that Member States have engaged in competitive law-making, this has largely been confined to minimum capital requirements and rules affecting the ease of the incorporation process—areas concerning primarily micro-companies. We argue that the modest effect of Centros is not only a function of limited economic incentives to engage in regulatory competition and regulatory arbitrage, but also of the fact that the applicability of large sections of relevant laws governing corporate behaviour is determined by real seat-like connecting factors which render regulatory arbitrage more difficult. We analyse the boundaries between the lex societatis and neighbouring legal areas, notably insolvency and tort law, and find that the body of rules regulating a company’s outward-facing activities, as opposed to its internal affairs, is largely removed from regulatory arbitrage. It therefore seems likely that the potential benefits of selecting the applicable company law, while remaining subject to a cocktail of other, equally relevant rules, are sufficiently small to be regularly outweighed by the costs of a complex and non-standard corporate structure that is necessary to exercise free movement rights.

Basel Capital Adequacy Ratio Standard in The Light of Islamic Law Perspective

2016 ◽  
Vol 1 ◽  
pp. 308-317
Author(s):  
Adi Rahmanur Ibnu
Keyword(s):  
Financial Crises ◽  
Global Economy ◽  
Banking Sector ◽  
Islamic Law ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Minimum Capital ◽  
Capital Adequacy Ratio ◽  
Global Banking ◽  
Banking Development

Bank is one of the most important pillars of economy activities. However, banking sector has a real potential crisis threat. Alongside with the steady current global banking development, financial crises that have happened clearly affected global economy. Based on that situation, BIS (Bank for International Settlement) – an international financial standard setting organization, realizes the urgency to establishan international financial standard and supervision to anticipate future potential financial crises. This research aims to identify how Capital Adequacy Ratio Standard in Basel Capital Accord (II) based on Islamic law perspective. The research is conducted by analyzing Basel Capital Accord published by BIS. The research uses library research method to find out the aimed result. The focus is on the 1st pillar of Basel II publication that is Minimum Capital Requirements (CAR) policy. CAR, as an Islamic economics policy, will be analyzed using falāḥ approach. Falāḥ is an Islamic economics objective that consists of happiness, success, accomplishment or good luck concept. The earthly dimension of falāḥ has some parameters that can be used to analyze Islamic economics policy. Additionally, the Islamic fiqh maxim takes part in analyzing the policy. The maṣlaḥat concept in fiqh maxim approach shares aim with falāḥ concept in the sense that all of sharia law aims for success, happiness, eternal survival etc. The maṣlaḥat can be accomplished by extinguishing mafsadat or seizing maṣlaḥat. The maṣlaḥat aspect is essential to determine the compatibility Basel Capital Accord with jurisprudential maxim i.e harm must be dispelled (al-dharāru yuzāl). The conclusion results are, 1) Basel Capital Accord focuses on macro-prudential aspect in order to anticipate potential financial crises, 2) beneficial/interest (maṣlaḥat) aspects of the hereafter, cooperation principle, justice, fairness and the prohibition of exploitation are not the core value of Basel Capital Accord frame work, thus 3) the achievement of maslahat as intended by sharia i.e. jurisprudential maxim are not convincing. Therefore, 4) Basel Capital Accord as a regulation basis is not in line with jurisprudential maxim i.e harm must be dispelled (al-dharāru yuzāl).

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