Integrated models of capital adequacy – Why banks are undercapitalised

With the majority of large UK and many US banks collapsing or being forced to raise capital over the 2007–9 period, blaming bankers may be satisfying but is patently insufficient; Basel II and Federal oversight frameworks also deserve criticism. We propose that the current methodological void at the heart of Basel II, Pillar 2 is filled with the recommendation that banks develop fully-integrated models for economic capital that relate asset values to fundamental drivers of risk in the economy to capture systematic effects and inter-asset dependencies in a way that crude correlation assumptions do not. We implement a fully-integrated risk analysis based on the balance sheet of a composite European bank using an economic-scenario generation model calibrated to conditions at the end of 2007. Our results suggest that the more modular, correlation-based approaches to economic capital that currently dominate practice could have led to an undercapitalisation of banks, a result that is clearly of interest given subsequent events. The introduction of integrated economic-scenario-based models in future can improve capital adequacy, enhance Pillar 2’s application and rejuvenate the relevance of the Basel regulatory framework.     

Joint implementation: a promising instrument for climate protection

The first Conference of the Parties to the UN Framework Convention on Climate Change opened the path for a new policy instrument to mitigate anthropogenic climate change. It instituted a pilot phase for international emission offsets, “Joint Implementation”, open for all signatories to the Convention. During the pilot phase, however, emission reductions achieved abroad cannot be credited to domestic emission targets. By 2000, a decision on crediting and the final structure of the Joint Implementation regime must be taken by the Conference of the Parties.     

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Ohne Zusammenfassung     

Decisions by players of comparable strength

Summary Committees are represented by simple games. The strength of the players is not always ordinally scaled. In ballots the strength of the players is (nearly) cardinally scaled (by the number of votes). The size of the gap between ordinally and cardinally scaled strength is examined. Especially in the ordinal case the constant-sum property has a much weaker meaning than in the cardinal case. Examples are constructed for the crucial points.     

Innovation and the creation,development and destruction of markets in the world machine tool industry

In the 1970's the Japanese machine tool builders began to create and develop, first in the US and later in Europe, new markets for computer-numerically controlled (CNC) machine tools. Their control-technology innovations rendered the machines of their US competitors obsolete. Consequently, many US and German machine tools builders, who saw their markets being destroyed by their larger Japanese competitors in the late 1970's, were forced to exist the industry in the mid 1980's. This study identifies the main characteristics of the world machine tool industry, describes the evolution of the world machine tool industry from the early 1960's, and analyzes the effect of Japanese innovation on US and German machine tool markets.     

Many leaders make light work in banking innovation projects

This paper reports the results of a study into leadership of new service development projects in consumer banking in the UK. It endorses the findings of previous research which shows more than one leader involved in major innovation projects, but highlights the importance of leadership team-working to successful projects. Furthermore it discusses the critical role of the senior leader in setting a leadership style for project leadership teams. The study found a power sharing (empowerment) approach in successful projects together with greater involvement by top management.