Fratianni & Marchionne 2009 - THE ROLE OF BANKS IN THE SUBPRIME FINANCIAL CRISIS
Samenvatting:
Vooral structured finance (securitization), fair value accounting en errors in judgement van Credit Rating Agencies hebben de crisis gemaakt tot wat ze is op vlak van banken.
Nuttige stukken:
There are some features that are unique to this crisis,
such as the transfer of assets from the balance sheets of banks to the markets,
the creation of complex and opaque assets, the failure of ratings agencies to
properly assess the risk of such assets, and the application of fair value
accounting P3
Two serious problems arise with the practice of structured
finance. The first regards the incentive of the originator to screen debtors
when the loans are destined to be placed off balance sheet. Reputational
considerations would suggest that the originator would not want to compromise
its standards. However, the fact that regulators and accounting standards
required little disclosure about unconsolidated off-balance sheet entities made
these entities opaque to investors and lowered the cost of reputational loss to
the sponsoring institution. P9
Implications of Fair Value accounting: The first is that
unrealized gains and losses impact owners capital. The second is that, like
for any other accounting rule, fair valuation provides incentives to management
to game the rules to boost earnings (or reduce losses) and management bonuses
linked to earnings performance. Thus, during periods of rising asset prices,
the incentives will be to move assets into the trading account categories, and
conversely during declining asset prices. The third is that when markets become
less liquid, valuation models based on internal information become more
relevant than valuation models based on observables and the latter more
relevant than the use of unadjusted quoted prices. In the presence of patently
illiquid markets, an argument can be made that fair values should be based on
reliable estimates of future net cash flows. Finally, the pro-cyclical bias of
fair value accounting tends to magnify current financial trends and,
consequently, exacerbates a financial crisis (Wallison 2008). Lower accounting
asset values that impact on regulatory capital may trigger management to sell
in illiquid markets. P13
Ander bruikbaar materiaal:
Errors
in judgment were as glaring as assigning the same letter grade to a CDO and a
corporate bond with sharply different default rates.6
Calomiris (2007,
p. 19) quotes from the Bloomberg Market of July, 2007 that CDOs rated
Baa by Moody suffered five-year default rates of 24 percent, whereas corporate
bonds with the same rating had default rates of 2.2 percent.
14-07-2009 om 00:00
geschreven door pieter
Te Doen Lijst
formeel testen informatie portefeuilles-> + vermelden in hoeveel gevallen die informatie van bronnen komt buiten de risk reports
kwaliteit? formeel testbaar?
typfouten verwijderen
ideeën omtrent eventuele 3e onderzoeksvraag
significantie overschakelen op impairment tests -> 3rd party test wordt inhouse test -> geen invloed meer door markt
P/E ratio's berekenen voor banken EPS ratio ROE ratio -> indien kapitaalverhoging, gebruik ROAE kijken naar evolutie in operationele resultaten enzo kijken hoeveel ratings KBC producten hebben en van wie (2-rating standard) eerst jaren 07 08 vergelijken en kwartaal 1.
