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1 – 6 of 6Financial crises in the international markets, which have global effects, have increased the importance of internal auditing especially in the banking sector in recent years…
Abstract
Financial crises in the international markets, which have global effects, have increased the importance of internal auditing especially in the banking sector in recent years. Minimizing the negative effects of crises is closely related to the establishment and functioning of an effective internal control system. International internal audit standards (IIAS) issued by the International Internal Audit Standards Boards are internationally applicable standards that contain the basic requirements for the professional implementation and evaluation of the effectiveness of internal auditing. In developing countries where the effects of crises are intensely felt, public banks are one of the most important actors of the financial system. An effective internal control structure in public banks and in compliance with international standards is necessary for a strong and fragile financial system. The purpose of this study is to examine the internal audit activities in public banks in terms of compliance with international standards. In this study conducted at one of the leading state-owned bank in Turkey, the bank’s internal control procedures and internal control activities reports were examined. In addition, the Bank’s internal audit activities were analyzed by conducting interviews with bank officials for a better understanding of the internal control system. The IIAS, which are grouped under two main headings, are related to the internal audit activities of the related bank. It is thought that the study will guide banks and auditors in terms of demonstrating the application of IIAS, which usually consist of abstract statements.
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The role of financial institutions and financial intermediaries in fostering economic growth (ECO) by improving the efficiency of capital accumulation, encouraging savings, and…
Abstract
The role of financial institutions and financial intermediaries in fostering economic growth (ECO) by improving the efficiency of capital accumulation, encouraging savings, and ultimately improving the productivity of the economy has been well established by the researchers. The reforms in the financial sector worldwide during the 1980s and 1990s were aimed at ushering in greater efficiency and more competitiveness.
The impact of financial market freedom (MF) on the overall development of the financial sector and thereby the growth in an economy is one of the most important considerations for policymakers over the years. This chapter aims to examine the causal relationship between financial MF and ECO in the Indian economy in the post-reform period.
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Riya Singla, Madhumita Chakraborty and Vivek Singh
The study examines the effect of increased Economic Policy uncertainty on analyst optimism in the Indian market. The study also explores whether the SEBI Research Analyst…
Abstract
Purpose
The study examines the effect of increased Economic Policy uncertainty on analyst optimism in the Indian market. The study also explores whether the SEBI Research Analyst Regulation, 2014, has effectively contained the optimistic nature of analysts.
Design/methodology/approach
The study is based on firms in the Indian market. The sample period is 2003–2020. It runs a linear panel regression to measure the impact of Economic Policy uncertainty on the optimism level of analysts' forecasts and recommendations, controlling for firm fixed effects. Further, the impact of the SEBI Research Analyst Regulation, 2014, has been assessed with the help of the difference-in-difference approach.
Findings
The Economic Policy uncertainty is significantly and positively related to the analyst optimism, reflected in the forecast bias and recommendation in the Indian context. The experience of analysts and the age of the firm positively drive optimism. However, introducing the Research Analyst Regulation by SEBI led to a decline in analyst optimism. The regulation decoupled the analysts' compensation from brokerage service transactions. Thus, the results suggest that the regulation has effectively curbed the incentive to produce optimistic output.
Originality/value
This is the first study in the Indian market to assess the impact of uncertainty on analyst output. It also investigates the effectiveness of the first analyst-specific regulation in India, i.e. The Research Analyst Regulation, 2014.
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Semir Ibrahimovic and Ulrik Franke
This paper aims to examine the connection between information system (IS) availability and operational risk losses and the capital requirements. As most businesses today become…
Abstract
Purpose
This paper aims to examine the connection between information system (IS) availability and operational risk losses and the capital requirements. As most businesses today become increasingly dependent on information technology (IT) services for continuous operations, IS availability is becoming more important for most industries. However, the banking sector has particular sector-specific concerns that go beyond the direct and indirect losses resulting from unavailability. According to the first pillar of the Basel II accord, IT outages in the banking sector lead to increased capital requirements and thus create an additional regulatory cost, over and above the direct and indirect costs of an outage.
Design/methodology/approach
A Bayesian belief network (BBN) with nodes representing causal factors has been used for identification of the factors with the greatest influence on IS availability, thus helping in investment decisions.
Findings
Using the BBN model for making IS availability-related decisions action (e.g. bringing a causal factor up to the best practice level), organization, according to the presented mapping table, would have less operational risk events related to IS availability. This would have direct impact by decreasing losses, related to those events, as well as to decrease the capital requirements, prescribed by the Basel II accord, for covering operational risk losses.
Practical implications
An institution using the proposed framework can use the mapping table to see which measures for improving IS availability will have a direct impact on operational risk events, thus improving operational risk management.
Originality/value
The authors mapped the factors causing unavailability of IS system to the rudimentary IT risk management framework implied by the Basel II regulations and, thus, established an otherwise absent link from the IT availability management to operational risk management according to the Basel II framework.
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Kumbirai Mabwe and Kalsoom Jaffar
This paper aims to present an analysis of the UK bank loans and deposits in tandem, linking the loan-to-deposit (LTD) ratio to macroprudential policy and funding restrictions. LTD…
Abstract
Purpose
This paper aims to present an analysis of the UK bank loans and deposits in tandem, linking the loan-to-deposit (LTD) ratio to macroprudential policy and funding restrictions. LTD ratio is used by micro and macroprudential authorities to address both structural (long-term) and cyclical (short-term) liquidity risks. It is an outcome of several political and economic factors and should be evaluated against this background.
Design/methodology/approach
The authors use trend analysis and panel regression to investigate LTD ratio of Major British Banking Groups from 1945 to 2012 in the midst of changing the UK Government policies.
Findings
The results show that wholesale funding, government intervention and repression were the major forces behind LTD trends.
Originality/value
The authors recommend the use of LTD as a complement to other liquidity ratios in micro and macro-prudential regulation, particularly in the context of current reforms to banking capital requirements.
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The purpose of this paper is to measure how frequently innovative financial products appeared or became widely adopted in the municipal securities markets over the last two…
Abstract
Purpose
The purpose of this paper is to measure how frequently innovative financial products appeared or became widely adopted in the municipal securities markets over the last two decades; and also investigate what types of issuers adopted the innovations, the relationship between yields and innovation and the patterns of diffusion within states.
Design/methodology/approach
Using comprehensive data on municipal securities issued from 1992 to 2015, the author searches for financial innovations as defined in the literature. The author uses issuer fixed effects models to characterize the relationship between yields and use of innovative products. Other models provide estimates of the conditional correlations between issuer characteristics and innovation usage. Finally, the author fits trend models to identify significant differences in the pace of adoption between different types of issuers.
Findings
In total, 35 security features fit one or more definitions of innovation. Extensive analysis is presented for four innovations that represent significant transfers of risk: variable rates, put options, corporate backers and derivatives. Small issuers used these innovative products, but the largest issuers adopted them to a greater extent. Usage appears to diffuse within states. Issuance of innovative securities fell during the financial crisis and has not recovered. Novel securities since the financial crisis have been created by legislation rather than by market participants.
Research limitations/implications
The data appear to cover all or nearly all municipal securities, but they do not cover loans or other types of municipal borrowing.
Practical implications
This analysis reveals that financial innovations in municipal securities markets usually take the form of a rare practice becoming widespread rather than a never-before-seen feature appearing in the market. Changes in response to legislation are an exception.
Social implications
Regulators concerned about financial stability can monitor the expansion of formerly rare securities features. This will be informative about new risks or transfers of risk in the market. They can also anticipate that expanded use of an innovation by states and high-volume issuers will be followed by adoption of the innovations by smaller, less sophisticated issuers in subsequent years.
Originality/value
This paper is the first attempt to empirically analyze the extent of financial innovation in municipal securities. Existing public finance literature has proposed definitions of financial innovation, qualitatively documented some specific innovations and empirically analyzed others. However, no previous study has empirically analyzed the entire municipal securities market for all possible innovations.
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