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This paper provides a comprehensive overview of the gradual evolution of the supervisory policy adopted by the Basel Committee for the regulatory treatment of asset securitisation. The pathology of the new “securitisation framework” is carefully highlighted to facilitate a general understanding of what constitutes the current state of computing adequate capital requirements for securitised credit exposures. Although a simplified sensitivity analysis of the varying levels of capital charges depending on the security design of asset securitisation transactions is incorporated, the author does not engage in a profound analysis of the benefits and drawbacks implicated in the new securitisation framework.

The purpose of this paper is to develop a possible method of money laundering and terrorism financing (MLTF) risk assessment in non‐bank entities that are the subject matter of anti‐money laundering and counter terrorism financing (AMLCTF) Tranche II in Australia.

The objectives are achieved by proposing a scorecard of risk assessment under its various dimensions drawing from the literature on credit‐scoring models. The method of analogy has been used and appropriate changes made to the elements of typical credit‐scoring model to arrive at a risk assessment model under AMLCTF II. The theory in which the paper is grounded is theories of money laundering regulation. Theory suggests an inverse relationship between money laundering regulation and the amount of money laundering. The more effective the regulatory mechanism the more costly it is for money launderers to launder funds and the lesser the amount of money laundering.

It was found that the AMLCTF Tranche II will impose several obligations the AMLCTF Tranche II legislation will impose several obligations on the entities such as accounting firms. These obligations require the identification, mitigation and management of MLTF risk arising out of provision of product/service. Two types of risks need to be managed by entities: regulatory risk and business risk. This paper, therefore, proposed a possible method for approaching the issue of risk assessment drawing from the literature on credit‐scoring models.

Future studies can undertake such surveys and gather more empirical evidence regarding the application of the model suggested and its utility in real world scenarios.

The approach developed in this paper has value to the policy makers in the government in addressing risk assessment policy issues in the MLTF area in the context of non‐bank entities such as professional services, e.g. that of accountants. The relevant bodies will also find value in this paper because currently there is no guidance as to how to address the issue. Also, future academics/researchers can take this first approach as a guide and go on do further research in this area and to refine policy issues in this area. No established practice exists in this area at the moment. This paper attempts to provide a guideline.

This paper addresses a major unanswered question in the subject of anti‐money laundering. The question addressed in this paper, which has not been researched before is how MLTF risk can be assessed in the context of non‐bank entities such as professional services, e.g. that of accountants. The model will be useful to user groups such as organizations dealing with bullions, precious stones and precious jewellery, real estate, professional and business services such accounting, auditing and financial services for implementing the AMLCTF Tranche II. The relevant bodies will also find value in this paper because currently there is no guidance as to how to address the issue. Also future academics/researchers can take this first approach as a guide and go on do further research in this area and to refine policy issues in this area.

This paper aims to explore the ways in which the international standards in the field of anti-money laundering (AML) and counter-terrorist financing (CTF) have reshaped regulatory regimes in a globalised world.

This paper deconstructs the origins and development of international standards in the field of AML and CTF dealing with longstanding legal professional privilege. This paper adopts both qualitative and quantitative research methodologies. The qualitative aspect comprises a literature review of sources, including scholarly works, Financial Action Task Force (FATF) recommendations, reports and domestic laws. The quantitative aspect analyses a unique and comprehensive table reproduced below, that indicates Australia’s compliance with all the FATF recommendations over more than a decade with full alternation to FATF’s revisions of its recommendations.

This paper demonstrates that an understanding of the influence of the FATF norms can shed light on the departure from regular lawmaking processes and emerging forms of international governance. The conclusion suggests that tranche II is coming and Australia will amend it in domestic regime to comply with the international standard, applying the AML/CTF regime to the legal profession and thus interfering with legal professional privilege. The question is not if but when.

This paper fills the gaps in the existing literature by contemplating the future of legal professional privilege globally and in Australia, which provides a case study of a regime that does not yet comply fully with AML and CTF international standard. This approach differs significantly from that of other literature in the field, which deals comprehensively with the theoretical foundations of legal professional privilege, as well as its practicalities and limitations, without considering the influence of the international non-binding norms.

The purpose of this paper is to highlight vulnerabilities in Australia’s anti-money laundering/counter-terrorism financing (AML/CTF) regime through Australia’s non-compliance with the Financial Action Task Force (FATF) recommendations on the regulation of designated non-financial businesses and professions (DNFBPs). It is intended that through examination of the justifications for and against AML/CTF regulation of DNFBPs, the paper will provide support for the position that Australia’s AML/CTF regime should incorporate regulation of DNFBPs.

The paper presents findings from research conducted in 2015 that focused on some of the principal arguments for and against the extension of Australia’s AML/CTF regime to DNFBPs. Review and consideration of the merits of these arguments is undertaken to support the conclusion that AML/CTF regulation should be extended to DNFBPs, in line with the FATF recommendations.

The current exemption of many DNFBPs from AML/CTF regulation perpetuates vulnerabilities within Australia’s AML/CTF regime; until this is addressed, criminals will continue to exploit these vulnerabilities and the regulated AML/CTF sector will continue to shoulder an unfair burden of Australia’s AML/CTF response.

This paper provides an objective assessment of factors for and against the regulation of DNFBPs in Australia. It may be of value to government policymakers, regulators, financial institutions and DNFBPs.

This paper complements existing research on this subject and provides a specific focus on some of the main arguments for and against the extension of Australia’s AML/CTF regime to specific DNFBPs.

The purpose of this paper is to introduce a project development framework (PDF) aiming to find socially beneficial public infrastructure provision (PIP) projects in the transport sector. From this perspective, the current paper focuses on the framework of finding an optimized PIP organizational model based on which the projects will be both economically and financially viable and will meet the interests of all the stakeholders. From this perspective, the objective of the current paper is to find in the design phase of the projects, a PIP organizational model for the transport sector, that generates the socially required economic internal rate of return (hereinafter EIRR), thus providing the society with the added social values from the relevant infrastructure projects and, at the same time, ensuring relevant level of the financial internal rate of return (hereinafter FIRR) for the private companies interested in investing in relevant assets. This allows finding socially beneficial PIP organizational model according to the adopted PDF.

The methodology aiming to develop the PDF focuses on analyzing both the economic and financial effectiveness of the PIP projects by exploring different combinations of available options for business, contractual, and financial models of relevant projects. Based on the example of the Republic of Armenia it is shown how the EIRR can be calculated for the PIP projects using the adopted PDF by taking into consideration the transport sector specifics of the country.

The main advantage of the designed framework is that it focuses on the calculation of the EIRR not only based on the different design options, but also explores the influence of the chosen procurement models on the economic output of the projects. The identification and the calculation of the positive and negative externalities (benefits and losses of the projects) in the economic values within the current PDF serve as the main instrument for the development of the PIP optimized socially beneficial/viable organizational models. The main privilege of the paper is that it considers the social aspect of the project together with the financing aspect without extruding any interests of the parties.

The uniqueness and the novelty of the adopted PDF is that it considers the efficiency of the PIP projects based on the analysis of not only the design options that influence the economic and financial output of the projects, but also compares the impact of the different combinations of the existing privatization, partnership, contractual, financial, and business models on the level of the EIRR and the FIRR. The socially beneficial infrastructure (economically viable) model generates economically and financially viable projects. Thus, the public partner is provided with the highest social value while the private partner is guaranteed a desired financial return.

The purpose of this paper is to examine the recent subprime mortgage market meltdown from a theoretical and practical perspective.

The authors apply the principles of transaction costs economics to critically evaluate the roles of lenders, borrowers, institutions, and investors.

It is found that a combination of need, greed, perverse incentives, inadequate risk controls, lax regulation, and lax oversight caused a bubble in the subprime mortgage market which has inevitably burst. The principles of transaction cost economics provide a template for analysis and corrective action.

The subprime mortgage market provides a useful example of where theory can provide helpful insights. The example has implications for future research in other financial market settings.

The results provide insight and guidance to lenders, borrowers, institutions, investors, regulators, and central bankers in how to identify and handle potentially toxic financial scenarios.

The theoretical perspective has not been applied to the subprime market or other similar financial settings. It offers both academic and practical contributions.

The aim of this study is to analyse the level of environmental, economic, and social engagement disclosed by local governments, taking into account factors such as political ideology and media pressure.

The authors analysed 102 large Spanish municipalities, using data from 2011. An econometric model was used based on dependency techniques for cross-sectional data. The Tobit technique is suitable, since it enables the authors to address particular considerations of extreme scores on the dependent variable.

The results show that local governments report less strategic and socio-economic information when subjected to strong media pressure, because the press tends to focus on unusual, negative news, and ignores other issues such as the environment. However, in municipalities governed by left-wing parties, media pressure actually promotes disclosure of this type of information.

It would be interesting to create an information index which includes local governments' disclosure, spanning a period of several years.

Particularly in municipalities governed by a left-wing party, media pressure favours the disclosure of sustainability information, including information about the municipal corporation and strategic and social issues.

This study analyses the impact of the press on the disclosure of sustainability information by local governments and also tests the moderating effect of the ruling party's political ideology. The authors did not find any paper that had analysed this impact before.

Risk is difficult to measure — so difficult that no single measure seems robust enough for all circumstances. This is especially true of measuring the risk contained in insurance‐linked securities. Insurance risk is usually asymmetrically skewed. As a conse‐quence, traditional capital market risk measures — expected loss, probability of default, and the standard deviation of return out‐comes — are less than perfect to the insurance task. Without a good risk measure, it is impossible to compare the risk‐adjusted pricing of insurance‐linked notes on a consistent basis. It is impossible to tell which securities are cheap and which are expensive. It is impossible to decide on their value relative to more traditional investments.

The purpose of this paper is to develop a model to hedge annuity portfolios against increases in life expectancy. Across the globe, and in the industrial nations in particular, people have seen an unprecedented increase in their life expectancy over the past decades. The benefits of this apply to the individual, but the dangers apply to annuity providers. Insurance companies often possess no effective tools to address the longevity risk inherent in their annuity portfolio. Securitization can serve as a substitute for classic reinsurance, as it also transfers risk to third parties.

This paper extends on methods insurer's can use to hedge their annuity portfolio against longevity risk with the help of annuity securitization. Future mortality rates with the Lee-Carter-model and use the Wang-transformation to incorporate insurance risk are forecasted. Based on the percentile tranching method, where individual tranches are aligned to Standard & Poor's ratings, we price an inverse survivor bond. This bond offers fix coupon payments to investors, while the principal payments are at risk and depend on the survival rate within the underlying portfolio.

The contribution to the academic literature is threefold. On the theoretical side, building on the work of Kim and Choi (2011), we adapt their pricing model to the current market situation. Putting the principal at risk instead of the coupon payments, the insurer is supplied with sufficient capital to cover additional costs due to longevity. On the empirical side, the method for the German market is specified. Inserting specific country data into the model, price sensitivities of the presented securitization model are analyzed. Finally, in a case study, the procedure to the annuity portfolio of a large German life insurer is applied and the price of hedging longevity risk is calculated.

To illustrate the implication of this bond structure, several sensitivity tests were conducted before applying the pricing model to the retail sample annuity portfolio from a leading German life insurer. The securitization structure was applied to calculate the securitization prices for a sample portfolio from a large life insurance company.

The findings contribute to the current discussion about how insurers can face longevity risk within their annuity portfolios. The fact that the rating structure has such a severe impact on the overall hedging costs for the insurer implies that companies that are willing to undergo an annuity securitization should consider their deal structure very carefully. In addition, we have pointed out that in imperfect markets, the retention of the equity tranche by the originator might be advantageous. Nevertheless, one has to bear in mind that by this behavior, the insurer is able to reduce the overall default risk in his balance sheet by securitizing a life insurance portfolio; however, the fraction of first loss pieces from defaults increases more than proportionally. The insurer has to take care to not be left with large, unwanted remaining risk positions in his books.

In this paper, we extend on methods insurer's can use to hedge their annuity portfolio against longevity risk with the help of annuity securitization. To do so, we take the perspective of the issuing insurance company and calculate the costs of hedging in a four-step process. On the theoretical side, building on the work of Kim and Choi (2011), we adapt their pricing model to the current market situation. On the empirical side, we specify the method for the German market. Inserting specific country data into the model, price sensitivities of the presented securitization model are analyzed.

This paper presents the first known non‐proprietary empirical examination of the relationship between Commercial Mortgage Backed Security (CMBS) pricing. CMBS prices are examined as a function of the “moneyness” of the default option, the age of the security, the interest rate, interest rate volatility, property price volatility, amortization features and yield curve slope utilizing a proprietary data set of monthly prices on 40 CMBS securities. We find that though the senior tranche CMBS in the sample are effectively immune from default loss per se, they are not immune from early return of principal and resulting duration shift implied by increasing default probabilities. Thus, they behave very much like residential mortgage backed securities in that discount security prices are positively related to explanatory variables associated with potential shifts in duration. As a result, senior tranche CMBS prices increase with explanatoryd factors that raise the likelihood of default such as property volatility and loan to value ratio whereas CMBS prices decrease with variables that lower default probability such as amortization. These empirical results fit well with existing theoretical models of multi‐tranche CMBS pricing and models of commercial mortgage default and suggest that senior tranche CMBS may embody elements of risk that justify their seemingly rich spreads to similar duration corporate securities.