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A comparative study of the capital structures of liquid and liquidity-stressed banks

- Momberume, Richard

  • Authors: Momberume, Richard
  • Date: 2013-07-24
  • Subjects: Bank liquidity , Bank failures , Discriminant analysis , Global Financial Crisis, 2008-2009 , Basel II (2004)
  • Type: Thesis
  • Identifier: uj:7697 , http://hdl.handle.net/10210/8563
  • Description: M.Comm. (Financial Management) , The costs of the 2007- 09 financial crises on global economies have resulted in new central bank rules to strengthen financial institutions. The question of whether there were any significant differences in capital structures between banks who were liquid and those who were liquidity constrained in the 2007– 2009 global financial crisis, still needs to be answered. Theoretical models on corporate failure partly explain how bank capital management impacts on whether a bank fails or not. This study investigates the differences in capital ratios between banks who were liquidity- stressed and those who were liquid. A comparative analysis of selected banking capital ratios were done followed by a discriminant analysis to determine if there is a relationship between the capital structures of liquid and liquidity- stressed banks. It was found that there were differences in capital structures of liquid and liquidity- stressed banks but capital ratios on their own, could not be used as early warning sign for bank failure.
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Extreme conditional value-at-risk : a scenario for risk management

- Mhlanga, Isaah Alexy

  • Authors: Mhlanga, Isaah Alexy
  • Date: 2013-09-17
  • Subjects: Risk management , Global Financial Crisis, 2008-2009 , Financial crises , Value at risk , Extreme value theory
  • Type: Thesis
  • Identifier: uj:7743 , http://hdl.handle.net/10210/8613
  • Description: M.Comm. (Financial Economics) , Systemically important international institutions that were too “big to fail” such as American International Group, Citi Group, Merrily Lynch, UBS and MF Global to name a few, were bailed out from their financial problems by their respective government. Besides the immediate substantial financial costs that were incurred globally, banking sector problems associated with the US mortgage-backed securities spread to other countries and had a significant negative impact on their real economies – many countries went into recession, unemployment increased and production levels declined. It is now 2012, three years after the crisis and global economic activity is yet to return to pre-crisis levels. Given the substantial losses that were incurred globally and claims that the financial crisis was caused by the failure of risk management, an investigation of the inadequacies of risk management as a discipline that developed to safeguard the world from such financial havoc is not only necessary but undoubtedly required. Therefore, this mini-dissertation investigate the inadequacy of risk management, specifically, the inadequacy of current models that are used to estimate market risk. Traditional Value-at-Risk (VaR) models and two extreme value theory (EVT) distribution models: the generalised extreme value distribution (GEV) and the generalised Pareto distribution (GPD) are used to estimate potential losses in order to evaluate the appropriate model for estimating losses in extreme market volatility. The main findings are that EVT-based models accurately estimates both downside and upside losses during extreme market volatility, and therefore must be used as internal bank models for market risk.
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Predicting extreme losses in the South African equity derivatives market

- Lourens, Karina

  • Authors: Lourens, Karina
  • Date: 2014-06-11
  • Subjects: Financial risk management - Forecasting , Financial risk management - South Africa , Derivative securities - South Africa , Stocks - South Africa , Financial crises - Asia , Global Financial Crisis, 2008-2009
  • Type: Thesis
  • Identifier: uj:11517 , http://hdl.handle.net/10210/11212
  • Description: M.Com. (Financial Economics) , This study investigates the best measure of extreme losses in the South African equity derivatives market, and applies this to estimate the size of a default fund for Safcom, the central counterparty (CCP) for exchange-traded derivatives in South Africa. The predictive abilities of historic simulation Value at Risk (VaR), Conditional VaR (CVaR), Extreme VaR (EVaR) calculated using a Generalised Extreme Value (GEV) distribution and stress testing are compared during historic periods of stress in this market. The iterative cumulative sum of squares (ICSS) algorithm of Inclan and Tiao (1994) is applied to identify significant and large, positive shifts in the volatility of returns, thus indicating the start of a stress period. The FTSE/JSE Top 40 Index Future (known as the ALSI future) is used as a proxy for this market. Two key periods of stress are identified, namely the 1997 Asian crisis and the 2008 global financial crisis. The maximum daily losses in the ALSI during these stress periods were observed on 28 October 1997 and 6 October 2008. For the VaR-based loss estimates, 2500 trading days’ returns up to 28 October 1997 and 2750 trading days’ returns up to 6 October 2008 is used. The study finds that Extreme VaR predicts extreme losses during these two historic periods of stress the most accurately and is consequently applied to the quantification of a default fund for Safcom, using 2500 daily returns from 5 June 2003 to 31 May 2013. The EVaR-based estimation of a default fund shows that the current Safcom default fund is sufficient to provide for market losses equivalent to what was suffered during the 2008 global financial crisis, but not sufficient for the magnitude of losses suffered during the 1997 Asian crisis.
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The proposed twin-peaks system for regulating the financial sector of South Africa in comparative perspective

- Erasmus, Amanda

The prudential regulator under the proposed twin peaks model of financial regulation

- Siphali, Sharm

  • Authors: Siphali, Sharm
  • Date: 2015
  • Subjects: Financial services industry - South Africa , Financial institutions - Law and legislation - South Africa , Banking law - South Africa , Global Financial Crisis, 2008-2009
  • Language: English
  • Type: Masters (Thesis)
  • Identifier: http://hdl.handle.net/10210/59433 , uj:16530
  • Description: Abstract: The effects and impact of the recent global financial crisis, are yet to fade away as being something of the past. Financial markets worldwide, in particular the major first world countries, are still trying to uncover the real causes that led to the crisis and how best to innovate with new risk mitigants to prevent such a catastrophic fallout from repeating itself. Reformed financial laws were being proposed and passed swiftly to protect the governments as well as its citizens from the so-called bailout packages. It is against this backdrop that there has been a concerted effort by the G20 countries to urgently propagate the reform of the Financial Regulatory environment. Whilst to a large extent it can be argued that South Africa may not have been directly impacted by the crisis at the time, its regulatory landscape as an emerging economy was and is by no means fool-proof. As a member of the G-20 countries South Africa is also obliged to align and review its financial regulatory laws as its financial markets also operate on a global scale. The South African financial markets framework and structure is largely similar in nature to its global counterparts, although on a smaller scale and less innovative. My dissertation sets out the global regulatory reaction following the global financial crisis and its challenges. In particular I deal with the review and intended reforms of the South African financial sector and its prudential regulation. The reforms proposed for South Africa are contained in the Financial Sector Regulation Bill. This bill proposes the “Twin Peaks” model of financial regulation. The Twin Peaks model refers to the creation of two dominant regulators for the financial sector, the Prudential Authority and the Financial Sector Conduct Authority. This regulatory reform is intended to bolster the ability of these two super regulators to have stronger monitoring, supervisory and enforcement powers in proactively preventing, mitigating and anticipating any potential threats to the financial system as well as protecting financial customers. The underlying objectives of these regulatory reforms are aimed at avoiding another global financial crisis as propagated by the G20 countries. Australia is one of the first countries that has embraced and started to adopt the Twin Peaks model of financial reform. I have chosen to compare the Australian Prudential Authority with the envisaged Prudential Authority for South Africa. In undertaking such a comparative exercise I highlight some of the major differences in terms of how the regulatory authorities are structured in both countries and give an assessment on its impact in enhancing its financial regulatory dispensation. I also point out some of the similarities in each country’s reform process. I note the benefits (little impact on the global financial crisis) that the Australian Prudential Authority has brought to its financial system and conclude that such benefits could also materialise for South Africa’s dispensation if implemented effectively. Finally I conclude with reasons why I think South Africa would benefit from adopting the Twin Peaks model of regulation in the form of the new Prudential Authority. In particular I am of the view that it would be in a much better position to proactively monitor, supervise, enforce and anticipate any systemic risks to its financial system thereby making it more resilient to any crisis. This reform is also intended to concentrate its efforts in protecting financial customers from unfair market conduct and treating them fairly. , LL.M.
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The relationship between fair value accounting and the cyclicality of bank lending in South Africa

- Chapanduka, Edwin Tinashe

  • Authors: Chapanduka, Edwin Tinashe
  • Date: 2016
  • Subjects: Current value accounting - South Africa , Fair value - South Africa - Accounting , Global Financial Crisis, 2008-2009 , Bank loans - South Africa , Financial instruments - South Africa
  • Language: English
  • Type: Masters (Thesis)
  • Identifier: http://hdl.handle.net/10210/261956 , uj:27635
  • Description: M.Com. , Abstract: The adoption and the application of fair value accounting (FVA) by financial institutions came under severe attack during the financial crisis. Critics of fair value accounting claimed that measuring financial instruments using fair values may have had unintended consequences such as increasing economic shocks, increasing income pro-cyclicality and undermining public confidence. They also indicated that fair value accounting of bank assets/liabilities results in increases in bank lending appetite which exposes financial institutions to credit risk. This debate presents a major challenge for FVA going forward. In this article, the researcher explores the relationship between fair value accounting of bank assets and bank lending in South Africa, and in particular, whether or not FVA exacerbates the cyclicality of bank lending in South Africa. In order to obtain an understanding of the research objective, the researcher has sought answers to the following questions: i. Do unrealised gains and losses from FVA affect bank lending? ii. Is there is a relationship between the FVA of banks’ assets and bank lending behaviour? iii. Is the FVA of bank assets pro-cyclical? To address these questions, the researcher have used econometric models, namely, unit root testing, ordinary least squares model, the GARCH-M model, the Johansen co-integration test and Granger causality test. This testing was further explored by means of a trend analysis. The research was limited to two financial institutions, namely, Bank 1 and Bank 2, using data extracted from the banks’ financial statements from 2003 to 2014. Lending data, asset amounts and fair value movements were used in this assessment. From the analysis of the results, using GARCH model we have noted that the volatility of FVA in the previous period affects bank lending in the current period. Further to that we noted that these co-efficients from the GARCH model were quite small, meaning that even while there is a positive relationship between...
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The value premium anomaly : evidence from the JSE in the post-global financial crisis era

- Mogapi, Benjamin

  • Authors: Mogapi, Benjamin
  • Date: 2018
  • Subjects: Stocks - South Africa - Rate of return - History , Global Financial Crisis, 2008-2009
  • Language: English
  • Type: Masters (Thesis)
  • Identifier: http://hdl.handle.net/10210/282390 , uj:30416
  • Description: M.Com. (Finance) , Abstract: The value premium is an anomaly of financial markets insofar as it enables portfolio managers to earn excess returns which cannot be predicted by the prevailing equilibrium asset pricing model, that is the capital asset pricing model (CAPM). The existence and persistence of the value premium anomaly is therefore a subject of interest for investment professionals. Kruger and Toerien (2014) tested the persistence of the value premium anomaly by investigating the effect of the global financial crisis of 2007 to 2009 on the value premium which was observed by prior studies of the JSE. The study confirms the value premium anomaly during the global financial crisis but finds that the proxy for the value premium is the ratio of a firm’s cash flow to its market price instead of the book-to-market or earnings-to-price ratios, as documented in prior studies on the JSE. The question addressed in the present study was whether or not the findings of Kruger and Toerien (2014) were specific to the period of the crisis or if similar results would be found almost a decade after the crisis. This is an important study to undertake as some researcher have suggested that the value premium observed in financial markets across the world is sample specific and data dependent (Pätäri & Leivo, 2017; Mahlophe & Muzindutsi, 2017; Malkiel, 2003). A quantitative approach was adopted to establish the relationship between proxies of the value premium anomaly and share returns. Panel regression analysis was applied to secondary data from the FTSE/JSE Top 40 Index which was used to study three sub-periods: the period before, during and after the global financial crisis of 2007 to 2009. The study concluded that there is a value premium anomaly for shares listed on the JSE in the period before, during and after the global financial crisis. Furthermore, the proxies by which value portfolios can be defined and ranked by order of significance are the cash-flow-to-price, book-to-market and earnings-to-price ratios.
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Volatility models applied to risk measurement after the global financial crisis

- Venter, Pierre Johan

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