The Economic Capital Management

Beyond these differences on the nature of the risk taken into account, the two types of methods are opposed to their method of calculation. Indeed, the peculiarity of the economic capital is that it incorporates the correlations between micro-economic risk of the counterparty in question and the macroeconomic risks that could affect it. The economic sector of the counterparty or its geographic location and are included in the measure of risk, so you can enjoy the most exhaustive possible potential failures.

More broadly, the sensitivity of the consideration to changing the general economic situation is also a factor in determining the economic capital, through the calculation of the coefficient R2. Thus, while regulatory capital stops at the theoretical definition of the risk of the counterparty, the internal model for determining the economic capital takes into account economic conditions and interdependencies of various factors, allowing a more detailed assessment of risk and therefore economic capital to put in front of the activity.

Specific objectives in the economic capital are an essential instrument of strategic management

Economic capital should actually meet three objectives nested, with the backdrop of the profit motive of financial institution:

* Assessment of risk-adjusted returns: in particular through the calculation of RAROC (Risk Adjusted Return on Capital). The RAROC measures the rate of return of an activity by adjusting the level of capital employed by the risk. Economic capital thus defined to measure the financial performance of the activity in the expected benefits related to capital needed to cover it.
* Portfolio Management: Once the risk-adjusted returns calculated, it becomes possible to compare the actual performance of various businesses of the bank.
* Strategic management activities: economic capital thus enables the bank to arbitrate between the different professions in order to optimize the use of capital.

http://www.youtube.com/watch?v=kx4K5aY9Wlk&NR=1

Visit Sponsor's Site

Best Playground Rubber Mulch

Since 1996 Rubberecycle established its name as one of the pioneers in tire recycling industry and have first introduced best quality rubber surfacing products to the defense and the domestic market. They are using the state of the art technology and most advanced high tech equipments to process the rubber mulch. Playsafer Playground Rubber Mulch is an exclusive rubber granule designed exclusively to make your playground safe. playground surfacing with Rubber Mulch cushions falls and reduces unsafe playground impacts. And it is not only the safest playground surfacing; it's assured to last long for lifetime! Playsafer is available in a variety of vibrant colors to choose. Since the customers receive the highest quality product directly from plant the rates are competitively very cheap and they can provide the assured quality and prompt delivery on time. The rubber mulch provides unmatched safety performance with a perfect look that too with nil maintenance. They are non toxic and hence it is safe for your kids. They are odor less, will not rot or mold and will stay in position. Because of its best shock absorbing property, it makes the playground twice safe for the user. This is best suited for the day care centers, schools, townships and homes. Investing on Playsafer is the investment for the safety of your kith and kin those who are using your playground. For more details log on to rubberecycle.com or dial 1.888.436.6846

Regulatory Capital

With the reform of the Cooke ratio implementation through the Basel II regulations, the calculation of regulatory capital tends to approach the method highly economical. Based on a finer appreciation of risk capital. Regulatory and would achieve the same objectives as economic capital. But if the effects induced by the application of Basel II can approach the objectives of economic capital, economic capital remains under a real added value in relation to regulatory capital for strategic management activities.


The economic capital of a financial institution, amount of capital required to meet unexpected losses (unexpected loss) is defined using internal models for each activity. The Cooke ratio in turn was based on a more comprehensive approach to risk, not broken down by activity. Conversely, regulatory capital as defined by Basel II is characterized by a measure of individual risk, including segmentation between risk classes, which brings them closer to an economic vision. Moreover, the loss rate (LGD) or exposure to default (EAD) are factors common to both types of methods in determining the capital.

However, despite these similarities, a fundamental difference between the two methods is the notion of risk considered. Indeed, the risk of "outstanding" included in the internal economic capital model is wider than the risks involved in the Basel II regulations, and cover the face of unexpected losses does not necessarily require an increase in equity . Indeed, the economic capital includes the entire system set up on the line of activity. Thus, the managerial qualities such coverage may be the face of extraordinary losses considered in determining the economic capital.

potential Of Financial Services

The share of foreign capital into the banking assets of the countries of Central and Eastern Europe (CEE), now estimated at 75% to 80%, is anything but an accident. This trend was encouraged by the movement of bank privatization. Trade observed over the past decade and to develop intermediary capable of mobilizing domestic savings. Above all, this figure demonstrates the potential growth in the region to major markets such as Russia, Poland or Hungary, and masks the presence of unequal foreign financial players.

Specifically, several German and Italian banks such as Commerzbank and Unicredit or Austrian and Swiss, the image of Erste Bank and Raiffeisen, are already well established, indicating that geographic proximity was a key factor in the conquest of the new Eastern markets. Also, funds provided by these states and for the CEECs in the 1990s have probably facilitated the implementation of their banks. Most surprising finding, the "global players" (HSBC, Citibank ...) have invested less, preferring other growth markets like China. Similarly, the French presence is limited, with the exception of Societe Generale which CEE a major focus of its development.


Yet these countries have managed to restore their economies and now represent a real alternative to the erosion of traditional markets of Western Europe. To get there, the CEECs, ordered to move towards the convergence criteria, have benefited from European integration, or at least his perspective, positively impacting their economies. Thus, before adopting the euro in 2007, Slovenia has seen its GDP grow by 5.2%, its unemployment rate drop to 6% and inflation at 2.6%.

The Currency

The dollar Thaler born in the mountains of Bohemia in 1520, is very young face, for example, the dinar Arabic, the denarius of the New Testament. Longevity also a bit mysterious, like everything related to money. After all, why accept a piece of gold, silver or shell as payment? Because this object is easily transformed into jewelry, thus satisfying a need for adornment supposedly inherent in all humanity. But then an austere and puritanical society should not prohibit it and the currency is limited to barter? In fact, the seller has accepted this sign because he knows that he will pay him tomorrow or something, which means something more durable, the day after tomorrow. And he knows because it is the custom, or rather the law, which de facto limits the jurisdiction in which money circulates. Moreover, more power is distant and changing the law, more monetary support of the sign must be rare and valuable: Darius fought for gold, silver and Pericles Leonidas iron.

Therefore, only legitimate democracies of the twentieth century were able to permanently accept the greenback as currency transactions, and reserve account. Only, indeed, such a system allows the public to believe sincerely that the State work for the common good and not primarily for private benefit, especially legally. Contract law is respected by the courts, the promised values do not fluctuate overnight at the discretion of the parties, as is often the case with an arbitrary power, so a simple piece of paper is a reserve credible value. Even today, this is not apparent everywhere and one can rightly assume that the strong demand for gold, saving the Indians and, increasingly, the Chinese in fact reflect a deep distrust of these people face their leaders and their judges. It is thus not surprising that any lasting weakening of the statutory authority is accompanied by currency turmoil.