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Research On Off-Balance Sheet Activities Of Commercial Banks

Posted on:2004-06-29Degree:DoctorType:Dissertation
Country:ChinaCandidate:G Q LiuFull Text:PDF
GTID:1116360092487882Subject:Agricultural Economics and Management
Abstract/Summary:PDF Full Text Request
Since 70 & 80 decades of last century, a new tide of innovation has been commenced in modem commercial banks in west countries. Off-Balance Sheet Activities (OBSA) plays an active role as an important content of the innovation. Most commercial banks take OBSA business as their future orientation. OBSA has become the third pillar with its great increase of significance and scale in commercial bank's business structure, and its business amount is approximately reaching that of traditional assts and liabilities business, which rank the first and the second. OBSA brings enormous vigor to banking businesses through its features of low cost, high income and risks avoidance function. Meanwhile, OBSA promotes the functions of serving clients, tying up and consolidating relations with clients, accelerating the development of traditional business. Therefore, it is natural that foreign commercial banks have paid much attention to the development of OBSA. At present, it has become the third trend in the field of international finance with the other two globalization and securitization.This paper employs methods of concluding, demonstrating, analyzing and comparing to investigate the reasons, influences, development, management and supervision on its risks. Based on the above research, a framework of strategy is put forward. The following are the main contents of this paper.1. OBSA is a kind of financial innovation on operation. This paper begins with the theory of financial innovation to search for the basis of OBSA from different aspects, such as inducement by restrictions, avoidance of regulation, principal-agency theory, model of market for competition, theory of TRICK, inadequacy of investment, critical point and phenomenon reversion and the theory of character demand.2. On the basis of OBSA's definition in both broad sense and narrow sense, this paper differentiates the OBSA and intermediary business. It is concluded from the comparison that the conception of intermediary business is inaccurate and easy to cause confusion. While the conception of OBSA is not only accurate but also clear, and has been accepted and employed broadly in international finance, international accounting and Basel Committee. For the above reasons, the conception of OBSA is recommended for the convenience of comparison among different countries.3. The reasons of appearance and rapid development of OBSA can be summarized as following: the drastic financial turbulence, release of limitation on business, severe competition caused by financial disintermediation, requisition of avoiding of regulation and the improvement of science & technology. However, to some extent, the occurrence of OBSA destroys the stability of financial system, increases the functions of credit creation and decreases the validity of conductive mechanism of monetary policy while increasing the difficulties of implement of monetary policy.4. OBSA can also arouse financial risks while bringing considerable income. It is thetruth that profit will never be separated with risks. Avoiding risks is only a course of transfer of risks, and actually the risks won't disappear at all. This paper chooses some financial institution such as Bahrain, Daiwa, Fund of Orange County and Long Term Capital Management Company that have suffered tremendous losses from performing OBSA, and analyzes the cases involved in deep reason. It is very necessary to strengthen risk management and supervision of OBSA, which is the conclusion obtained. Value at Risk (VaR) is a new method to calculate the risk. In this paper, VaR is applied to make an integrative research on market risk and credit risk which are the most important and occurred frequently. At the same time, strict and flexible supervision is the guarantee to keep the sustainable development of OBSA, therefore, three levels of risk supervision are suggested: inner-control system of commercial banks, self-discipline of the whole industry and supervision from the authorities and international organizations.5.
Keywords/Search Tags:commercial banks, off-balance sheet activities, risk management, risk supervision, strategy
PDF Full Text Request
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