Qatar Airways Management of International competition Term Paper

Qatar Airways Management of International competition - Term Paper Example At the end of the paper, few of the growth strategies have been recommended to Qatar Airways in order to deal with the problem of rising international competition. Hence, the discussion in this paper is expected to provide with a detailed study of the problem of competition that Qatar Airways is facing in the present scenario. The potential risk of competition is the greatest problem that is faced by the managers of both the new businesses and the existing ones (Ethics Resource Center, 2012). Likewise, Qatar Airways is also facing maximum risks of competition in the international airlines market. In the present day, all the international airline companies are providing their passengers with quality services and several facilities during the air journey. Qatar Airways have been rapidly facing the problem of competition on the global context along with the increase of the number of airlines entering into the market. It is however comparatively a newly set up company, which could expand its business services within a fraction of time being formally restructured and re-established in the year 1997. Historical Review of Qatar Airways Qatar Airways Company was formed as a single leased domestic aircraft in November, 1993. But in January, 1994 it started its operations using Boeing 767-200ER from the Kuwait Airways. In the earlier days of its formation, it was totally owned and managed by the members of Royal Family of Qatar and was running as a no frill carrier. In the year 1997, the restructuring of the Airway was carried on and a new panel of management team was placed for the operations of the business. At present, Qatar Airways is partly owned by the government of Qatar and the private investors in the national market (The Qatar Source, 2011). Arguably, it has been with the virtues of its business level and corporate level strategies that within a fraction of time it was able to expand its services in almost all the continents of the world and become one of the m ost preferable airlines services providers in the world. The initial intention to establish Qatar Airways was to serve its Qatar based guests from the Indian subcontinents by providing attractive discounts in the journey in competition with the similar western companies. Later, with the rise in demand for the air journey between the routes, it decided to discard the idea of operating within the nation and implement a newer business model of being a global carrier in the airlines industry (Qatarhandball, 2013). Qatar Airways had a raise of 30% customers after its expansion of business as a global carrier across the world. This airline usually provides with international services from Doha International Airport. Recently, in the year 2012, it was observed that Qatar Airways possesses fleet of Boeing and Airbus since four years. Along with the provision of international services, Qatar Airways is also planning for providing the valuable customers with luxury lounge and a 5 star hotel f acility in the airport where the airways is operating (Destination Travel, 2012). Description and analysis of the problem of international competition by the managers The airlines industry usually operates in the oligopolistic market where the risk of competition always exists between the different companies. As a matter of fact, modern companies struggle hard to exist in such market and maintain their significant

Project Study 01 - Personal Objective Strategy Con't Statement

Project Study 01 - Objective Strategy Con't - Personal Statement Example Other weighty considerations in a dreaming well plan include ones specific synergies with their target organisation and their critical success and risk factors, whose analysis Gentle (108) argues is of utmost importance. Besides personal analysis, my dreaming well plan accommodates my primary target firm Nestle, where I realise particular interest in environmental sustainability (Nestle Sustainability Review 1-5) which bodes well with my strengths; hence strong specific synergies. All of these factors for the establishment of dreaming well plan do not have to be taken into consideration as prioritising can help to settle down on the strategic options for a dreaming well plan based on the most effective factors. Simerson (89) argues that it is absolutely necessary to gather and analyse everything about your dream, from personal stock taking to the opportunities available externally. Based on this, my career strategy plan can include research tasks into my career goals, SWOT, UPPs, specific synergies, critical success factors and personal risk factors. Research tasks into my strengths, weaknesses, opportunities and threats will help me know my career potential. Basing research on my UPPs will help me realise my selling points, while establishing my specific synergy will provide me with insight into how I fit into my preferred career. Research tasks focused on my critical success factors and risk factors can help determine where to position myself and what to avoid in my career path. The stakeholders in the first SO (focussing on my career goal, undertaking a SWOT analysis and considering my UPPs) are personal belief in the selected SO and the targeted client, hence I give it a score of 2. It also gets a 2 in terms of systems since it only involves motivations and achievement. Financially, it gets a 3 in terms of its low costs, income and ROI. (Total score=7). Focusing

LOreal company Project analysis

LOreal company Project analysis Many cosmetic brands are popping up recently, perhaps, due  to  the increasing consumers of products that beautify and enhance the physical appearance of a person. Even though the market is already full of the said cosmetic brands, the company LOreal Groups could still  be considered as the leading supplier cosmetics and hair-color. (LOreal Introduction profile) Company Profile   Before the facial cosmetics, LOreal was known as a hair-color formula developed by French chemist Eugene Schueller in 1907. It was then known as Aureole. Schueller formulated and manufactured his own products which were sold to Parisian hairdressers. It was only in 1909 that Schueller registered his company as Societe Francaise de Teintures Inoffensives pour Cheveus, the future LOreal. Scheuller began exporting his products, which was then limited to hair-coloring products. There were 3 chemists employed in 1920. In 1950, the research teams increased to 100 and reached 1,000 by 1984. Today, research teams are numbered to 2,000 and are still expected to increase in the near future. Through agents and consignments, Scheuller further distributed his products in the United States of America, South America, Russia and the Far East. The LOreal Group is present worldwide through its subsidiaries and agents. LOreal started to expand its products from hair-color to other cleansing and bea uty products. The LOreal Group today markets over 500 brands and more than 2,000 products in the various sectors of the beauty business. Such includes hair colors, permanents, styling aids, body and skincare, cleansers and fragrances. Indeed, the LOreal Group has reached the peak that all cosmetic brands sought after. Many factors contribute to the success of the Company. These will be discussed further in the proceeding parts of this study. (LOreal Introduction profile) http://photos7.flickr.com/8100492_df5327a9c4_m.jpg Since October, the most famous general public cosmetics brand, LOreal Paris, launched its products for men named: Men Expert. LOreal group already sold a range of cosmetics products for men with Biotherm or Lancà ´me brand for example, but it was the first time it launched these products with LOreal brand. With seven different products, LOreal Paris wants to touch all targets: Young men with their skins problems, adults men with their first tiredness signs but also matures men with their first wrinkles. LOreal Paris suggests as well specifics products for men such as shaving products or after-shave lotions. The prices of this range are between 2, 80 and 9, 95 à ¢Ã¢â‚¬Å¡Ã‚ ¬. They are reasonable because these products are marketed for general public. (LOreal Introduction profile) Global branding LOreal is a good illustration of how global branding can be used to generate new growth opportunities without in any way reducing responsiveness to local needs. LOreal has a portfolio of popular brands that embody their country of origin. The French company believes that two beauty cultures dominate the French and the American. The two flagship brands, LOreal and Maybelline, have distinct positions. LOreal is positioned as a French product, with supreme elegance, high prices and sophisticated packaging. Maybelline on the other hand, represents an American value for money product which is perceived as street smart and attempts to convey the urban American chic.Owen Jones feels that creativity in a large organization such as LOreal can be stimulated through competing brands2: It sets one research centre against another research centre, one marketing group against another marketing group. They fight among themselves and in so doing, we hope, also beat the competition. In line with this philosophy3, LOreal has set up two creative headquarters, one in Paris and the other in New York. Owen Jones explains: (LOreal policy) We set up a counter power in New York with people that have a totally different mindset, background and creativity. The two hubs undertake collaborative research efforts but are competitors when it comes to marketing. LOreals American brand, Redken, competes with Preference, the companys brand in France. Owen Jones feels that healthy competition will motivate the French and American companies to perform even better. (LOreal policy) Table I LOreal: Summarized Profit and Loss Account (Figures in $ Million) 1999 1998 1997 Sales 10,825 13,417 11,522 Gross Profit 3,733 4,864 4,298 Net Income 702 839 664 Net Profit Margin (Percent) 6.5 6.3 5.8 LOreals global marketing efforts have been spearheaded by Owen Jones himself. Press reports describe his habit of moving around on the streets in overseas markets, trying to understand customer needs. Owen Jones says*: We have this great strategy back in the head office of how we are going to do it worldwide. But when you go out and look at what is happening, is there a big gap between your projections and the reality of what you see and hear? It is so important to have a world vision because otherwise decentralized consumer goods companies with many brands can fracture into as many little parts if somebody isnt pulling it back the other way the whole time with a central vision. (LOreal policy) Table II LOreal: Geographic Segment Information (Sales for 1999) $ Million Percentage of Total Western Europe 5,995 56 North America 2,972 27 Other regions 1,837 17 Total 10,804 100 Having already established itself in Europe and the US, LOreal is now seriously looking at emerging markets. Its acquisition of Soft Sheen is expected to help LOreal to penetrate the African markets. L Oreal has been rapidly expanding in India since it set up shop in 1997. It is already the market leader in Mexico. LOreals experience in China reflects some of the challenges it faces in emerging markets. The companys move to use the glamorous Chinese movie star, Gong Li to sponsor its products has not paid off. Looking back, some analysts feel that LOreal should have preferred a sponsor with the girl next door looks as ordinary customers could not relate to Gong Li. When the movie stars contract came up for renewal, L Oreal decided to involve other sponsors in place of the earlier exclusive arrangement. One important market where LOreal continues to be weak is Japan, the second largest cosmetics market in the world with annual sales of about $ 25 billion. Among the problems which the company faces in Japan are the countrys complex distribution network and strict health and safety regulations. LOreal recently regained control of Maybelline from local cosmetics maker Kose which had purchased the rights prior to LOreals takeover. Notwithstanding these problems in Japan, LOreal seems well placed to continue its global thrust. The French company has seen double digit growth for the last 10 years. As Business Week has reported, LOreal has developed a winning formula: a growing portfolio of international brands that has transformed the French company into the United Nations of beauty. (LOreal policy) LOreal: The Global Presence Marketing Strategies Customer Satisfaction (Product; Price) The LOreal Group is known for their continuous innovation in order to improve the quality of their products and the services they have to offer to their consumers. Part of their strategic plan is to cater to the best interest of their costumers, in other words, costumer satisfaction. Through giving a wide variety of products, consumers have a whole gamut of products and services that they can choose from and which best serves their preference. The range of their prices caters to the demands of women, from the younger ones to the aging, from the affluent to those with lower budget for cosmetic products. Through constant research and passion for innovation, the LOreal Group best caters to the demands of women of different cultures. The Company also sees to it that they know the latest trend, or better yet, set the trend in the market as to attract more consumers. (Padambanam, 2010) Control of the Company A very vital aspect in the success of a company is how their leaders handle and run the business. In fact, the LOreal Group is very particular in the governance of the Company. The Board directors and the Board members are well aware of all of their duties required by their respective functions and of their collective mission, for it is in their hands that the Companys future depends on. The Board members are also obliged to act with due care and attention to their duties in order to carry out their responsibilities. (Padambanam, 2010) Worldwide Marketing (Place of Distribution; Promotion) Part of the LOreal Groups strategic plan is the marketing of their products worldwide. From the bloom of LOreal during its primary stage, the Company already catered to the demands of women worldwide. In line with this, they are also well aware of the diversities of women around the world. Part of this strategy is to formulate products that suit other women from other parts of the world. Through research and development of their products, the LOreal group has already covered most parts of the globe and still got high approval ratings from their clients. Just recently, the LOreal Groups received the Diversity Best Practices 2004 Global Leadership Award for embracing diversity, not only in their employees, but also in their consumers (Anonymous, 2004). The Companys taking consideration of women of color is especially appreciated by its consumers for they are also being given the chance to enhance their features and embrace their diversity without having to conform with the traditional concept of beauty, particularly that of the white Caucasian women. The LOreal Group also has employees who are considered minorities, such as the women and people of color. Valuing of the peoples culture and ideas is important to the LOreal Group, in order to best serve the interest of the consumers, the employees and the Company. (Padambanam, 2010) D. Impeccable Advertising (Promotion)   During the early days of advertising, LOreal commissioned promotional posters from various graphic artists to publicize the Companys products. The 1950s brought about a new advertising medium, particularly the movies. LOreal made its on-screen debut during this period and in 1953 won an award advertising Oscar, the first in a long series of awards. Today, LOreal takes on actresses or different personalities of all ages that best exudes the vision of the Company. Famous personalities enable average individuals to relate to their personal lives, that they can look as good, and so ensures higher sales. (Padambanam, 2010) Example Marketing in India In business, as in life, its important to be in the right place at the right time and thats clearly been the aim of French cosmetics giant LOreal in India. LOreal Paris, Lancome and Garnier tried and tested a variety of innovation and marketing strategies that appear to have paid off. Today, LOreal reportedly has 41.5 per cent share of the market in India for hair conditioner, around 20 per cent for hair coloring products, and 6.5 per cent and 4.6 per cent for the skincare and shampoo markets respectively. Meanwhile, it is the countrys leading player in the salon products sector. Different strategies of marketing of products in India:- (Padambanam, 2010) Going Local Garnier mens product For its consumer products brands Garnier and LOreal Paris, adapting to local culture and preferences has been critical. Increasingly our blockbusters have been India innovation-led products, .Garnier redesigned its Excellence hair-coloring product that involved more manual work to mix the dye. But at a quarter of the international retailing price, it meant new consumers were more willing to buy the product. Other successes include an oil-based shampoo, Garnier Fructis Shampoo + Oil, to match the frequent use of hair oil, as well as products for previously-dormant segments such as anti-wrinkle creams and mens skincare Growing the customer base In the emerging markets, product penetration is low, providing generous room for growth.  Theres a huge growth and a desire to consume even within segments that have a lot of usage like shampoos, there is a desire to upgrade to performing products. In India there is a heterogeneous market and each one has its own preferences. On all fronts, the growth is very high. Consumer goods are also showing healthy growth rates of about 15 percent. (Padambanam, 2010) Segmenting markets   Luxury products may be selling in Indias cosmopolitan cities like Delhi, Mumbai and Bangalore, but their small customer base also makes them highly competitive markets, whether for cosmetics, fragrances or accessories. . Additionally, there is a very large opportunity in the middle market where consumers want to consume but not at very high price points, a challenge for international players like LOreal that face brutal competition from successful local brands like Marico and Dabur India and consumer goods giant Hindustan Unilever. (Padambanam, 2010) ANSWER 2 LOreal Policy LOreal is required to have an understanding of its different cultural distinctions: à ¢Ã¢â€š ¬Ã‚ ¢ Reflect consumers diversity of origins within teams at every level In terms of nationality, ethnic or social origin, age, while maintaining standards of excellence in terms of competencies. à ¢Ã¢â€š ¬Ã‚ ¢ Promote gender equity within teams Promote the access of women to positions of responsibility, facilitate gender equity in functions that are currently over-staffed by men or women (Marketing, Industry), and ensure equal treatment in terms of salary. à ¢Ã¢â€š ¬Ã‚ ¢ Encourage the employment people with disabilities. à ¢Ã¢â€š ¬Ã‚ ¢ Valorize work experience in anticipation of a longer work life. à ¢Ã¢â€š ¬Ã‚ ¢ Develop an inclusive managerial culture, respectful of all. Diversities Matrix LOreal based its approach on a Diversities Matrix, composed of 6 priority dimensions and 7 action levers: (Padambanam, 2010) http://www.loreal.com/_en/_ww/html/company/Img/diversity/matrice.jpg Translating Commercial Websites: LOreal has links to numerous country specific website Again a very good example of global marketing strategy.The Web is not only a new channel for information exchange but also a powerful instrument for businesses to reach potential customers. With well-maintained multilingual websites, a company can not only project its image across borders but also sell goods online without the material presence of a shop front (Malaval, 2001 p.204). Commercial websites are seen as a necessary marketing move to reach out to visible and invisible customers in a real as well as avirtual world. The following discussion of commercial website translation takes into account the interaction and interdependence of three elements, namely the Web, translation and advertising. On at least two counts the translation of commercial websites coincides with advertising translation. First and foremost, advertising and websites are in essence mass communication devices in modern society. Therefore it is crucial to take into account elements of advertising translation i n order to investigate website translation. (LOreal Introduction profile) C:UsersKanikaAppDataLocalMicrosoftWindowsTemporary Internet FilesContent.WordNew Picture.png The figures above are the homepages of LOrà ©al websites in English and Chinese languages. These images suggest that there are at least two templates for websites, with figure 1-1 and 1-3 sharing the same layout and the other two another. The figures of different LOrà ©al websites offer certain guidance for the discussion. First of all, the verbal elements are undoubtedly an important aspect in the investigation of translational activity. Nonetheless, the layout and other non-verbal elements altogether provide insight into whether or not images/meanings are translated. In figures 1-1 to 1-4 for instance, the spokesperson and color scheme are very obvious differences. In the global website, the spokesperson in the homepage is a scientist who won a competition sponsored by the company. Clearly the image involved here aims to promote a recent campaign and is thus placed in the eye-catching place, indicating the companys intention to create a positive and involved corporate image. Yet it is important to be aware that this is a temporary promotional event and the image can be replaced anytime after the promotional period. The images of the spokesperson in the Taiwan and Hong Kong websites are the same, featuring an actress based in Hong Kong. The spokesperson in the simplified Chinese website, however, is yet another Chinese actress with whom the local audiences are more familiar. Aside from the image appearing on the homepage, the logo of the company is placed differently in the two templates. The template of the global website presents the logo at the upper-left corner, whereas the Hong Kong website template has the logo occupying nearly one-third of the webpage. (LEE, 2009) Conclusion: In business, as in life, its important to be in the right place at the right time and thats clearly been the aim of French cosmetics giant LOreal in India For nearly two decades, the owner of brands like Maybelline, LOreal Paris, Lancome and Garnier tried and tested a variety of innovation and marketing strategies that appear to have paid off. Today, LOreal reportedly has 41.5 per cent share of the market in India for hair conditioner, around 20 per cent for hair colouring products, and 6.5 per cent and 4.6 percent for the skincare and shampoo markets respectively. Meanwhile, it is the countries Innovating for a local market, both with product and pricing, as well as an aggressive marketing strategy, have proved particularly effective, says Dinesh Dayal (MBA 84J), LOreal Indias chief operating officer. Its really a mixture of intuition, hard market research and the power of our global RD which yielded the right kind of innovation.

Drinking Reality Essay -- essays papers

Drinking Reality There is nothing in the world I love more than coffee, I thought. The aroma that calls you from a million miles away. The bitterness it sends through your soul, filling you up; giving you the warmth that you so desperately crave. And the darkness†¦ the blackness that reminds me all too much of my life. I didn’t know what I was doing there, but somehow it made sense. I skipped my first class that day. My first class ever. I didn’t know why†¦. If I had to think about it, I never knew why I did anything. All my life, I was guided and told what to do by others. I never realized where I was going; I walked a tight rope of others expectations thinking that if I ever took my eyes off what was ahead, I would fall. I never even looked out to see if there was another rope†¦. Maybe one who did not have such high expectations. I just hoped that my parents and friends knew best, and that I was heading in the right direction. I sat at one of those coffee shops, w here they pretend that the black stuff that they sell you for three dollars a cup is really gourmet. I was sittin...

The Concern For Global Sustainability Issues Environmental Sciences Essay

One of the pressing jobs of the modern universe is planetary warming. This job has been analyzed by diverse research groups, and it is extremely controversial: the two chief positions are that planetary warming emerged due to human actions, and that planetary heating is a natural inclination and does non interfere with human actions ( Weart, 2011 ) . The protagonists of both hypotheses have a assortment of research turn outing their places, and neither of the hypotheses has been to the full proved today. The intent of this paper is to analyse the statements for and against each of these hypotheses related to planetary heating and to analyse the impact of planetary heating on a sustainable universe.1. The concern for planetary sustainability issuesThe job of planetary heating is widely discussed and analyzed presents, and it is normally supposed that the jobs of planetary heating started some 50-70 old ages before ( Turk & A ; Bensel, 2011 ) . Significant grounds of planetary warming emerged in the beginning of twenty-first century: analysis of temperatures clearly indicates that alterations took topographic points during the industrial period. In 2005 the research workers found out that universe oceans have dramatically warmed ( Weart, 2011 ) , which besides aligns with the hypothesis of planetary heating. Figure 1 shows the kineticss of temperature alterations during the recent 200 old ages. Figure 1. Global alterations of temperature during 1880-2000 period ( Smith, 2004 ) Such issues as intensive nursery gas emanations and depletion of ozone bed besides affect planetary clime and lead to climatic alterations. Possible effects of clime alterations might be the thaw of ice caps, deforestation, increased methane emanations and unexpected climatic alterations due to reconfigured pelagic circulation ( Masih, 2010 ) . Other utmost conditions events and rise of the sea degrees worldwide pose more menaces to the humanity. Climatic alterations might increase the possibility of the natural catastrophes, such as hurricanes, storms, heat moving ridges, drouths and inundations. Among a assortment of issues which should be considered to construct a sustainable universe in the conditions, there are the alterations in rainfall forms, increasing possibility of high temperatures and heat moving ridges, perceived badness of storms and hurricanes, and increased alterations of infective disease forms in the development states ( Masih, 2010 ) . All domains of human life, p articularly agribusiness, fabricating industries, wellness attention and building have to be ready to turn to the alterations, and in order to make sustainability, the solutions should be developed before important jobs with the bing methods emerge.2. Arguments for the hypothesis of natural global-warmingThe job of clime alteration is equivocal. There are a assortment of factors which might hold an impact on climatic conditions, and it is true that in the history of the Earth there have been dramatic alterations of temperature and other climatic conditions which did non associate to human activities ( Kump, 2011 ) . It is barely possible to set up cause-and-effect relationships between climatic alterations and the merchandises of human activity because purposeful scientific research on the jobs of environment is no more than 200 old ages old, which is non a important period to calculate the planetary alterations. The Earth has experienced important fluctuations of temperatures durin g its long-run history ( Kump, 2011 ) , and the humanity merely lacks grounds to turn out that climatic and temperature alterations are significantly associated with human activities. There is clear statistical grounds indicating out to the increased solar activity during the first half of the twentieth century, and greater volcanic activity. Khandekar, Murty and Chittibabu ( 2005 ) besides mention the relationship between the 11-year rhythm of solar activity, behavior of the tropical Pacific Ocean and the stratosphere. The bulk of bing climatic phenomena can be explained by these interrelatednesss, and even certain anticipations of the rainfall tendencies and natural catastrophes can be predicted utilizing this theoretical account. The analysis of physical grounds ( such as ice nucleuss, tree rings, dust plumes, and even the analysis of prehistoric small towns and algae skeletons ) provided by Singer and Avery ( 2007 ) along with human records and memories of the ice age and medieval warming show that planetary heating has been witnessed every 1500 old ages, and human-induced activities can non significantly change this tendency.3. Arguments for the hypothesis of human-induced planetary heatingSupporters of the human-induced theory of planetary heating have identified the nursery consequence aa‚ ¬ † addition of planetary temperatures due to turning concentration of specific gases in the ambiance of the Earth. These gases, particularly C dioxide, gaining control heat or infrared energy and keep warmer clime on the planet ( Turk & A ; Bensel, 2011 ) . The ocean H2O does non absorb big per centum of C dioxide, so big concentrations of C dioxide in the ambiance are likely to take to the addition of planetary temperatures. One more alarming effect of human activities is the depletion of ozone bed. Ozone is destructed by solar radiation in the ambiance, but it is re-created in natural manner. However, ozone can besides be destructed by Cl. Human-induced chemical compounds ( CFCs ) which contain Cl are really stable ; they can be therefore carried to the stratosphere and increase the velocity of ozone devastation. This external influence might interrupt the natural balance and consequence in the lessening of ozone bed ( make ozone holes ) . The denseness of ozone was analyzed in item in the 1980s, and scientists found important grounds of the decrease of ozone bed ( Turk & A ; Bensel, 2011 ) . Anticipated effects of human-induced planetary heating call the world to action and impulse to rethink the major ingestion processes taking topographic point in the modern society ( Weart, 2011 ) .DecisionThere is clear grounds that human activities can add to the climatic alterations ( Turk & A ; Bensel, 2011 ) , and uncontrolled enlargement and production are really likely to make conditions for environmental calamity, even if the chief cause of planetary heating is natural. Therefore, the humanity should concentrate chiefly non on seeking for the causes of planetary heating, but on future response to possible environmental challenges, and on making a sustainable society ( Rowland, 2010 ) . It should be noted that although there exist two opposing point of views on the job of planetary heating, both sides stress the importance of sustainability. Rowland ( 2010 ) gives grounds that due to human activities the regenerative capacity of the biosphere has been exceeded, and human existences are moving as the chief factor altering the Earthaa‚ ¬a„?s ecosystem now ( Turk & A ; Bensel, 2011 ) . This fact increases the environmental duty of the world, and relates to the issues of planetary heating in peculiar. The humanity should therefore halt debating whether the planetary heating is human-induced or non, and seek to cut down ain consequence on clime alterations. It can be done by making sustainable development schemes for both developed and developing states, and besides turn toing the jobs of population growing and extractive industries needed to keep the endurance of a big figure of people ( Rowland, 2010 ) .

Plea of an Aborted Fetus

Every people who reads called a reader. As we read an article or even a story we always make our own interpretation on what we read. Two ways of reading is reading like a reader and reading like a writer. A reading expert named Steve Peha, theorizes that there are two ways of reading, one is reading like a reader. This way of reading is a normal way of reading. According to Peha there are six activities that readers do while they are reading. First is Question, in which we ask question to our self while we are reading. We are curious in happenings and unusual things in the story or text that we read.Questioning helps us to analyze more and to easily understand what we are reading. Second is Predict, as a reader we always predcit and make guesses about what is coming next to the story. Third is Infer, sometimes, readers try to figure out what the writer is saying about the story that are not actually in the text. In this way of reading we readers use our imagination. The fourth one is Connect, readers try ro connect their own story in what they are reading, many stories reminded reader’s life on a story they read. Next is Feel, readers usually feels what the story is saying, many readers express their emotions while reading.Sad parts make them sad, the feelings they express depends on what the story is saying. The last is Evaluate, in this way of reading we try to make judgements on the text or story that we read, we ask questions like, is it a good story? What is the goal of the writer why did he/she write this story? It was just a fine questions for evaluating a story or a text. Another way of reading is reading like a writer. Readers focuses on what the writer is trying to say, they wanted to know different techniques that writers used in making a story or text. Professor Peha enumerates six things readers who are writers pay attention to.One is Ideas, idea is the heart of the story, without this a story can be just a simple story without a beautiful i dea. Second is Organization, this refers to the order of ideas and the way the writer from one idea to the next and how the writer organize the story to be more interesting to read. The third is Voice, this refers to the feeling of the writer’s individual personality through words. The writer just using the characters in the story or text just to express how he/she feels. Fourth is the Word Choice, this refers to the different words and set of phrases that writers used in the text to gather more attention of the reader.Fifth is the Sentence Fluency, this is the rhythm and flow of the structured sentence used by the writer in the text or story. Last is Convention, in making a text we have to be reminded that there are important parts like punctuation, grammar and spelling. Those are things that make writing consistent and easy to read. REACTIONS After I read about Peha’s two type of reading, I just realize that reading is not an easy thing to do, you have to use not onl y just your lips to read and yoyr mind to think.In reading for us to understand it more, we have to be open in what the writer is saying in the text, much more understanding if we feel and connect it in our life. Expressing feelings while reading. I do love how professor Peha generalizes the different types of reading. I just wanted to know how he does it? Even though I really don’t know him I admire him so much, because of what he done in the world of reading. If a person really love to read he/she will appreciate the 6 activities in reading like a reader and reading like a writer.

Difference Between Oxidation State and Oxidation Number

Difference Between Oxidation State and Oxidation Number Oxidation state and oxidation number are quantities that commonly equal the same value for atoms in a molecule and are often used interchangeably. Most of the time, it doesnt matter if the term oxidation state or oxidation number is used.There is a slight difference between the two terms.Oxidation state refers to the degree of oxidation of an atom in a molecule. In other words, oxidation state is the charge of an atom if all bonds it formed were ionic bonds. Each atom of the molecule will have a distinct oxidation state for that molecule where the sum of all the oxidation states will equal the overall electrical charge of the molecule or ion. Each atom is assigned an oxidation state value based on predetermined rules based on electronegativity and periodic table groups. If a molecule has a neutral charge, the sum of all oxidation states of its atoms must equal zero. For example, in the molecule FeCl3, each chlorine atom has an oxidation state of -1, while the iron atom has an oxidation state of 3. The three chlorine atoms cancel out the one iron atom, leaving a net charge of 0.Oxidation numbers are used in coordination complex chemistry. They refer to the charge the central atom would have if all ligands and electron pairs shared with the atom were removed.

Physical, Psychosocial & Cognitive Development of 0-3 essays

Physical, Psychosocial & Cognitive Development of 0-3 essays There are many developmental achievements that will occur in areas of physical, psychosocial and cognitive throughout the first three years. Normal developmental milestones nearly always occur in the same order but at different ages for different children. Caregivers are also teachers and must help cultivate their development and learning experiences through developmentally appropriate activities. There are no years more important then these first three years of life and it is of great importance that infants and toddlers get environmental stimulation through physical, motor, psychosocial, cognitive, language and literacy experiences. In the first 12 months of life, an infants size increases by approximately 50 percent and In no other one year period until puberty are there so many physical changes. . There are many milestones in the infants physical and motor development and their motor development will move from gross to fine in two distinct patterns. The cephalocaudal pattern is where motor control of the head to arms is achieved first then to trunk and legs. The proxmidodestal pattern is where command of head to the trunk is achieved first, followed by arms to the fingers and feet. Newborns respond physically to stimuli by unlearned and involuntary sensorimotor reflex abilities, such as sucking, rooting, stepping and grasping. Newborns uncoordinatedly swipe at objects and by the end of their first three months they will be able to hold their head steady and support their weight on their elbows. Around three to six months of age hand-eye coordination is improving and they are also able to begin to si t with some assistance or support and roll from side to back. Towards the end of 9 months infants will be able to raise themselves to a sitting position, sit steadily, crawl then creep and perhaps even stand up and cruise along furniture as well as successfully reach and grasp with their hands. Af...

Basel Norms in India

B. C. D. E. F. G. Background Functions of Basel Committee The Evolution to Basel II – First Basel Accord Capital Requirements and Capital Calculation under Basel I Criticisms of Basel I New Approach to Risk Based Capital Structure of Basel II First Pillar : Minimum Capital Requirement Types of Risks under Pillar I The Second Pillar : Supervisory Review Process The Third Pillar : Market Discipline 3 3 3 3 3 4 4 II. The Three Pillar Approach A. B. C. D. 5 5 6 6 7 7 7 III. Capital Arbitrage and Core Effect of Basel II A. Capital Arbitrage B. Bank Loan Rating under Basel II Capital Adequacy Framework C. Effect of Basel II on Bank Loan Rating IV. Basel II in India A. Implementation C. Impact on Indian Banks D. Impact on Various Elements of Investment Portfolio of Banks E. Impact on Bad Debts and NPA’s of Indian Banks D. Government Policy on Foreign Investment E. Threat of Foreign Takeover 8 8 9 10 10 10 V. Conclusion A. SWOT Analysis of Basel II in Indian Banking Context B. Challenges going ahead under Basel II 11 11 13 13 VI. VII. References The Technical Paper Presentation Team 2 I. Introduction: A. Background Basel II is a new capital adequacy framework applicable to Scheduled Commercial Banks in India as mandated by the Reserve Bank of India (RBI). The Basel II guidelines were issued by the Basel Committee on Banking Supervision that was initially published in June 2004. The Accord has been accepted by over 100 countries including India. In April 2007, RBI published the final guidelines for Banks operating in India. Basel II aims to create international standards that deals with Capital Measurement and Capital Standards for Banks which banking regulators can use when creating regulations about how much banks need to put aside to guard against the types of financial and operational risks banks face. The Basel Committee on Banking Supervision was constituted by the Central Bank Governors of the G-10 countries in 1974 consisting of members from Australia, Brazil, Canada, United States, United Kingdom, Spain, India, Japan, etc to name a few. The ommittee regularly meets four times a year at the Bank for International Settlements (BIS) in Basel, Switzerland where its 10 member Secretariat is located. B. Functions of the Basel Committee The purpose of the committee is to encourage the convergence toward common approaches and standards. However, the Basel Committee is not a classical multilateral organisation like World Trade Organisation. It has no founding treaty and it does not issue binding regulat ions. It is rather an informal forum to find policy solutions and promulgate standards. C. The Evolution to Basel II – First Basel Accord The First Basel Accord (Basel I) was completed in 1988. The main features of Basel I were: †¢ †¢ †¢ Set minimum capital standards for banks Standards focused on credit risk, the main risk incurred by banks Became effective end-year 1992 The First Basel Accord aimed at creating a level playing field for internationally active banks. Hence, banks from different countries competing for the same loans would have to set aside roughly the same amount of capital on the loans. D. Capital Requirements and Capital Calculation under Basel – I Minimum Capital Adequacy ratio was set at 8% and was adjusted by a loan’s credit risk weight. Credit risk was divided into 5 categories viz. 0%, 10%, 20%, 50% and 100%. Commercial loans, for example, were assigned to the 100% risk weight category. To calculate required capital, a bank would multiply the assets in each risk category by the category’s risk weight and then multiply the result by 8%. Thus, a Rs 100 commercial loan would be multiplied by 100% and then by 8%, resulting in a capital requirement of Rs8. E. Criticisms of Basel – I Following are the criticisms of the First Basel Accord (Basel I):†¢ †¢ It took too simplistic an approach to setting credit risk weights and for ignoring other types of risk. Risks weights were based on what the parties to the Accord negotiated rather than on the actual risk of each asset. Risk weights did not flow from any particular insolvency probability standard, and were for the most part, arbitrary. 3 †¢ †¢ †¢ The requirements did not account for the operational and other forms of risk that may also be important. Except for trading account activities, the capital standards did not account for hedging, diversification, and differences in risk management techniques. Advances in technology and finance allowed banks to develop their own capital allocation models in the 1990’s. This resulted in more accurate calculation of bank capital than possible under Basel I. These models allowed banks to align the amount of risk they undertook on a loan with the overall goals of the bank. Internal models allow banks to more finely differentiate risks of individual loans than is possible under Basel – I. It facilitates risks to be differentiated within loan categories and between loan categories and also allows the application of a capital charge to each loan, rather than each category of loan. F. New Approach to Risk-Based Capital †¢ †¢ †¢ By the late 1990’s, growth in the use of regulatory capital arbitrage led the Basel Committee to begin work on a new capital regime (Basel II) Effort focused on using banks’ internal rating models and internal risk models June 1999: The Basel Committee issued a proposal for a new capital adequacy framework to replace Basel – I. In order to overcome the criticisms of Basel – I and for adoption of the new approach to riskbased capital, Basel II guidelines were introduced. G. Structure of Basel – II Basel – II adopts a three pillar approach: †¢ †¢ †¢ Pillar I – Minimum Capital Requirement (Addressing Credit Risk, Operational Risk Market Risk) Pillar II – Supervisory Review (Provides Framework for Systematic Risk, Liquidity Risk Legal Risk) Pillar III – Market Discipline Disclosure (To promote greater stability in the financial system) II. The Three Pillar Approach The first pillar establishes a way to quantify the minimum capital requirements. The main objective of Pillar I is to align capital the adequacy ratios to the risk sensitivity of the assets affording a greater flexibility in the computation of banks’ individual risk. Capital Adequacy Ratio is defined as the amount of regulatory capital to be maintained by a bank to account for various risks inbuilt in the banking system. The focus of Capital Adequacy Ratio under Basel I norms was on credit risk and was calculated as follows: Capital Adequacy Ratio = Tier I Capital+Tier II Capital Risk Weighted Assets Basel Committee has revised the guidelines in the year June 2001 known as Basel II Norms. Capital Adequacy Ratio in New Accord of Basel II: Capital Adequacy Ratio = Total Capital (Tier I Capital+Tier II Capital) Market Risk(RWA) + Credit Risk(RWA) + Operation Risk(RWA) *RWA = Risk Weighted Assets Calculation of Capital Adequacy Ratio: Total Capital: Total Capital constitutes of Tier I Capital and Tier II Capital less shareholding in other banks. Tier I Capital = Ordinary Capital + Retained Earnings Share Premium – Intangible assets. Tier II Capital = Undisclosed Reserves + General Bad Debt Provision+ Revaluation Reserve+ Subordinate debt+ Redeemable Preference shares Tier III Capital: Tier III Capital includes subordinate debt with a maturity of at least 2 years. This is addition or substitution to the Tier II Capital to cover market risk alone. Tier III Capital should not cover more than 250% of Tier I capital allocated to market risk. A. First Pillar : Minimum Capital Requirement B. Types of Risks under Pillar I . Credit Risk Credit risk is the risk of loss due to a debtor’s non-payment of a loan or other line of credit (either the principal or interest (coupon) or both). Basel II envisages two different ways of measuring credit risk which are standarised approach, Internal Rating-Based Approach. The Standardised Approach The standardized approach is conceptually the same as the present Accord, but is more ri sk sensitive. Under this approach the banks are required to use ratings from External Credit Rating Agencies to quantify required capital for credit risk. The Internal Ratings Based Approach (IRB) Under the IRB approach, different methods will be provided for different types of loan exposures. Basically there are two methods for risk measurement which are Foundation IRB and Advanced IRB. The framework allows for both a foundation method in which a bank estimate the probability of default associated with each borrower, and the supervisors will 5 supply the other inputs and an advanced IRB approach, in which a bank will be permitted to supply other necessary inputs as well. Under both the foundation and advanced IRB approaches, the range of risk weights will be far more diverse than those in the standardized approach, resulting in greater risk sensitivity. 2. Operational Risk An operational risk is a risk arising from execution of a company’s business functions. As such, it is a very broad concept including e. g. fraud risk, legal risk, physical or environmental risks, etc. Basel II defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. Although the risks apply to any organization in business, this particular risk is of particular relevance to the banking regime where regulators are responsible for establishing safeguards to protect against systematic failure of the banking system and the economy. Banks will be able to choose between three ways of calculating the capital charge for operational risk – the Basic Indicator Approach, the Standardized Approach and the advanced measurement Approaches. 3. Market Risk Market risk is the risk that the value of a portfolio, either an nvestment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices. The preferred approach is VAR(value at risk). C. The Second Pillar : Supervisory Review Process Supervisory review process has been introduced to ensure not only that banks have adequate capital to support all th e risks, but also to encourage them to develop and use better risk management techniques in monitoring and managing their risks. The process has four key principles – a) Banks should have a process for assessing their overall capital adequacy in relation to their risk profile and a strategy for monitoring their capital levels. b) Supervisors should review and evaluate bank’s internal capital adequacy assessment and strategies, as well as their ability to monitor and ensure their compliance with regulatory capital ratios. c) Supervisors should expect banks to operate above the minimum regulatory capital ratios and should have the ability to require banks to hold capital in excess of the minimum. ) Supervisors should seek to intervene at an early stage to prevent capital from falling below minimum level and should require rapid remedial action if capital is not mentioned or restored. D. The Third Pillar : Market Discipline Market discipline imposes strong incentives to banks to conduct their business in a safe, sound and effective manner. It is proposed to be effected through a series of disclosure requirements on capital, risk exposure etc. so that market participants can assess a bank’s capital adequacy. These disclosures should be made at least semiannually and more frequently if appropriate. Qualitative disclosures such as risk management objectives and policies, definitions etc. may be published annually. 6 III. Capital Arbitrage and Core Effect of Basel II Regulatory arbitrage is where a regulated institution takes advantage of the difference between its real (or economic) risk and the regulatory position. Securitization is the main means used by Banks to engage in Regulatory Capital Arbitrage. Example of Capital Arbitrage is given below: A. Capital Arbitrage †¢ Assume a bank has a portfolio of commercial loans with the following ratings and internally generated capital requirements – AA-A: 3%-4% capital needed – B+-B: 8% capital needed – B- and below: 12%-16% capital needed Under Basel I, the bank has to hold 8% risk-based capital against all of these loans To ensure the profitability of the better quality loans, the bank engages in capital arbitrage, it securitizes the loans so that they are reclassified into a lower regulatory risk category with a lower capital charge Lower quality loans with higher internal capital charges are kept on the bank’s books because they require less risk-based capital than the bank’s internal model indicates. †¢ †¢ †¢ B. Bank Loan Rating under Basel – II Capital Adequacy Framework †¢ On April 27, 2007, the Reserve Bank of India released the final guidelines for implementation of the New Capital Adequacy Framework (Basel II) applicable to the Banking system of the country The new framework mandates that the amount of capital provided by a bank against any loan and facility will be based on the credit rating assigned to the loan issue by an external rating agency. This means that a loan and a facility with a higher credit rating will attract a lower risk weight than one with a lower credit rating. †¢ †¢ Illustration of capital-saving potential by banks on a loan of Rs 1000 million Rating Basel I Basel II Capital Saved (Rs Long Short Risk Capital Risk Capital Million) Term Term Weight Required* Weight Required Rating Rating (Rs Million) (Rs Million) AAA P1+ 100% 90 20% 18 72 AA P1 100% 90 30% 27 63 A P2 100% 90 50% 45 45 BBB P3 100% 90 100% 90 0 BB P4 P5 100% 90 150% 135 (45) below Unrated Unrated 100% 90 100% 90 0 *Capital required is computed as Loan Amount ? Risk Weight ? 9% C. Effect of Basel – II on Bank Loan Rating †¢ †¢ Banks would either prefer that the Borrower should get itself rated, or, It would prefer that the borrowing institution should pay a higher rate of interest to compensate for the loss. 7 To substantiate the above fact, following example is taken in respect of a strong company: Loan of Rating AAA is taken of Rs 100 Crores @ 12% interest rate Capital Adequacy Rating Risk % Capital Required Opportunity Ratio (Rs Crores) Interest lost by the Bank (Rs Crores) C. A. R. Unrated 100% 9. 00 1. 08 C. A. R. New 20% 1. 80 0. 22 Total Opportunity Interest lost by the Bank (Rs Crores) 0. 86 Hence, Banks would resort to the above-mentioned measures in order to reduce or curb this loss on opportunity interest. Worse affected by this action taken by Banks would be the weaker companies. They would either be charged a higher rate of interest on loans to compensate for the loss or would alternatively have to approach another bank charging a lower rate of interest. The ideal solution to this problem would be that a weaker company should get itself rated and also take steps in order to have a better credit rating. Credit Rating is an evaluation of credit worthiness of a person, company or instrument. Thus, it indicates their willingness to pay for the obligation and the net worth. IV. Basel II in India A. Implementation The deadline for implementing the base approach of Basel II norms in India, was originally set for March 31, 2007. Later the RBI extended the deadline for Foreign banks in India and Indian banks operating abroad to meet those norms by March 31, 2008, while all other scheduled commercial banks were to adhere to the guidelines by March 31, 2009. Later the RBI confirmed that all commercial banks were Basel II compliant by March 31, 2009. Keeping in view the likely lead time that may be needed by the banks for creating the requisite technological and the risk management infrastructure, including the required databases, the MIS and the skill up-gradation, etc. , RBI has proposed the implementation of the advanced approaches under Basel II in a phased manner starting from April 1, 2010 B. Impact on Indian Banks Basel II allows national regulators to specify risk weights different from the internationally recommended ones for retail exposures. The RBI had, therefore, announced an indicative set of weights for domestic corporate long-term loans and 8 bonds subject to different ratings by international rating agencies such as Moody’s Investor Services which are slightly different from that specified by the Basel Committee (Table 1). C. Impact on various elements of the investment portfolio of banks The bonds and debentures portfolio of the banks consist of investments into higher rated companies, hence the corporate assets measured using the standardised approach may be exposed to slightly lower risk weights in comparison with the 100 per cent risk weights assigned under Basel I. The Indian banks have a large short-term portfolio in the form of cash credit, overdraft and working capital demand loans, which were un-rated, and carried a risk weight of 100 per cent under the Basel I regime. They also have short-term investments in commercial papers in their investment portfolio, which also carried a 100 per cent risk weight. The RBI’s capital adequacy guidelines has prescribed lower risk weights for short-tem exposures, if these are rated (Table 2). This provides the banks with an opportunity to benefit from their investments in commercial paper (which are typically rated in A1+/A1 category) and give them the potential to exploit the proposed short-term credit risk weights by obtaining short-term ratings for exposures in the form of cash credit, overdraft and working capital loans. The net result is that the implementation of Basel II provided Indian banks with the opportunity to significantly reduce their credit risk weights and reduce their required regulatory capital, if they suitably adjust their portfolio by lending to rated but strong corporate and increase their retail lending. According to some reports, most of the Indian banks who have migrated to Basel II have reported a reduction in their total Capital Adequacy Ratios (CARs). However, a few banks, those with high exposures to higher rated corporate or to the regulatory retail portfolio, have reported increased CARs. However, a recent study by New Delhi-based industry lobby group Assocham has concluded that Capital Adequacy Ratio (CAR) of a group of commercial banks, which were part of the study improved to 13. 48% in 2008-09 from 12. 35% in 2007-08, due to lower risk weights, implementation of Basel II norms and slower credit growth. 9 D. Bad debts and requirement of additional capital In this context, the situation regarding bad debts and NPA’s is very pertinent. The proportion of total NPAs to total advances declined from 23. 2 per cent in March 1993 to 7. per cent in March, 2004. The improvement in terms of NPAs has been largely the result of provisioning or infusion of capital. This meant that if the banks required more capital, as they would to implement Basel II norms, they would have to find capital outside of their own or the governmentâ₠¬â„¢s resources. ICRA has estimated that, Indian banks would need additional capital of up to Rs. 12,000 crore to meet the capital charge requirement for operational risk under Basel II. Most of this capital would be required by PSBs Rs. 9,000 crore, followed by the new generation private sector banks Rs. 1,100 crore, and the old generation private sector bank Rs. 750 crore. In practice, to deal with this, a large number of banks have been forced to turn to the capital market to meet their additional regulatory capital requirements. ICICI Bank, for example, has raised around Rs. 3,500 crore, thus improving its Tier I capital significantly. Many of the PSBs, namely, Punjab National Bank, Bank of India, Bank of Baroda and Dena Bank, besides private sector banks such as UTI Bank have either already tapped the market or have announced plans to raise equity capital in order to boost their Tier I capital. E. Government Policy on foreign investment The need to go public and raise capital challenged the government policy aimed at restricting concentration of share ownership, maintaining public dominance and limiting foreign influence in the banking sector. One immediate fallout was that PSBs being permitted to dilute the government’s stake to 51 per cent, and the pressure to reduce this to 33 per cent increased. Secondly, the government allowed private banks to expand equity by accessing capital from foreign investors. This put pressure on the RBI to rethink its policy on the ownership structure of domestic banks. In the past the RBI has emphasised the risks of concentrated foreign ownership of banking assets in India. Subsequent to a notification issued by the Government, which had raised the FDI limit in private sector banks to 74 per cent under the automatic route, a comprehensive set of policy guidelines on ownership of private banks was issued by the RBI. These guidelines stated, among other things, that no single entity or group of related entities would be allowed to hold shares or exercise control, directly or indirectly, in any private sector bank in excess of 10 per cent of its paid-up capital. F. Threat of foreign takeover There has been growing pressure to consolidate domestic banks to make them capable of facing international competition. Indian banks are pigmies compared with the global majors. India’s biggest bank, the State Bank of India, which accounts for onefifth of the total banking assets in the country, is roughly one-fifth as large as the world’s biggest bank Citigroup. Given this difference, even after consolidation of 10 omestic banks, the threat of foreign takeover remains if FDI policy with respect to the banking sector is relaxed. Not surprisingly, a number of foreign banks have already evinced an interest in acquiring a stake in Indian banks. Thus, it appears that foreign bank presence and consoli dation of banking are inevitable post Basel II. V. Conclusion A. SWOT Analysis of Basel II in Indian Banking Context Strenghts †¢ †¢ Aggression towards development of the existing standards by banks. Strong regulatory impact by central bank to all the banks for implementation. Presence of intellectual capital to face the change in implementation with good quality. †¢ †¢ †¢ Weaknesses Poor Technology Infrastructure Ineffective Risk Measures Presence of more number of Smaller banks that would likely to be impacted adversely. †¢ Opportunities †¢ †¢ Increasing Risk Management Expertise. Need significant connection among business,credit and risk management and Information Technology. Advancement of Technologies. Strong Asset Base would help in bigger growth. †¢ †¢ Threats Inability to meet the additional Capital Requirements Loss of Capital to the entire banking system, due to Mergers and acquisitions. Huge Investments in technologies †¢ †¢ †¢ B. Challenges going ahead under Basel II †¢ The new norms will almost invariably increase capital requirement in all banks across the board. Although capital requirement for credit risk may go down due to adoption of more risk sensitive models – such advantage will be more than offset by additional capital charge for operational risk and increased capital requirement for market risk. This partly explains the current trend of consolidation in the banking industry. Competition among banks for highly rated corporates needing lower amount of capital may exert pressure on already thinning interest spread. Further, huge implementation cost may also impact profitability for smaller banks. The biggest challenge is the re-structuring of the assets of some of the banks as it would be a tedious process, since most of the banks have poor asset quality leading to significant proportion of NPA. This also may lead to Mergers Acquisitions, which itself would be loss of capital to entire system. The new norms seem to favor the large banks that have better risk management and measurement expertise, who also have better capital adequacy ratios and geographically diversified portfolios. The smaller banks are also likely to be hurt by the rise in weightage †¢ †¢ †¢ 11 of inter-bank loans that will effectively price them out of the market. Thus, banks will have to re-structure and adopt if they are to survive in the new environment. †¢ Since improved risk management and measurement is needed, it aims to give impetus to the use of internal rating system by the international banks. More and more banks may have to use internal model developed in house and their impact is uncertain. Most of these models require minimum historical bank data that is a tedious and high cost process, as most Indian banks do not have such a database. The technology infrastructure in terms of computerization is still in a nascent stage in most Indian banks. Computerization of branches, especially for those banks, which have their network spread out in remote areas, will be a daunting task. Penetration of information technology in banking has been successful in the urban areas, unlike in the rural areas where it is insignificant. An integrated risk management concept, which is the need of the hour to align market, credit and operational risk, will be difficult due to significant disconnect between business, risk managers and IT across the organizations in their existing set-up. Implementation of the Basel II will require huge investments in technology. According to estimates, Indian banks, especially those with a sizeable branch network, will need to spend well over $ 50-70 Million on this. Computation of probability of default, loss given default, migration mapping and supervisory validation require creation of historical database, which is a time consuming process and may require initial support from the supervisor. With the implementation of the new framework, internal auditors may become increasingly involved in various processes, including validation and of the accuracy of the data inputs, review of activities performed by credit functions and assessment of a bank’s capital assessment process. Pillar 3 purports to enforce market discipline through stricter disclosure requirement. While admitting that such disclosure may be useful for supervisory authorities and rating agencies, the expertise and ability of the general public to comprehend and interpret disclosed information is open to question. Moreover, too much disclosure may cause information overload and may even damage financial position of bank. Basel II proposals underscore the interaction between sound risk management practices and corporate good governance. The bank’s board of directors has the responsibility for setting the basic tolerance levels for various types of risk. It should also ensure that management establishes a framework for assessing the risks, develop a system to relate risk to the bank’s capital levels and establish a method for monitoring compliance with internal policies. The risk weighting scheme under Standardised Approach also creates some incentive for some of the bank clients to remain unrated since such entities receive a lower risk weight of 100 per cent vis-a-vis 150 per cent risk weight for a lowest rated client. This might specially be the case if the unrated client expects a poor rating. The banks will need to be watchful in this regard. †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ We can conclude by saying that the Basel II framework provides significant incentives to banks to sharpen their risk management expertise to enable more efficient risk-return tradeoffs, it also presents a valuable opportunity to gear up their internal processes to the 12 international best standards. This would require substantial capacity building and commitment of resources through close involvement of the banks’ Top Management in guiding this arduous undertaking. Notwithstanding intense competition, the expansionary phase of the economy is expected to provide ample opportunities for the growth of the banking industry. The growth trajectory, adherence to global best practices and risk management norms are likely to catapult the Indian Banks onto the global map, making them a force to reckon with. VI. References 1. The Evolution to Basel II by Donald Inscoe, Deputy Director, Division of Insurance and Research, US Federal Deposit Insurance Corporation. 2. Basel II – Challenges Ahead of the Indian Banking Industry by Jagannath Mishra and Pankaj Kumar Kalawatia. 3. Basel II Norms and Credit Ratings by CA Sangeet Kumar Gupta. 4. The Business Line Magazine. 5. The Chartered Accountant – Journal of the Institute of Chartered Accountants of India. 6. www. bis. org 7. www. rbi. org. in 8. www. wikipedia. org 9. www. google. com VII. The Technical Paper Presentation Team Name of Member Email ID’s rahulscsharma@icai. org tulsyan. abhishek@yahoo. co. in sikha. kedia0311@gmail. com ca. gouravmodi@gmail. com Praveen_did@yahoo. com 1. Rahul Sharma 2. Abhishek Tulsyan 3. Sikha Kedia 4. Gourav Modi 5. Praveen Didwania 13 Basel Norms in India Basel Norms in India Basel Norms in India B. C. D. E. F. G. Background Functions of Basel Committee The Evolution to Basel II – First Basel Accord Capital Requirements and Capital Calculation under Basel I Criticisms of Basel I New Approach to Risk Based Capital Structure of Basel II First Pillar : Minimum Capital Requirement Types of Risks under Pillar I The Second Pillar : Supervisory Review Process The Third Pillar : Market Discipline 3 3 3 3 3 4 4 II. The Three Pillar Approach A. B. C. D. 5 5 6 6 7 7 7 III. Capital Arbitrage and Core Effect of Basel II A. Capital Arbitrage B. Bank Loan Rating under Basel II Capital Adequacy Framework C. Effect of Basel II on Bank Loan Rating IV. Basel II in India A. Implementation C. Impact on Indian Banks D. Impact on Various Elements of Investment Portfolio of Banks E. Impact on Bad Debts and NPA’s of Indian Banks D. Government Policy on Foreign Investment E. Threat of Foreign Takeover 8 8 9 10 10 10 V. Conclusion A. SWOT Analysis of Basel II in Indian Banking Context B. Challenges going ahead under Basel II 11 11 13 13 VI. VII. References The Technical Paper Presentation Team 2 I. Introduction: A. Background Basel II is a new capital adequacy framework applicable to Scheduled Commercial Banks in India as mandated by the Reserve Bank of India (RBI). The Basel II guidelines were issued by the Basel Committee on Banking Supervision that was initially published in June 2004. The Accord has been accepted by over 100 countries including India. In April 2007, RBI published the final guidelines for Banks operating in India. Basel II aims to create international standards that deals with Capital Measurement and Capital Standards for Banks which banking regulators can use when creating regulations about how much banks need to put aside to guard against the types of financial and operational risks banks face. The Basel Committee on Banking Supervision was constituted by the Central Bank Governors of the G-10 countries in 1974 consisting of members from Australia, Brazil, Canada, United States, United Kingdom, Spain, India, Japan, etc to name a few. The ommittee regularly meets four times a year at the Bank for International Settlements (BIS) in Basel, Switzerland where its 10 member Secretariat is located. B. Functions of the Basel Committee The purpose of the committee is to encourage the convergence toward common approaches and standards. However, the Basel Committee is not a classical multilateral organisation like World Trade Organisation. It has no founding treaty and it does not issue binding regulat ions. It is rather an informal forum to find policy solutions and promulgate standards. C. The Evolution to Basel II – First Basel Accord The First Basel Accord (Basel I) was completed in 1988. The main features of Basel I were: †¢ †¢ †¢ Set minimum capital standards for banks Standards focused on credit risk, the main risk incurred by banks Became effective end-year 1992 The First Basel Accord aimed at creating a level playing field for internationally active banks. Hence, banks from different countries competing for the same loans would have to set aside roughly the same amount of capital on the loans. D. Capital Requirements and Capital Calculation under Basel – I Minimum Capital Adequacy ratio was set at 8% and was adjusted by a loan’s credit risk weight. Credit risk was divided into 5 categories viz. 0%, 10%, 20%, 50% and 100%. Commercial loans, for example, were assigned to the 100% risk weight category. To calculate required capital, a bank would multiply the assets in each risk category by the category’s risk weight and then multiply the result by 8%. Thus, a Rs 100 commercial loan would be multiplied by 100% and then by 8%, resulting in a capital requirement of Rs8. E. Criticisms of Basel – I Following are the criticisms of the First Basel Accord (Basel I):†¢ †¢ It took too simplistic an approach to setting credit risk weights and for ignoring other types of risk. Risks weights were based on what the parties to the Accord negotiated rather than on the actual risk of each asset. Risk weights did not flow from any particular insolvency probability standard, and were for the most part, arbitrary. 3 †¢ †¢ †¢ The requirements did not account for the operational and other forms of risk that may also be important. Except for trading account activities, the capital standards did not account for hedging, diversification, and differences in risk management techniques. Advances in technology and finance allowed banks to develop their own capital allocation models in the 1990’s. This resulted in more accurate calculation of bank capital than possible under Basel I. These models allowed banks to align the amount of risk they undertook on a loan with the overall goals of the bank. Internal models allow banks to more finely differentiate risks of individual loans than is possible under Basel – I. It facilitates risks to be differentiated within loan categories and between loan categories and also allows the application of a capital charge to each loan, rather than each category of loan. F. New Approach to Risk-Based Capital †¢ †¢ †¢ By the late 1990’s, growth in the use of regulatory capital arbitrage led the Basel Committee to begin work on a new capital regime (Basel II) Effort focused on using banks’ internal rating models and internal risk models June 1999: The Basel Committee issued a proposal for a new capital adequacy framework to replace Basel – I. In order to overcome the criticisms of Basel – I and for adoption of the new approach to riskbased capital, Basel II guidelines were introduced. G. Structure of Basel – II Basel – II adopts a three pillar approach: †¢ †¢ †¢ Pillar I – Minimum Capital Requirement (Addressing Credit Risk, Operational Risk Market Risk) Pillar II – Supervisory Review (Provides Framework for Systematic Risk, Liquidity Risk Legal Risk) Pillar III – Market Discipline Disclosure (To promote greater stability in the financial system) II. The Three Pillar Approach The first pillar establishes a way to quantify the minimum capital requirements. The main objective of Pillar I is to align capital the adequacy ratios to the risk sensitivity of the assets affording a greater flexibility in the computation of banks’ individual risk. Capital Adequacy Ratio is defined as the amount of regulatory capital to be maintained by a bank to account for various risks inbuilt in the banking system. The focus of Capital Adequacy Ratio under Basel I norms was on credit risk and was calculated as follows: Capital Adequacy Ratio = Tier I Capital+Tier II Capital Risk Weighted Assets Basel Committee has revised the guidelines in the year June 2001 known as Basel II Norms. Capital Adequacy Ratio in New Accord of Basel II: Capital Adequacy Ratio = Total Capital (Tier I Capital+Tier II Capital) Market Risk(RWA) + Credit Risk(RWA) + Operation Risk(RWA) *RWA = Risk Weighted Assets Calculation of Capital Adequacy Ratio: Total Capital: Total Capital constitutes of Tier I Capital and Tier II Capital less shareholding in other banks. Tier I Capital = Ordinary Capital + Retained Earnings Share Premium – Intangible assets. Tier II Capital = Undisclosed Reserves + General Bad Debt Provision+ Revaluation Reserve+ Subordinate debt+ Redeemable Preference shares Tier III Capital: Tier III Capital includes subordinate debt with a maturity of at least 2 years. This is addition or substitution to the Tier II Capital to cover market risk alone. Tier III Capital should not cover more than 250% of Tier I capital allocated to market risk. A. First Pillar : Minimum Capital Requirement B. Types of Risks under Pillar I . Credit Risk Credit risk is the risk of loss due to a debtor’s non-payment of a loan or other line of credit (either the principal or interest (coupon) or both). Basel II envisages two different ways of measuring credit risk which are standarised approach, Internal Rating-Based Approach. The Standardised Approach The standardized approach is conceptually the same as the present Accord, but is more ri sk sensitive. Under this approach the banks are required to use ratings from External Credit Rating Agencies to quantify required capital for credit risk. The Internal Ratings Based Approach (IRB) Under the IRB approach, different methods will be provided for different types of loan exposures. Basically there are two methods for risk measurement which are Foundation IRB and Advanced IRB. The framework allows for both a foundation method in which a bank estimate the probability of default associated with each borrower, and the supervisors will 5 supply the other inputs and an advanced IRB approach, in which a bank will be permitted to supply other necessary inputs as well. Under both the foundation and advanced IRB approaches, the range of risk weights will be far more diverse than those in the standardized approach, resulting in greater risk sensitivity. 2. Operational Risk An operational risk is a risk arising from execution of a company’s business functions. As such, it is a very broad concept including e. g. fraud risk, legal risk, physical or environmental risks, etc. Basel II defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. Although the risks apply to any organization in business, this particular risk is of particular relevance to the banking regime where regulators are responsible for establishing safeguards to protect against systematic failure of the banking system and the economy. Banks will be able to choose between three ways of calculating the capital charge for operational risk – the Basic Indicator Approach, the Standardized Approach and the advanced measurement Approaches. 3. Market Risk Market risk is the risk that the value of a portfolio, either an nvestment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices. The preferred approach is VAR(value at risk). C. The Second Pillar : Supervisory Review Process Supervisory review process has been introduced to ensure not only that banks have adequate capital to support all th e risks, but also to encourage them to develop and use better risk management techniques in monitoring and managing their risks. The process has four key principles – a) Banks should have a process for assessing their overall capital adequacy in relation to their risk profile and a strategy for monitoring their capital levels. b) Supervisors should review and evaluate bank’s internal capital adequacy assessment and strategies, as well as their ability to monitor and ensure their compliance with regulatory capital ratios. c) Supervisors should expect banks to operate above the minimum regulatory capital ratios and should have the ability to require banks to hold capital in excess of the minimum. ) Supervisors should seek to intervene at an early stage to prevent capital from falling below minimum level and should require rapid remedial action if capital is not mentioned or restored. D. The Third Pillar : Market Discipline Market discipline imposes strong incentives to banks to conduct their business in a safe, sound and effective manner. It is proposed to be effected through a series of disclosure requirements on capital, risk exposure etc. so that market participants can assess a bank’s capital adequacy. These disclosures should be made at least semiannually and more frequently if appropriate. Qualitative disclosures such as risk management objectives and policies, definitions etc. may be published annually. 6 III. Capital Arbitrage and Core Effect of Basel II Regulatory arbitrage is where a regulated institution takes advantage of the difference between its real (or economic) risk and the regulatory position. Securitization is the main means used by Banks to engage in Regulatory Capital Arbitrage. Example of Capital Arbitrage is given below: A. Capital Arbitrage †¢ Assume a bank has a portfolio of commercial loans with the following ratings and internally generated capital requirements – AA-A: 3%-4% capital needed – B+-B: 8% capital needed – B- and below: 12%-16% capital needed Under Basel I, the bank has to hold 8% risk-based capital against all of these loans To ensure the profitability of the better quality loans, the bank engages in capital arbitrage, it securitizes the loans so that they are reclassified into a lower regulatory risk category with a lower capital charge Lower quality loans with higher internal capital charges are kept on the bank’s books because they require less risk-based capital than the bank’s internal model indicates. †¢ †¢ †¢ B. Bank Loan Rating under Basel – II Capital Adequacy Framework †¢ On April 27, 2007, the Reserve Bank of India released the final guidelines for implementation of the New Capital Adequacy Framework (Basel II) applicable to the Banking system of the country The new framework mandates that the amount of capital provided by a bank against any loan and facility will be based on the credit rating assigned to the loan issue by an external rating agency. This means that a loan and a facility with a higher credit rating will attract a lower risk weight than one with a lower credit rating. †¢ †¢ Illustration of capital-saving potential by banks on a loan of Rs 1000 million Rating Basel I Basel II Capital Saved (Rs Long Short Risk Capital Risk Capital Million) Term Term Weight Required* Weight Required Rating Rating (Rs Million) (Rs Million) AAA P1+ 100% 90 20% 18 72 AA P1 100% 90 30% 27 63 A P2 100% 90 50% 45 45 BBB P3 100% 90 100% 90 0 BB P4 P5 100% 90 150% 135 (45) below Unrated Unrated 100% 90 100% 90 0 *Capital required is computed as Loan Amount ? Risk Weight ? 9% C. Effect of Basel – II on Bank Loan Rating †¢ †¢ Banks would either prefer that the Borrower should get itself rated, or, It would prefer that the borrowing institution should pay a higher rate of interest to compensate for the loss. 7 To substantiate the above fact, following example is taken in respect of a strong company: Loan of Rating AAA is taken of Rs 100 Crores @ 12% interest rate Capital Adequacy Rating Risk % Capital Required Opportunity Ratio (Rs Crores) Interest lost by the Bank (Rs Crores) C. A. R. Unrated 100% 9. 00 1. 08 C. A. R. New 20% 1. 80 0. 22 Total Opportunity Interest lost by the Bank (Rs Crores) 0. 86 Hence, Banks would resort to the above-mentioned measures in order to reduce or curb this loss on opportunity interest. Worse affected by this action taken by Banks would be the weaker companies. They would either be charged a higher rate of interest on loans to compensate for the loss or would alternatively have to approach another bank charging a lower rate of interest. The ideal solution to this problem would be that a weaker company should get itself rated and also take steps in order to have a better credit rating. Credit Rating is an evaluation of credit worthiness of a person, company or instrument. Thus, it indicates their willingness to pay for the obligation and the net worth. IV. Basel II in India A. Implementation The deadline for implementing the base approach of Basel II norms in India, was originally set for March 31, 2007. Later the RBI extended the deadline for Foreign banks in India and Indian banks operating abroad to meet those norms by March 31, 2008, while all other scheduled commercial banks were to adhere to the guidelines by March 31, 2009. Later the RBI confirmed that all commercial banks were Basel II compliant by March 31, 2009. Keeping in view the likely lead time that may be needed by the banks for creating the requisite technological and the risk management infrastructure, including the required databases, the MIS and the skill up-gradation, etc. , RBI has proposed the implementation of the advanced approaches under Basel II in a phased manner starting from April 1, 2010 B. Impact on Indian Banks Basel II allows national regulators to specify risk weights different from the internationally recommended ones for retail exposures. The RBI had, therefore, announced an indicative set of weights for domestic corporate long-term loans and 8 bonds subject to different ratings by international rating agencies such as Moody’s Investor Services which are slightly different from that specified by the Basel Committee (Table 1). C. Impact on various elements of the investment portfolio of banks The bonds and debentures portfolio of the banks consist of investments into higher rated companies, hence the corporate assets measured using the standardised approach may be exposed to slightly lower risk weights in comparison with the 100 per cent risk weights assigned under Basel I. The Indian banks have a large short-term portfolio in the form of cash credit, overdraft and working capital demand loans, which were un-rated, and carried a risk weight of 100 per cent under the Basel I regime. They also have short-term investments in commercial papers in their investment portfolio, which also carried a 100 per cent risk weight. The RBI’s capital adequacy guidelines has prescribed lower risk weights for short-tem exposures, if these are rated (Table 2). This provides the banks with an opportunity to benefit from their investments in commercial paper (which are typically rated in A1+/A1 category) and give them the potential to exploit the proposed short-term credit risk weights by obtaining short-term ratings for exposures in the form of cash credit, overdraft and working capital loans. The net result is that the implementation of Basel II provided Indian banks with the opportunity to significantly reduce their credit risk weights and reduce their required regulatory capital, if they suitably adjust their portfolio by lending to rated but strong corporate and increase their retail lending. According to some reports, most of the Indian banks who have migrated to Basel II have reported a reduction in their total Capital Adequacy Ratios (CARs). However, a few banks, those with high exposures to higher rated corporate or to the regulatory retail portfolio, have reported increased CARs. However, a recent study by New Delhi-based industry lobby group Assocham has concluded that Capital Adequacy Ratio (CAR) of a group of commercial banks, which were part of the study improved to 13. 48% in 2008-09 from 12. 35% in 2007-08, due to lower risk weights, implementation of Basel II norms and slower credit growth. 9 D. Bad debts and requirement of additional capital In this context, the situation regarding bad debts and NPA’s is very pertinent. The proportion of total NPAs to total advances declined from 23. 2 per cent in March 1993 to 7. per cent in March, 2004. The improvement in terms of NPAs has been largely the result of provisioning or infusion of capital. This meant that if the banks required more capital, as they would to implement Basel II norms, they would have to find capital outside of their own or the governmentâ₠¬â„¢s resources. ICRA has estimated that, Indian banks would need additional capital of up to Rs. 12,000 crore to meet the capital charge requirement for operational risk under Basel II. Most of this capital would be required by PSBs Rs. 9,000 crore, followed by the new generation private sector banks Rs. 1,100 crore, and the old generation private sector bank Rs. 750 crore. In practice, to deal with this, a large number of banks have been forced to turn to the capital market to meet their additional regulatory capital requirements. ICICI Bank, for example, has raised around Rs. 3,500 crore, thus improving its Tier I capital significantly. Many of the PSBs, namely, Punjab National Bank, Bank of India, Bank of Baroda and Dena Bank, besides private sector banks such as UTI Bank have either already tapped the market or have announced plans to raise equity capital in order to boost their Tier I capital. E. Government Policy on foreign investment The need to go public and raise capital challenged the government policy aimed at restricting concentration of share ownership, maintaining public dominance and limiting foreign influence in the banking sector. One immediate fallout was that PSBs being permitted to dilute the government’s stake to 51 per cent, and the pressure to reduce this to 33 per cent increased. Secondly, the government allowed private banks to expand equity by accessing capital from foreign investors. This put pressure on the RBI to rethink its policy on the ownership structure of domestic banks. In the past the RBI has emphasised the risks of concentrated foreign ownership of banking assets in India. Subsequent to a notification issued by the Government, which had raised the FDI limit in private sector banks to 74 per cent under the automatic route, a comprehensive set of policy guidelines on ownership of private banks was issued by the RBI. These guidelines stated, among other things, that no single entity or group of related entities would be allowed to hold shares or exercise control, directly or indirectly, in any private sector bank in excess of 10 per cent of its paid-up capital. F. Threat of foreign takeover There has been growing pressure to consolidate domestic banks to make them capable of facing international competition. Indian banks are pigmies compared with the global majors. India’s biggest bank, the State Bank of India, which accounts for onefifth of the total banking assets in the country, is roughly one-fifth as large as the world’s biggest bank Citigroup. Given this difference, even after consolidation of 10 omestic banks, the threat of foreign takeover remains if FDI policy with respect to the banking sector is relaxed. Not surprisingly, a number of foreign banks have already evinced an interest in acquiring a stake in Indian banks. Thus, it appears that foreign bank presence and consoli dation of banking are inevitable post Basel II. V. Conclusion A. SWOT Analysis of Basel II in Indian Banking Context Strenghts †¢ †¢ Aggression towards development of the existing standards by banks. Strong regulatory impact by central bank to all the banks for implementation. Presence of intellectual capital to face the change in implementation with good quality. †¢ †¢ †¢ Weaknesses Poor Technology Infrastructure Ineffective Risk Measures Presence of more number of Smaller banks that would likely to be impacted adversely. †¢ Opportunities †¢ †¢ Increasing Risk Management Expertise. Need significant connection among business,credit and risk management and Information Technology. Advancement of Technologies. Strong Asset Base would help in bigger growth. †¢ †¢ Threats Inability to meet the additional Capital Requirements Loss of Capital to the entire banking system, due to Mergers and acquisitions. Huge Investments in technologies †¢ †¢ †¢ B. Challenges going ahead under Basel II †¢ The new norms will almost invariably increase capital requirement in all banks across the board. Although capital requirement for credit risk may go down due to adoption of more risk sensitive models – such advantage will be more than offset by additional capital charge for operational risk and increased capital requirement for market risk. This partly explains the current trend of consolidation in the banking industry. Competition among banks for highly rated corporates needing lower amount of capital may exert pressure on already thinning interest spread. Further, huge implementation cost may also impact profitability for smaller banks. The biggest challenge is the re-structuring of the assets of some of the banks as it would be a tedious process, since most of the banks have poor asset quality leading to significant proportion of NPA. This also may lead to Mergers Acquisitions, which itself would be loss of capital to entire system. The new norms seem to favor the large banks that have better risk management and measurement expertise, who also have better capital adequacy ratios and geographically diversified portfolios. The smaller banks are also likely to be hurt by the rise in weightage †¢ †¢ †¢ 11 of inter-bank loans that will effectively price them out of the market. Thus, banks will have to re-structure and adopt if they are to survive in the new environment. †¢ Since improved risk management and measurement is needed, it aims to give impetus to the use of internal rating system by the international banks. More and more banks may have to use internal model developed in house and their impact is uncertain. Most of these models require minimum historical bank data that is a tedious and high cost process, as most Indian banks do not have such a database. The technology infrastructure in terms of computerization is still in a nascent stage in most Indian banks. Computerization of branches, especially for those banks, which have their network spread out in remote areas, will be a daunting task. Penetration of information technology in banking has been successful in the urban areas, unlike in the rural areas where it is insignificant. An integrated risk management concept, which is the need of the hour to align market, credit and operational risk, will be difficult due to significant disconnect between business, risk managers and IT across the organizations in their existing set-up. Implementation of the Basel II will require huge investments in technology. According to estimates, Indian banks, especially those with a sizeable branch network, will need to spend well over $ 50-70 Million on this. Computation of probability of default, loss given default, migration mapping and supervisory validation require creation of historical database, which is a time consuming process and may require initial support from the supervisor. With the implementation of the new framework, internal auditors may become increasingly involved in various processes, including validation and of the accuracy of the data inputs, review of activities performed by credit functions and assessment of a bank’s capital assessment process. Pillar 3 purports to enforce market discipline through stricter disclosure requirement. While admitting that such disclosure may be useful for supervisory authorities and rating agencies, the expertise and ability of the general public to comprehend and interpret disclosed information is open to question. Moreover, too much disclosure may cause information overload and may even damage financial position of bank. Basel II proposals underscore the interaction between sound risk management practices and corporate good governance. The bank’s board of directors has the responsibility for setting the basic tolerance levels for various types of risk. It should also ensure that management establishes a framework for assessing the risks, develop a system to relate risk to the bank’s capital levels and establish a method for monitoring compliance with internal policies. The risk weighting scheme under Standardised Approach also creates some incentive for some of the bank clients to remain unrated since such entities receive a lower risk weight of 100 per cent vis-a-vis 150 per cent risk weight for a lowest rated client. This might specially be the case if the unrated client expects a poor rating. The banks will need to be watchful in this regard. †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ We can conclude by saying that the Basel II framework provides significant incentives to banks to sharpen their risk management expertise to enable more efficient risk-return tradeoffs, it also presents a valuable opportunity to gear up their internal processes to the 12 international best standards. This would require substantial capacity building and commitment of resources through close involvement of the banks’ Top Management in guiding this arduous undertaking. Notwithstanding intense competition, the expansionary phase of the economy is expected to provide ample opportunities for the growth of the banking industry. The growth trajectory, adherence to global best practices and risk management norms are likely to catapult the Indian Banks onto the global map, making them a force to reckon with. VI. References 1. The Evolution to Basel II by Donald Inscoe, Deputy Director, Division of Insurance and Research, US Federal Deposit Insurance Corporation. 2. Basel II – Challenges Ahead of the Indian Banking Industry by Jagannath Mishra and Pankaj Kumar Kalawatia. 3. Basel II Norms and Credit Ratings by CA Sangeet Kumar Gupta. 4. The Business Line Magazine. 5. The Chartered Accountant – Journal of the Institute of Chartered Accountants of India. 6. www. bis. org 7. www. rbi. org. in 8. www. wikipedia. org 9. www. google. com VII. The Technical Paper Presentation Team Name of Member Email ID’s rahulscsharma@icai. org tulsyan. abhishek@yahoo. co. in sikha. kedia0311@gmail. com ca. gouravmodi@gmail. com Praveen_did@yahoo. com 1. Rahul Sharma 2. Abhishek Tulsyan 3. Sikha Kedia 4. Gourav Modi 5. Praveen Didwania 13

Air transport Essay Example | Topics and Well Written Essays - 2000 words

Air transport - Essay Example How would people get to these destinations? Since most people cannot walk to any of these destinations and both Cuba and Hawaii are islands so driving is an impossibility, without airports, airlines and planes visiting any of destinations would be next to impossible. Airlines have rejuvenated the tourism industry and contributed to the globalization of the tourist trade. Without airlines this industry were be remarkably different and would not be the lucrative global industry that it has now become. Airlines give us unparalleled choice in the vacations we choose and commercial flight operators are the backbone of the dynamic tourist trade. Seeking to understand structure of the airline industry through a holistic analysis, this research paper identify three innovations brought by the major carriers in the 1980s and discuss how these innovations have changed the structure of the airline industry. This early section will be descriptive and will describe the major changes put forth by the most important airline players in the 1980s and will explore how these changes in fact contributed to the dramatic alteration of an industry which has always been in a state of flux and evolution. Following this analysis, the second component of this research paper will be prescriptive in nature and will discuss how the structure of the airline industry will change in the next 10 years. The bulk of this assignment will explore the future if the airline industry; by looking at the major issues facing the global airline industry in the future we will help provide solutions to the major challenges facing this dynamic industry. In the context of the United States, the deregulation of the airline industry set the stage for the complete transformation of the American airline industry. Accordingly in 1978, US President Jimmy Carter signed the Airline Deregulation Act, a United States federal law which paved the way for major changes to the airline industry in the United