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Bank capital adequacy evaluation and measurement: problems and solutions
Full text linkThe matter of bank capital adequacy evaluation is of great importance, and ensuring the relationship between risk and capital is one of the main conditions of financial stability of banks. Financial stability of the banking system is provided for at international level by means of Basel Committee rules. Due to introduction of new regulatory capital requirements banks are required to pay great attention to capital adequacy, analysis of its sources, structure and consider possibilities to ensure their compliance with the new Basel III rules until the set deadline.
The aim of the study is to evaluate capital adequacy in Latvian commercial banks, reveal existing problems, related with evaluating of bank capital adequacy and to develop suggestions on improving bank capital adequacy according to the effective and the planned Basel Committee requirements.
Methodological, analytical materials and publications of the Bank of Latvia, the Financial and Capital Market Commission and the European Parliament, and Basel Committee on Banking Supervision regulatory documents on commercial banks\u27 capital adequacy evaluation were used in the research process. Publications in periodicals, statistical information of the Association of Commercial Banks of Latvia, the Republic of Latvia Credit Institutions Law and regulations of the Financial and Capital Market Commission were taken into consideration. The capital analysis of Latvian commercial banks was performed mainly based on financial information of banks: annual financial reports, balance sheet and notes to it, bank\u27s capital flow and capital adequacy reports, capital adequacy and risk management methods, official audit reports on financial standing of commercial banks available with annual reports of banks. Analytical and business publications, opinions of specialised agencies (Moody’s Analytics, PricewaterhouseCoopers) and financial publications in mass media - were used as well
Basel III: Countercyclical capital buffer proposal – the case of Latvia
Full text linkAn objective of the countercyclical capital buffer is to encourage banks to build up buffers in good times that can be drawn down in bad times.
The purpose of the research presented in the paper is to assess countercyclical capital buffer implementation in the Latvian banking sector derived from two approaches, using credit-to-GDP ratio and using credit growth ratio.
Methodology. The countercyclical buffer approaches in use are the aggregate credit-to-GDP ratio and its trend as well as credit growth and its trend. The approaches are implemented for Latvia for the time period 2000-2012. The report compares two approaches and analyses their relevance to Latvia by testing the correlation between a growth in studied variables and a growth of corresponding gaps, which triggers decisions to establish a countercyclical capital buffer. Also, the impact of each approach on countercyclical capital buffers is assessed and two approaches are mutually compared. Methods used in the empirical part of the report are econometric analysis, including analysis of regression, as well as economic analysis, including main trend analysis, development indicators, relative and absolute indicators and other methods.
Results and findings. The research outcome is a comparison of two alternative approaches to establish or release a countercyclical capital buffer by banks and their implications for Latvia.
Originality. The research paper implements two alternative approaches recommended by the Basel Committee to establish or release a countercyclical capital buffer by banks in case of Latvia for the retrospective period 2000-2012
Immunised quasi-arbitrage
Full text linkArbitrage refers to the possibility of making money with no outlay of capital or possibility of loss. In this paper the concept of quasi-arbitrage is introduced: "A small risk, small net investment strategy that still generates significant profits". From existence of quasi-arbitrage the important consequences result, among them the "one price principle" failure necessary follows. The method of integral immunization what differs from well known Redington immunization is offered, and the numerical illustration of immunized quasi-arbitrage in the stylized financing an investing situation associated with case investigated by Lutz Krushwitz is presented. The concept of integral immunization of quasiarbitrage appear to be innovative, not discussed in literature available to the author of the present paper. The theoretical questions examined in this paper require further investigation
Use of lower partial moments in the asset allocation process
Full text linkOver the past years before the world financial and economic turbulences, the Baltic States have been the fastest developing economies in Europe. The Baltic insurance industry (and the Latvian one as well) was a direct beneficiary of this economic miracle. In 2002 – 2007, the local insurance market in three Baltic States doubled in volume. After the booming years insurance business suffered from the economic downturn as the income from main business operations did not show sustainable growth and companies should gain extra income from investing activities in order to stay on the market, but due to the vulnerable financial markets the return on investment decreased. So the relevance of asset allocation problem gained extra attention in the particular industry. The main purpose of the current paper is providing the foundation for the development of the ―new‖ portfolio model. The reader is going to be instructed on the essential aspects of the (μ,LPM)- portfolio model which, on the one side, enables its critical review, and on the other side, provides a platform for its later application in the practice of portfolio management. The paper is covering only the theoretical aspect of the topic. The research is concerned with the portfolio selection based on the downside risk and mean, which utilises risk measure corresponding with the risk understanding of the prevailing number of investors. As a consequence, by the portfolio optimisation based on the downside risk the chance to over-perform the reference point is not minimised as by the portfolio optimisation based on the variance
Evaluation of design application level for ensuring sustainable competitiveness: case of Latvia
Full text linkPurpose – the increasing importance is given to the new, unfolded sources of competitive advantage of companies in the fast changing business environment. The stage of design application level in business is directly correlated to the greater strategic importance given to design in strategic business management and respective demand of professional design by business management in various industries. The aim of this paper is to evaluate the stage of design application in public and private sectors in Latvia and explore the most crucial factors, which influence its potential.
Design/methodology/approach – Survey-based primary research was conducted in companies providing professional services of design to various organisations in various sectors. By analysing data from 85 respondents or 39 % of companies in design industry, summarised results are applied into Design Ladder framework (DDC, 2003) in order to evaluate whether design and its application in broader sense leading to design thinking is perceived as strategically important source of better organisation performance and competitive advantage.
Findings – the main findings of the study indicate that such concepts as strategic design, design management and design thinking are notably entering business environment by having conceptually new applications. However, due to domination of short-term business models, low public awareness of broader forms of design application, design is mainly considered as a form of art or visual element and there is a very limited place in management practices yet in Latvia. Public awareness, innovation policies, education systems have not yet caught up with these developments and these are the problems for further challenges and subject for research in this emerging area.
Research limitations/implications – the research is based on evaluation of design awareness, forms of applications in business management from perspectives of design industry professionals and their experience of design application in the private and public sectors.
Practical implications – this work is useful for executives, who search for development of new sources of competitive advantage to sustain competitiveness in emerging future.
Originality/Value – this is one of the first studies of design awareness, forms of application in management using Design Ladder framework in Latvia
Management training evaluation: a case study of a retail store chain
Full text linkObjectives of the paper are: 1. to compare the theoretical concept of effective management training evaluation with obvious practice in one of the largest retail store chains in Latvia; 2. to identify the main strengths and weaknesses in training process implementation in practice; 3. to study the employee attitude (assessment) to the training provided.
The research question: what are the main differences between theory and practice in organising management training? What are the causes of these differences and how to resolve them?
The methodological base of the paper consists of literature analysis of training concept and efficiency criteria. The main theoretical base is Donald L Kirkpatrick‘s 4 level training evaluation model.
The research methods: literature analysis, in-depth interviews with company executives and training providers, the employee survey, statistical methods of data analysis.
In the research the authors are investigating the training process from the theoretical and practical point of view. The main attention is given to the successive stages of training process: making decision to provide training; identification of training needs, objectives, tasks; expected results and determination of the effectiveness criteria of training, the training provider‘s choice and training programme development. At the end of training, participants‘ reaction or attitude to training is measured. This study does not cover the research of employees‘ behaviour or job performance changes as training results.
The originality/value of the paper – the authors use training research methodology based on Donald L. Kirkpatrick‘s model. It is the first practical impact study of such nature and scope in the Latvian supermarket network
The influence of global crisis on trad in financial services
Full text linkThe given article deals with the analysis of the impact of global economic crisis on financial services trade. The aim of the research described in the article is to forecast the development of financial services export during the period of global economic crisis. To achieve this aim, two main tasks have been set. Firstly, analyze the influence of global economic crisis on trade in financial services. Secondly, define tendencies in the development of financial services export during short- or medium-term prospects. As the basis for the achievement of the given tasks one used such research methods as: mathematic correlation, scenario analysis and the analysis of advanced researches in the sphere of financial services trade. Data base of the following international organizations: World Trade Organization, Organization for Economic Co-operation and Development and the United Nations served as the sources of statistical information. The results of the research proved to be: the revealed correlation between financial services export and economic cycles, as well as scenarios of the development of trade in financial services during the period of an economic crisis
The sustainability of family businesses: evidence from three UK case studies
Full text linkThis paper analyses some of the key issues faced by family businesses (FBs) in the UK. Perhaps because most family businesses are Small and Medium sized Enterprises (SMEs), in the UK it is rare to draw any distinction between the problems faced by FBs and SMEs, yet FB have some unique characteristics and problems.. The paper examines certain key issues for the development (and perhaps the very existence), of the FBs. These areas are motivation (to found the business), development/diversification, sustainability (it is this family succession that most distinguishes an FOB from other businesses), and the role and importance of technology in all aspects of the business. These issues are discussed, with reference to the available literature and are highlighted by evidence from three case studies, each of which is taken from a different business sector in the UK
Digital Times: The Present-Tense Novel as a Response to Digitization and Social Acceleration
Full text linkHow does generic change manifest itself in the twenty-first century? Proceeding from the increasing popularity of present-tense narration among contemporary novelists, this article claims that the present-tense novel is a direct response to the cultural changes and challenges of the digital age. The essay unfolds this argument in two steps: It first establishes a link between digitization and our current understanding of time, which is determined by notions of the extended present (Helga Nowotny) and social acceleration (Hartmut Rosa), and then goes on to investigate how present-tense narrative reacts to these developments. Taking Sally Rooney’s Normal People and Bernadine Evaristo’s Girl, Woman, Other as examples, the article shows that the present-tense novel negotiates contemporary configurations of time in various ways, as it either imitates the fast and superficial practices of storytelling in the new media environment or functions as a literary corrective to digitization and the acceleration of life
Accounting Measurement of Long-Lived Assets:A Case Study of Impairment Practices
No full textIn accounting practices long-lived assets evaluation based on the current market situation is one of the most complex issues. For companies making large-scale investments in long-lived assets this question becomes vitally important because impairments of tangible assets and goodwill are significantly associated with future cash flows. The procedure for the evaluation of long-lived assets is regulated by the national accounting laws and international financial reporting standards, in particular IAS 36 "Impairment of Assets". However, many questions related to the practical application remain unresolved and lead to different interpretations and subjective judgments. Therefore, in some cases shareholders\u27 expectations of future economic benefits from the use of long-lived assets are not fulfilled.
This article reveals the theoretical and practical relevance of the researched topic examines the existing approaches used by Latvian companies for measuring the value of long-lived assets and considers the peculiarities of information disclosure in their financial statements. Particular attention is paid to the importance of measuring assets impairment using the example of a Latvian fuel retail company. The authors’ conclusions based on the study of Western publications and analysis of Latvian practices will be useful for the company management when forming the company’s accounting policy for measuring and valuing long-lived assets, and may be taken into consideration by investors when developing investment strategies