Key Financial Regulators - Essay Example

the Federal Financial Supervisory Authority - in Germany,e) the US Securities Exchange Commission – in the USA and so on. In the context of the International Community the most known financial regulators are the following ones: a) the International Organization of Securities Commissions – also known as IOSCO, b) the Basel Committee on Banking Supervision, and c) the Committee of European Securities Regulators – for the supervision of Financial Services across Europe. It has to be noted that international regulators have no power to impose specific rules on countries internationally – or to ask the local authorities to take measures to support such activity (Backley, 2008, p.135)

2) What does Denomination intermediation mean?
The term ‘denomination intermediation’ refers to the transformation of money by financial intermediaries – usually the banks (Jeucken, 2001, p.56); a clearer definition of the above term is provided by Neave (1998); by the above researcher, the term ‘denomination intermediation’ reflects the following activities of banks: a) the gathering of money through the accounts of individuals – the amount deposited in each account is usually small and b) the lending of this amount – money gathered; the amounts given as loans are usually high (Neave, 1998, p.260). Towards the same direction, Brigham (2008) notes that ‘denomination intermediation’ is a term reflecting ‘the process by which financial intermediaries transform funds provided by savers into funds used by borrowers’ (Brigham, 2008, p.101).

3) What is the difference between insolvency and liquidity risks?
Liquidity risk is related to insolvency at the following point: in cases of high liquidity, the risk of insolvency is decreased; on the other hand, in low liquidity, the risk of insolvency is increased; it is in this context that the above two risks have been characterized as ‘linearly coupled processes’ (Matz et al., 2007, p.174). At the next level, liquidity can have a series of different aspects – including ‘the asset, institutional and national liquidity’ (Schmaltz, 2009, p.23); by the above view, insolvency is part of liquidity; this view is supported by Coyle (2004) who noted that liquidity risk can have the following two forms: a) either cash is not available for meeting specific financial obligations – insolvency or b) the development of a transaction is possible not because of the lack of funds but because of the level of market prices – which are too high or too low compared to the ‘normal acceptable size of trading lots’ (Coyle, 2004, p. 10).

4) What is the difference between operational and technology risks?
Technology risks refer to a series of requirements that a business has to meet regarding its Information Systems; these requirements usually include a) the demands of customers, b) the advances of technology in markets worldwide, and c) the internal needs of the organization in terms of information management; technology risk indicates the potential failure of a business to meet the above requirements (Chorafas, 2004, p.91). By Loader et al. (2002, p. 181) technology risk can also involve the potential of an Information System to meet the requirements expected – this risk is increased if the amount invested in this Information System is high. Operational risk reflects the potential failure of a business to meet any of its targets regarding its various departments. In this context, technology risk can be considered as incorporated with the operational risk.

5) What are the sizes of some securities ( corporate bonds, treasury bills.....) in the financial markets in the years 2008, 2009, and if possible 2010?
The level of corporate bonds in the US has increased in 2010 compared to the previous years; in a recent report published by Bloomberg (October 2010) it is noted that ‘the international issuers account for 43 percent of sales this year, compared with 37 percent in 2009 and an average 23 percent from 1999 to 2009’ (Bloomberg, October 2010); however, not all of the international issuers have been convinced on the prospects of the US securities – for this reason, in December 2009, China sold a significant amount of US bonds – about $3.4 bn (Guardian, 2010).
On the other hand, Ireland has used securities to support its economy – which faces severe pressures; recently, Ireland issued ‘300 million euros of securities’ (Bloomberg, September 2010).

In general, corporate bonds – especially those sold by banks - are considered the securities most preferred by investors worldwide (MarketWatch, 2009); the above assumption does not involve all countries – for instance, in USA corporate bonds had been increased for about 10 years and in 2010 their prices were stabilized (Reuters, December 2010). The above trend is not necessarily decisive regarding the potential performance of these securities; however, it reflects the criteria set by investors when choosing securities – those that have already reached a high level of performance may be avoided instead of other ones that have higher profit margins. Read More