BIS Locational Banking Statistics - Assignment Example

BIS locational banking statistics Introduction The globalization is inevitable from the purview of International banking. Nowadays the international banking is taking steps into global level banking because of the competition faced globally. Every bank wants to outwit the other banks by some crook methods. In this aspect, as well as to reduce the competition, this study is emphasized. Once globalization is successful, any customer can get loan from any bank (locally and globally) and operate his account any where in the world from where he/she is seated. To study the globalization and put a thrust on it, some ratios are analyzed in this study. Two important claims are taken into consideration 1. International claims, 2. Local currency claims and more important is their ratio i.e. International Claims / Local Currency Claims ratio. This ratio is analysed for 28 years starting from 1983 to 2010. The ratio is computed at the end of each year (December) and only for 2010 it is computed on June since 2010 has not ended so far. Once the ratio is computed, it is easy to know the trend and the regression equation involved in it so that the future projection can be easily predicted. The results are presented below: (A) / (B)=(C) Local currency claims on local residents/Total international claims Year All countries Developed countries Offshore centres Developing countries Dec.1983 0.073648 0.2481471 0.0666034 0.0549228 Dec.1984 0.084256 0.2077552 0.0961602 0.0602272 Dec.1985 0.082992 0.1585433 0.0917749 0.0649633 Dec.1986 0.086234 0.2745211 0.0737162 0.0629422 Dec.1987 0.090838 0.3185211 0.0700645 0.063497 Dec.1988 0.11196 0.4529099 0.0821234 0.0757169 Dec.1989 0.117726 0.4771856 0.0831253 0.0813093 Dec.1990 0.122278 0.4638123 0.0790234 0.0972866 Dec.1991 0.128708 0.4908776 0.083544 0.1011831 Dec.1992 0.146416 0.6206201 0.083881 0.1181838 Dec.1993 0.20107 0.6667176 0.1801163 0.1411616 Dec.1994 0.206344 0.617453 0.1869644 0.1558048 Dec.1995 0.214795 0.6179451 0.1907486 0.1660038 Dec.1996 0.241605 0.6401931 0.2276359 0.1813258 Dec.1997 0.234952 0.186591 0.2456715 0.2556117 Dec.1998 0.261372 0.1984316 0.2635024 0.3023472 Dec.1999 0.364609 0.3739278 0.3410635 0.3465215 Dec.2000 0.376507 0.3673122 0.3419335 0.5004356 Dec.2001 0.404362 0.3879865 0.3266547 0.6370088 Dec.2002 0.438338 0.4278786 0.3267814 0.6858319 Dec.2003 0.456996 0.4539198 0.2905873 0.672314 Dec.2004 0.462018 0.4592431 0.2593907 0.723092 Dec.2005 0.484497 0.4776418 0.2375767 0.801873 Dec.2006 0.472538 0.4677633 0.2032363 0.7712034 Dec.2007 0.475965 0.4719022 0.1756166 0.7611177 Dec.2008 0.505888 0.5014255 0.2339194 0.7395513 Dec.2009 0.528446 0.5196212 0.2705661 0.7747422 Jun.2010 0.544796 0.5440841 0.2654883 0.7583624 Mean 0.282863 0.4318904 0.1920525 0.3626622 SD 0.167152 0.1442748 0.0951508 0.2984187 CV 59.09% 33.41% 49.54% 82.29% Chart showing Local currency claims on local residents/Total international claims ratio for all the countries, developed countries, offshore centes and developing countries From the above table and graph, it is observed that the ratio is having highest mean for Developed countries and lowest for Offshore centres. The Coefficient of variation is the lowest (33.41%) in developed countries which shows that the developed countries have consistent performance of the ratio (between Local Currency and Global currency). So it indicates that all other countries would prefer to exchange their currencies with the currencies of developed countries. The trend chart shows that the developed countries had a steep fall / slump in the year 1997 over the previous year (because of significant improvement in cross border claims over the local claims which reflects series break that year from the inclusion of derivative positions) and a moderate surge in the year 1999 over the previous year. Except this the performance is satisfactory for the developed countries. The ratio for developing countries is steadily increasing and showed consistent performance. Explanation for y and R Usually in regression analysis, one variable is considered as dependent variable and the other variable(s) is/are considered to be independent variable(s). Here in this study, we have taken year from 1983 as independent variable and Local currency claims on local residents/Total international claims ratio for all countries ratio as dependent variable. So the regression equation is fitted to find the relationship between these two variables. The procedure is: Just select the independent variable range and dependent variable ranges in MS Excel and then select line chart. Having the line chart placed in the work sheet, select add trend line from the chart menu and in the options sub menu tick mark the “Display equation on chart” and “Display R-squared value on chart”. Then you will see that the trend line the equations will be displayed in the chart. For example, in the equation y=0.0199x – 0.0057, y represents Local currency claims on local residents/Total international claims ratio and x represent year from 1983. The R2 value is the square of the correlation between x and y. The trend equation is used for prediction purposes. For example, you want to know the value for 2011, ie.29 years from 1983 (including 1983) substitute 29 in place of x, then y=0.5201 which is the predicted ratio. Similarly we make use of all the other equations and R2 values. The R2 value indicates the strength of linear relationship between x and y. If R2 is close to 1, then the correlation is very good and the prediction is better and better. If R2 is close to 0, the correlation is very weak and the prediction is poor. Chart showing Local currency claims on local residents/Total international claims ratio for all countries Interpretation The above chart shows that for all countries taken together, the regression equation is y=0.0199x – 0.0057 with R2=0.9592 which is a very good correlation and 96% of the dependent variable (ratio) is explained through the independent variable (year from 1983). The regression is significant and influential. Chart showing Local currency claims on local residents/Total international claims ratio for developed countries Interpretation: y=0.0063 + 0.3412 with R2=0.1273 which is not a good correlation and only 13% of the dependent variable (ratio) is explained through the independent variable (year from 1983). The regression is not significant and not influential. If the years from 1997 to 1999 is removed it may show some significant improvement in the prediction. Chart showing Local currency claims on local residents/Total international claims ratio for Offshore centres Interpretation: y=0.009x + 0.0623 with R2=0.599 which is not a moderately good correlation and 60% of the dependent variable (ratio) is explained through the independent variable (year from 1983). The regression is somewhat significant and influential. The rise is steep in the year 1992 to 1993 and maximum at 1999. Chart showing Local currency claims on local residents/Total international claims ratio for developing countries Interpretation: y=0.0342x - 0.1333 with R2=0.89 which is not a good correlation and 90% of the dependent variable (ratio) is explained through the independent variable (year from 1983). The regression is greatly significant and influential. The rise is steep in the year 1999 to 2000 and maximum at 2005. Conclusion: The important aspect of globalization is characterized by the ratio between local currency claims and total international claims. This study is mainly deals with comparison between the trend of this ratio between developed countries, offshore centres and developing countries and as a whole. The study reveals that the developing countries had steady and significant rise in the ratio where the ratio is unpredictable in developed countries and moderate in the case of offshore centres. Further studies can be done using moving average, Forecasting technique using exponential smoothing and further regression techniques. However, globalization in banking is a ‘welcomable’ measure which will remove the hazards of international transactions and trade. Read More