Belcanto Business Studio

Archive for the ‘Banking’ Category

Market Risk

Risks that arise due to changes in market variables, such as: interest rates, exchange rates, equity prices and commodity prices so that the value of the portfolio / asset that has banks decline

Based on Indonesian banks, as commercial banks with Islamic principles, the Islamic Bank only needs to manage the market risks associated with changes in exchange rates may cause loss to the Bank.

The reason for the emergence of interest rate risk
§ The discrepancy (mismatch) or the gap between interest rates of assets and liabilities
§ Improvement in:
§ The size of the mismatch
§ fluctuating market rates
§ Management of interest rate risk:
- Create a limit position for the mismatch
- Hedging (financial futures)
- Management with statistical techniques: Duration analysis, Simulation Models

Where the risks arising from the failure (default) from the other party (customer / debtor / mudharib in fulfilling its obligations.

Credit risk can occur in the activity: Financing, Treasury and Investment, finance and trade

• Failure of client to repay the installment murabaha

• Failure of client to pay (scheduled repayment) Ijarah

• Failure of client to pay back (repayment scheduled) Istishna

• Failure of client to deliver a commodity that is purchased (greeting)

• Etc.

Risk Management

Collateral

Pricing (higher margins for Higher risk)

Diversification (Wide geographical and industrial speed)

Client Credit Rating

Does Risk Management Function

Setting the direction and risk appetite with periodically reviewing and approving risk exposure limits that follow changes in the company’s strategy to set limits generally include the provision of credit, placement of non-credit, asset liability management, trading and other activities such as derivatives and others. Establish the adequacy of the procedure or examination procedures (audits) to ensure the integration of risk measurement, control reporting systems, and compliance with applicable policies and procedures Establish a methodology to manage risk by using the recording and reporting system that is integrated with a computerized system that can be measured and monitored sources The main risk to the organization’s bank

Risk Management Framework

• Risk Identification conducted by analyzing the characteristics of the risks inherent to functional activities, risks of product and business activities

• Measurement of risk undertaken by conducting regular evaluation of the appropriateness of assumptions, data sources and procedures used to measure risk, improvement of risk measurement system whenever there are changes in business activities, products, transactions and risk factors that are material

• Risk monitoring carried out by an evaluation of risk exposure Completion of the reporting process there is a change of business, product, transaction, risk factors, information technology and management information systems that are material Execution risk control process, is used to manage certain risks that could endanger the survival of

There are several reasons why risk management should be applied in Islamic banking, and why it is so important, if we thoroughly further especially with the implementation of Bassel Accord II, which is a refinement of the Bassel Accord I, is inseparable from the global risks that occur in theevent Enron which have occurred kecerobahan or manipulation of data, therefore it emerged two focal figure in the American parliament named Sarbone Oxley, so any financial laopran must cmply with SOX regulations or Sarbone Oxle. Inspired from it then the impact to the banking sector to implement risk management, coupled with the uncertain condition, causing the banks would not want to implement risk management

Reasons why risk management so important

The Bank is a service company whose income is obtained from interaction with customers so the risk is probably not there to know the risks then we can anticipate and take necessary actions in dealing with clients / issues to further develop understanding of embedded control, which is a very important function in the operational activities.

The prospect of the end of the Outlook physical demand of gold is still bright. Global demand rose 12 percent to 921.8 tonnes in the third quarter. Significant increase in demand comes from two of the world’s largest consumer, India (28 percent) and China (16 percent). India recorded bought 184.5 tons of gold jewelry and 45 tons in the form of bullion. While China bought up to 153.7 tons of gold. The threat of currency wars also forced several countries central banks adding gold stocks respectively.

Reserve diversification into gold is being actively conducted by the central bank of Iran and China. One of the critical comments contributed sentiment in November. World Bank President Robert Zoellick called for central banks to return to the gold standard in determining the value of its currency.

As if do not want to lag the momentum, interest in hedge funds to precious metals is never subside. Gold-based stocks such as SPDR Gold Trust is in great demand by Shumway Capital Partners and John Paulson. Although he has released half a million shares of gold ETF, George Soros also has 4.7 million shares plus 64 million U.S. dollars investment in the iShares Gold Trust. Consumers themselves seem less affected by high gold prices. The market began to familiar with this trend, perhaps even contributed to expect even higher prices.

Investors continue to collect gold in the midst of global economic uncertainty. The weakening U.S. dollar and the euro zone debt crisis increased the attractiveness of gold. If the scenario went on for so, period rally likely to continue. Every moment of decline is only a temporary correction.

Federal Reserve Bank recently decided to increase the number of purchases of U.S. government bonds as much as 600 billion U.S. dollars. Although Republicans criticized the harsh policy, the leader of the U.S. central bank, Ben S. Bernanke, insisted that the program is crucial role to stimulate economic activity. Liked or not, the central bank’s decision erodes the competitiveness of U.S. dollars, so the more shining gold on weakening dollar trend.

The Bank was first established in the form of such a firm in general in 1690, when the British empire-willed plan to rebuild the fleet marine force to compete with the French naval forces but the British government when it does not have the financial capability and then based on the idea of William Paterson later by Charles Montagu realized by forming a financial intermediary which ultimately can meet these financing funds in just twelve days.
History records the origin of banking activities are familiar in the days of the past empire in mainland Europe. Then the banking business has grown into West Asia by the merchants.  The development of banking in Asia, Africa and America]] taken by European nations during its colonial occupation to the country either in Asia, Africa and the Americas. When traced, the history of banking familiar starting from currency exchange services. Thus, in banking history, meaning the bank is known as a table of the exchange. [citation needed] In the course of the history of empire in the first exchange between the kingdom of the money made that one dnegan kingdom others.  The exchange is now known as the Foreign Exchange Traders (Money Changer). Then in the next, more developed banking operations into daycare money or so-called current deposit activity. Next banking activities increased with The money saved by the people, by the banks loaned back to the society needs it. [citation needed] The services of other banks followed in accordance with the times and the needs of an increasingly diverse society

Here are some benefits of banking in the life:

• As an investment model, which means that derivative transactions can be used as one model of investing. Although in general is kind of short-term investments (yield enhancement).
• As a way of hedging, which means that derivative transactions can serve as one way to eliminate risk by hedging (hedging), or also known as risk management.
• Price information, which means, derivatives transactions can serve as a means of seeking or providing information about the prices of certain commodities in the future (price discovery).
• Function speculative, which means, derivatives may provide an opportunity speculation (speculative) to changes in market value of derivative transaction itself.
• Production management functions work well and efficiently, which means that derivative transactions can give an idea to a manufacturer of production management in assessing the demand and market needs in the future. Apart from banking functions (bank) that the primary or its derivatives, hence the need to be considered for the banking world, is the philosophical purpose of the existence of bank

Islamic banking or Islamic banking is a banking system that was developed based on the sharia (law) of Islam. Operating system formation is based on the prohibition in Islamic religion to collect or borrow with interest or so-called usury and the prohibition of investment for businesses categorized as haram (ie business relating to the production of food / drink is haraam, efforts are un-Islamic media, etc. ), where this can not be guaranteed by the conventional banking system.
Islamic banking first appeared in Egypt without the frills of Islam, because of fears the regime in power at that time would see it as a fundamentalist movement. The leader of this pioneering effort Ahmad El Najjar, took the form of a savings bank based on profit sharing (profit sharing) in the town of Mit Ghamr in 1963. This experiment lasted until 1967, and it was already standing 9 banks with a similar concept in Egypt. These banks, which do not collect or receive interest, most businesses invest in trade and industry directly in the form of a partnership and share the profits with savers.

The most important items on my page right now are those who talk about what would happen to the money you have in the bank if the bankruptcy and the same with the mortgage or obligations to these banks. A simple answer to this is chelates most times your money is insured and that your debts will remain the same because these are assets (assets) of the bank when you sell. You can view the articles about the parent links to the right to “Most Visited”. It is important that, although cautiously, keep all your savings in the market at the same time your investments for retirement.

One of the ways in which you can help more for this economy can be stabilized is to leave your savings in the bank. My advice is to not worry about the money you have in a deposit account (savings or checking account) and that this money is insured. Your money is vital for banks to help other businesses and households more purchasing power and keep the flow of money.

New York Times also published an article that talks about saving for retirement through investment. This talks about the chances that people who are investing for retirement (bone, did not need this money in the next 20 years) may be affected by removing these savings since this is the time to buy a relatively inexpensive and exit later when the stock market afloat. If your investments are primarily for retirement, you could keep them there as it is almost impossible that this crisis lasts so long and historically the value of investment funds increased over the years but have moments of loss.