This study follows a three–pronged approach to investigate the effects of the global financial crisis on the South African retail credit market (using Woolworths as subject). These three prongs, or areas, include a literature study, step–by–step credit scoring guide and an application of this guide in an empirical study. To achieve this goal, credit scoring was selected as the quantitative tool to illustrate these effects. Two different periods were chosen to supply a snapshot of the retail credit industry, namely the retail credit situation before and during the global financial crisis. To correctly define and understand the mechanics affecting South Africa's retail credit industry, a literature review was conducted to investigate the global financial crisis, the South African retail credit market and credit scoring itself. The literature investigation explains the global financial crisis and identifies some of the primary drivers behind it. These drivers included the US housing bubble, the introduction of subprime loans and the securitisation of these loans (mortgage backed securities). The study found that these drivers, especially the securitisation of subprime loans, were the vehicle used to enable the crisis to spread globally. The ultimate goal of the study was to provide the individual, and companies, with an understanding of the global financial crisis' effects on the consumer specifically through their credit worthiness and retail credit behaviour. Through the use of credit scoring, the study found that at least one retailer (Woolworths) in the retail industry was affected. Woolworths placed a stronger emphasis on reducing their credit exposure whilst consumers were steadily increasing their facility utilisation. / Thesis (M.Com. (Risk management))--North-West University, Potchefstroom Campus, 2012.

This study follows a three–pronged approach to investigate the effects of the global financial crisis on the South African retail credit market (using Woolworths as subject). These three prongs, or areas, include a literature study, step–by–step credit scoring guide and an application of this guide in an empirical study. To achieve this goal, credit scoring was selected as the quantitative tool to illustrate these effects. Two different periods were chosen to supply a snapshot of the retail credit industry, namely the retail credit situation before and during the global financial crisis. To correctly define and understand the mechanics affecting South Africa's retail credit industry, a literature review was conducted to investigate the global financial crisis, the South African retail credit market and credit scoring itself. The literature investigation explains the global financial crisis and identifies some of the primary drivers behind it. These drivers included the US housing bubble, the introduction of subprime loans and the securitisation of these loans (mortgage backed securities). The study found that these drivers, especially the securitisation of subprime loans, were the vehicle used to enable the crisis to spread globally. The ultimate goal of the study was to provide the individual, and companies, with an understanding of the global financial crisis' effects on the consumer specifically through their credit worthiness and retail credit behaviour. Through the use of credit scoring, the study found that at least one retailer (Woolworths) in the retail industry was affected. Woolworths placed a stronger emphasis on reducing their credit exposure whilst consumers were steadily increasing their facility utilisation. / Thesis (M.Com. (Risk management))--North-West University, Potchefstroom Campus, 2012.

The financial crisis that struck financial markets in 2008 was devastating for the global economy. The impact continues to be felt in the market - most recently in sovereign defaults. 1 There are many questions as to the origin of the crisis and how the same events may be prevented in the future. This dissertation explores two financial instruments: securitisation and credit default swaps (CDSs) and attempts to establish the role they played in the financial crisis. To fully understand the events that unfolded before and during the crisis, a sound theoretical understanding of these instruments is required. This understanding is important to discern the future of stable financial markets and to gain insight into some of the potential risks faced by financial markets. The South African perspective regarding securitisation, CDSs and the global financial crisis is an important field of study. The impact of the crisis on South Africa will be explored in this dissertation, as well as, the effect of the crisis on South Africa's securitisation market (which has proved healthy and robust over the first part of the new millennium despite the global slowdown of these instruments) and the CDS market. A key goal of this work is to establish whether or not CDSs have been used in South Africa to hedge the credit risk component of bonds linked to asset–backed securities (ABSs). This will provide an indication of the maturity of the South African credit risk transfer (CRT) market and how South Africa compares to more developed financial markets regarding complexity, regulation, sophistication and market sentiment. Through the exploration and understanding of these concepts, the efficacy of emerging economies to adapt to globalisation, and how welcome financial innovation has proved to be in emerging markets will be addressed. / Thesis (M.Com. (Risk management))--North-West University, Potchefstroom Campus, 2012.

The financial crisis that struck financial markets in 2008 was devastating for the global economy. The impact continues to be felt in the market - most recently in sovereign defaults. 1 There are many questions as to the origin of the crisis and how the same events may be prevented in the future. This dissertation explores two financial instruments: securitisation and credit default swaps (CDSs) and attempts to establish the role they played in the financial crisis. To fully understand the events that unfolded before and during the crisis, a sound theoretical understanding of these instruments is required. This understanding is important to discern the future of stable financial markets and to gain insight into some of the potential risks faced by financial markets. The South African perspective regarding securitisation, CDSs and the global financial crisis is an important field of study. The impact of the crisis on South Africa will be explored in this dissertation, as well as, the effect of the crisis on South Africa's securitisation market (which has proved healthy and robust over the first part of the new millennium despite the global slowdown of these instruments) and the CDS market. A key goal of this work is to establish whether or not CDSs have been used in South Africa to hedge the credit risk component of bonds linked to asset–backed securities (ABSs). This will provide an indication of the maturity of the South African credit risk transfer (CRT) market and how South Africa compares to more developed financial markets regarding complexity, regulation, sophistication and market sentiment. Through the exploration and understanding of these concepts, the efficacy of emerging economies to adapt to globalisation, and how welcome financial innovation has proved to be in emerging markets will be addressed. / Thesis (M.Com. (Risk management))--North-West University, Potchefstroom Campus, 2012.

Solvency II is the new European Union (EU) legislation which will replace the capital adequacy regime for the insurance industry. Considering that the banking sector has experienced a similar change through the different Basel Accords (Basel), there is an opportunity for the insurance industry before The results indicate similar distortions between developing countries while the major driver behind the cost of capital for developing countries is equity market volatility, and not credit risk as might have been expected. Finally, the fourth research problem relates to another objective of financial regulations: to reflect the risks that financial institutions face. The risk sensitivities of economic and regulatory capital for credit risk are investigated empirically using a dynamic optimisation model in one of the first studies of its kind. Results show that economic capital is a superior risk measure to regulatory capital from a systemic- and institution-specific risk perspective. This, along with calls to strengthen Pillar 2 disciplines following the financial crisis, leads to a suggestion that economic capital could be considered as a Pillar 1 capital requirement, replacing the current forms of Pillar 1 regulatory capital. the implementation of Solvency II to learn from the weaknesses and shortcomings in Basel to ensure that the design of Solvency II will, as far as possible, compensate for these. The financial crisis of 2007 to 2010 highlighted certain weaknesses and shortcomings of Basel and there is accordingly an opportunity for the insurance industry to learn from these deficiencies and to strengthen Solvency II to help prevent similar events in the insurance industry. This thesis investigates these weaknesses in Basel in an attempt to determine the extent to which these are inherently included in Solvency II. The first research problem of this thesis examines these weaknesses in Basel and relates them back to Solvency II to determine which, and to what extent, some of them may have been included in Solvency II. The second research problem leads from the first and critically explores an objective of financial regulations, namely to provide financial institutions with equal competitive conditions (the so-called ‘level playing field’) from a regulatory perspective. To achieve this objective, there is an implicit assumption that the cost of capital between countries is equal. Investigation into the cost of capital between both developed and developing countries using a modified weighted average cost of capital model indicates that the cost of capital between developed and developing countries differs and that regulations based on capital requirements tend to favour developed countries. This means that current financial regulations cannot achieve this objective as intended. The third research problem investigates the cost of capital between various developing countries to determine firstly whether similar competitive distortions exist among such countries, while secondly exploring the drivers behind the cost of capital in such countries through linear regression analyses. / PhD (Risk Management), North-West University, Potchefstroom Campus, 2013

Solvency II is the new European Union (EU) legislation which will replace the capital adequacy regime for the insurance industry. Considering that the banking sector has experienced a similar change through the different Basel Accords (Basel), there is an opportunity for the insurance industry before The results indicate similar distortions between developing countries while the major driver behind the cost of capital for developing countries is equity market volatility, and not credit risk as might have been expected. Finally, the fourth research problem relates to another objective of financial regulations: to reflect the risks that financial institutions face. The risk sensitivities of economic and regulatory capital for credit risk are investigated empirically using a dynamic optimisation model in one of the first studies of its kind. Results show that economic capital is a superior risk measure to regulatory capital from a systemic- and institution-specific risk perspective. This, along with calls to strengthen Pillar 2 disciplines following the financial crisis, leads to a suggestion that economic capital could be considered as a Pillar 1 capital requirement, replacing the current forms of Pillar 1 regulatory capital. the implementation of Solvency II to learn from the weaknesses and shortcomings in Basel to ensure that the design of Solvency II will, as far as possible, compensate for these. The financial crisis of 2007 to 2010 highlighted certain weaknesses and shortcomings of Basel and there is accordingly an opportunity for the insurance industry to learn from these deficiencies and to strengthen Solvency II to help prevent similar events in the insurance industry. This thesis investigates these weaknesses in Basel in an attempt to determine the extent to which these are inherently included in Solvency II. The first research problem of this thesis examines these weaknesses in Basel and relates them back to Solvency II to determine which, and to what extent, some of them may have been included in Solvency II. The second research problem leads from the first and critically explores an objective of financial regulations, namely to provide financial institutions with equal competitive conditions (the so-called ‘level playing field’) from a regulatory perspective. To achieve this objective, there is an implicit assumption that the cost of capital between countries is equal. Investigation into the cost of capital between both developed and developing countries using a modified weighted average cost of capital model indicates that the cost of capital between developed and developing countries differs and that regulations based on capital requirements tend to favour developed countries. This means that current financial regulations cannot achieve this objective as intended. The third research problem investigates the cost of capital between various developing countries to determine firstly whether similar competitive distortions exist among such countries, while secondly exploring the drivers behind the cost of capital in such countries through linear regression analyses. / PhD (Risk Management), North-West University, Potchefstroom Campus, 2013