Banks face market pressure when determining their capital structures because they are subject to strict regulations. CFOs are willing to adjust their company’s capital structures in order to obtain higher ratings. The credit ratings are highly valuable not only because they assess the creditworthiness of the borrowers but also because those agencies take advantage of the information asymmetry and have access to data that companies might not disclose publicly. Also, this industry gained much interest after the BIS proposals back in 1999 and 2001 that the Basel Committee on Banking Supervision should consider the borrower’s credit ratings when examining banks’ solvency and adequacy. Factors used to determine the credit ratings are banks’ asset quality which is fundamental measure for the creditworthiness, banks’ capital which is related to the asset quality in relation to the RWA, banks’ profitability, and liquidity measurements. The purpose of this paper is to investigate whether the banks that keep excess equity to balance sheet receive better credit ratings, given the predictors capital, banks size and defaulted to total exposures. The European Banking Authority (EBA) stress test results are used as a benchmark for determining banks’ capital adequacy and solvency, whereas the credit ratings are obtained shortly after the EBA’s reports publication. The sample size is 73 and 95 banks for the years 2011 and 2014, respectively. The results from the multivariate ordinal regression do not show significant correlation results between the excess equity to balance sheet and the credit ratings, even though the estimated coefficient is negative, namely excess equity is associated with lower credit ratings. An explanation to this one can find in the low-quality capital relative to the banks’ capital base. Also, banks which plan to implement risker projects or currently hold risker assets are subject to higher capital requirements. Moreover, banks currently being rated low but with the potential of being upgraded would be more willing to issue equity than debt in order to avoid the corresponding risk and achieve the higher rating. The equity ratio and the defaulted to total exposures ratio show significant correlation to the banks’ credit ratings. Overall, since the results of the regression are insignificant, we do not have reasons to believe that holding excess equity is not beneficial for banks. When banks make changes in their leverage ratios they would either carry the cost of being downgraded or the cost related to issuing more equity, therefore at the end they will balance the leverage ratio close to the optimal and keep as much capital as required by regulations.

Title: Technical reserves of non-life insurance in the internal solvency model Author: Bc. Jiří Thomayer Department: Department of Propability and Mathematical Statistics Supervisor: Mgr. Ing. Jakub Mertl Abstract: In this work we study and describe calculation of solvency capital using the standard formula contained in the Directive of the European Union (Solvency II), which should be put into practice in Europe on 1 January 2013. This calcu- lation is described in quantitative impact study 5. We describe a general approach to risk measurement and we show some particular practical measures used to risk measurement. We explain under what conditions the standard formula or its parts can be replaced by internal model. Next, we show disadvantages of using the stan- dard formula and we propose possible internal model to calculate risk premiums and risk reserves in non-life insurance. Finally we apply the proposed model for calculation risk reverses in non-life insurance in practice. Keywords: Standard formula, Risk measurement, Solvency II, Internal model;

Les futures normes de solvabilité pour l’industrie de l’assurance, Solvabilité 2, ont pour buts d’améliorer la gestion des risques au travers de l’identification de différentes classes et modules de risque, et en autorisant les compagnies à utiliser des modèles internes pour estimer leur capital réglementaire. La formule standard définit ce capital comme étant égal à une VaR à 99.5% sur un horizon d’un an pour chaque module de risque. Puis, à chaque niveau de consolidation intermédiaire, les différentes VaR sont agrégées au travers d’une matrice de corrélation. Plusieurs problèmes apparaissent avec cette méthode : – Le régulateur utilise le terme de “VaR” sans communiquer de distributions marginales ni globale. Cette mesure de risque multi-variée n’est pertinente que si chaque risque suit une distribution normale. – L’horizon temporel à un an ne correspond pas à celui des engagements d’une compagnie d’assurance, et pose des problèmes d`es lors qu’il faut déterminer la fréquence de mises à jour des modèles internes. – La structure de dépendance proposée par la formule standard ne correspond pas à celle habituellement mise en place par les compagnies et est difficilement utilisable dans un modèle interne. La première partie présentera en détail les points clés de la réforme et donnera des axes de réflexion sur son application dans la gestion des risques. Dans une deuxième partie, il sera montré que cette mesure de risque multi-variée ne satisfait pas aux principaux axiomes d’une mesure de risque. De plus, elle ne permet pas de comparer les exigences de capital entre compagnies, puisqu’elle n’est pas universelle. La troisième partie démontrera que pour évaluer un capital à un point intermédiaire avant l’échéance, une mesure de risque doit pouvoir s’ajuster à différentes périodes, et donc être multi-périodique. Enfin, la quatrième partie mettra l’accent sur une alternative à la matrice de corrélation pour modéliser la dépendance, à savoir les copules. / The new rules of solvency for the insurance industry, Solvency II, aim to improve the risk management in the insurance industry by identifying different classes / modules of risk, and by allowing insurance companies to use an internal model to estimate their capital. The standard formula sets the capital requirement at a VaR of 99.5% level for a one year horizon for each sub risk module. Then at each consolidation level, the different VaR are aggregated through a correlation matrix. Some problems may appear with this method : – The regulator uses “VaR” term while he provides neither marginal distributions nor the global one. This multivariate risk measure is relevant only if each risk follows a normal distribution. – This short term horizon does not match the time horizon of the liabilities of an insurance company and leads to some problems in updating the capital requirement during the year. – The dependance structure given in the standard formula does not correspond to a practical one, and cannot be used in an internal model. The first part will present a detailed discussion about the reform and give some example of its application from risk management’s point of view. In the second part, it will be establish that this multivariate risk measure does not satisfy the main axioms that a risk measure should fulfill. With this approach, there is not uniqueness among the insurance companies, so the solvency capital requirement cannot be compared across the industry. The third part will demonstrate that a risk measure which adjusts to different periods should be used to evaluate the capital at a point in time, a multiperiod risk measure. At last, the fourth part will emphasize on an alternative to the correlation matrix to aggregate risks, the copula.

The aim of this thesis is to evaluate present experiences with enterprise risk management implementation and to provide potential solutions for futher risk management development. It also includes minor aims clarifying often falses, which are done by companies. At the beginning of the thesis there are presented common principles with qualitative and quantitative methods. Then the implemenation part is following where methods and conditions of enterprise risk management are described. For succesful system implementation is then described risk culture, where corporate governance is firstly mentioned. A diference among risk management and enterprise risk management is shown in a next chapter compiling financial management and risk management. Own Solvency II experiences, RVA concept, risk management deficiencies and transition from risk measurement to risk management are closing the thesis. The conclusion of the thesis only summarises aims' fulfillment and said hypotheses are confirmed. Enterprise risk management has to be based on common risk management acceptation as a mainstream of the company that has to be fully supported by risk management department.

[pt] Asset and Liability Management ou ALM pode ser definido como um processo gestão de ativos e passivos de forma coordenada com a finalidade de atingir os objetivos financeiros de uma organização. No caso dos fundos de pensão, o ALM consiste fundamentalmente na determinação da política ótima de investimentos. Esta deverá maximizar o capital acumulado através de contribuições dos participantes e do retorno dos investimentos ao mesmo tempo em que minimiza o risco do não cumprimento das obrigações do fundo. A aplicação de modelos de programação estocástica para problemas de ALM em fundos de pensão é dificultada pelos longos prazos envolvidos - a duração dos benefícios pode ultrapassar cem anos. No entanto, os modelos de programação estocástica propostos na literatura limitam o horizonte de planejamento a poucas décadas, ao final das quais é imposta uma restrição de capital mínimo com vistas a controlar o risco de equilíbrio relativo ao restante da vigência do fundo. Este trabalho propõe um novo método para incorporar o risco de equilíbrio na determinação do capital mínimo final do modelo de programação estocástica aplicado a um fundo de pensão no contexto brasileiro. No método proposto, o cálculo da probabilidade de insolvência leva em consideração que os benefícios futuros devem ser trazidos a valor presente pela rentabilidade futura da carteira, cuja distribuição de probabilidades é levantada através de um processo de reamostragem (bootstrap) dos cenários embutidos na solução do problema de programação estocástica. O método proposto permite evidenciar que a probabilidade de insolvência medida tradicionalmente utilizada subestima acentuadamente o risco de equilíbrio. / [en] Asset and Liability Management or ALM can be defined as a process of managing coordinately assets and liabilities in an attempt to achieve an organization´s financial objectives. For instance, a pension fund ALM consists in determining the optimal investment policy which is the one that maximizes wealth accumulated by the contributions and minimizes the equilibrium risk defined as the insolvency probability, i.e., the probability that the fund won´t be able to pay all benefits during the planning horizon. The use of stochastic programming models for ALM problems is more difficult because of the long planning horizon. However stochastic programming models are proposed in the literature reducing the planning horizon and including a chance constraint or an objective function penalization to control the equilibrium risk for the non-considered period. On this work, a new method for measuring and controlling the equilibrium risk is proposed determining capital requirement of a Brazilian pension fund for the nonconsidered period. This developed method considers the portfolio return as the discount rate of all net liability flows. The distribution of this discount rate conditioned on the optimal decisions is estimated by bootstrapping the portfolio return embedded on the stochastic programming solution. To sum up, this method shows that the usual insolvency probability of the previous models actually underestimates the pension fund`s equilibrium risk.

Nos últimos anos, o mercado segurador brasileiro tem apresentado forte expansão, a qual foi impulsionada pela estabilização econômica e o conseqüente aumento do consumo. No entanto, mediante um crescimento acelerado dos prêmios, eventuais desvios nas premissas adotadas na precificação podem expor as seguradoras a riscos pouco suportáveis no longo prazo. Este é um dos componentes do risco de subscrição, sendo o objeto do presente estudo. No âmbito regulatório, frente ao aumento das complexidades dos serviços financeiros e aos escândalos envolvendo grandes corporações, fez-se necessário o Novo Acordo da Basiléia, o qual introduziu metodologias de apuração da necessidade mínima de capital mais sensível a risco, beneficiando instituições melhor administradas na medida em que requer menor alocação de capital. Nessa mesma linha, no mercado segurador dos países membros da União Européia, segue o projeto Solvência II. Acompanhando a tendência mundial, no Brasil, foram promulgadas novas regras de solvência para o mercado segurador, sendo estabelecidas, num primeiro momento, regras de alocação de capital para cobertura do risco de subscrição, sendo os demais tipos de risco a serem tratados na seqüência. É importante esclarecer que, diferentemente do setor bancário, no mercado segurador brasileiro não é permitida a utilização do próprio modelo interno ou dos parâmetros deste para determinação do capital mínimo requerido regulatório, mas apenas a aplicação de fatores mais suavizados para tal fim. Assim, como este não observa o risco mensurado internamente, o capital regulatório passa a representar um potencial custo imposto às seguradoras, o qual pode impactar diretamente na rentabilidade das linhas de negócio. Nesse sentido, o presente estudo buscou investigar, sob a ótica e limitação de usuário externo das demonstrações contábeis, a existência de indícios que levam a supor que a nova regulamentação sobre o capital mínimo para cobertura do risco de subscrição penalizou as seguradoras de menor porte, tendo-se em vista o seu valor em risco para o nível de confiança de 99,5%. Para tanto, foi necessário: (a) apurar o capital mínimo regulatório, seja com ou sem modelo interno, (b) estimar o valor em risco de cada seguradora para o nível de confiança de 99,5% e (c) distinguir as seguradoras por porte, o qual foi determinado pela técnica de Análise de Conglomerados. O maior desafio foi determinar, para cada seguradora, o item (b), o qual consistiu na estimação das distribuições marginais das perdas por categoria de negócio e a agregação dessas pela aplicação da teoria de cópulas. Depois, calculou-se a razão entre (i) a somatória do grau de provisionamento com a alocação do capital regulatório (abordagens com e sem modelo interno) e (ii) o valor em risco ao nível de confiança de 99,5%. Em seguida, aplicou-se o teste de Mann-Whitney para comparar médias em função do porte. A partir da análise desenvolvida, observou-se que modelo regulatório se mostrou mais coerente quando aplicado às seguradoras médias e grandes, tendo-se em vista que apresentou menor dispersão no parâmetro calculado, cuja mediana estava em torno de 1. Ou seja, para essas, tal resultado sugere que o grau de provisionamento juntamente com o capital regulatório retrata, aproximadamente, o nível de confiança de 99,5%, em consonância com o Projeto Solvência II. A dispersão para as seguradoras pequenas é bem maior e a mediana está próximo a 1,5, o que indica que a abordagem regulatória requer em torno de 50% a mais de recursos que o nível de confiança de 99,5% exige. Esse resultado indica uma desvantagem competitiva se comparada às seguradoras de médio e grande porte. Portanto, os resultados dos testes sugerem que as novas regras de alocação de capital para o mercado segurador brasileiro penalizou as seguradoras de menor porte, impactando na rentabilidade, na precificação e na competitividade se comparada às médias e grandes, o que, por sua vez, tende a favorecer a concentração do setor. / In recent years, the Brazilian insurance market has shown strong growth, which was driven by economic stabilization and the consequent increase in consumption. However, on an environment accelerated growth of premiums, any deviations in the pricing assumptions may expose insurers to unbearable risks in the long term. This is one of the components of the underwriting risk which is the object of this study. In a regulatory side, increased complexities of the financial services and scandals involving large corporations resulted in the creation of the New Basel Accord, which introduced new methodologies to analyze the minimum capital required, considering the risk based capital approach, benefiting the better managed institutions as they require less capital allocation. In a similar vein, countries of the European Union follow the Solvency II project for their insurance market. Following the global trend, new solvency rules for the insurance market were approved in Brazil, being established in the first instance, rules of capital allocation to cover the underwriting risk. Other risk types will be addressed later by the government. It is important to clarify that, unlike the banking sector, the Brazilian insurance market is not allowed to use its own internal model or the parameters of this model to determine the minimum regulatory capital required, but only the application softened factors for this purpose. Thus, as it does not observe the risk internally measured, the regulatory capital becomes a potential cost imposed on the insurers, which can impact directly the profitability of the business lines. Therefore, from the point of view and limitation of external user of financial statements, the present study investigated the existence of signs that could lead to suppose that the new regulations on minimum capital to cover the underwriting risk have penalized the smaller insurance companies, when keeping in view their value at risk for the confidence level of 99,5%. To this end, it was necessary: (a) to determine the minimum regulatory capital, either approaches with or without internal model; (b) to estimate the value at risk of each insurer for the confidence level of 99,5%; and (c) to distinguish insurers by size, according to the cluster analysis technique. The biggest challenge was to determine, for each insurer, the item (b), which consisted in the estimation of marginal distributions of losses and aggregation of these by applying the theory of copulas. Then we calculated the ratio of (i) the sum of the degree of provisioning with the allocation of regulatory capital (approaches with and without internal model) and (ii) the value at risk at the level of confidence 99,5%. Next, we applied the Mann-Whitney Test to compare means of the insurers by size. From the developed analysis, it was observed that the regulatory model was more consistent on medium and large insures as they have shown a lower dispersion in the parameter of interest, presenting a median around 1. That is, for them, the result suggests that the level of provisioning along with the regulatory capital has approximately reflected the confidence level of 99,5%, which is in line with the Solvency II project. Small insurers have shown much higher dispersion and their median is close to 1,5. This indicates that the regulatory approach requires around 50% more resources than the confidence level of 99,5% requires. This represents a disadvantaged competition, if compared with large and medium sized companies. Therefore, the test results suggest that the new rules of capital allocation for the Brazilian insurance market has penalized the smaller insurers, impacting their profitability and competitive pricing when compared with the medium and large ones, which, in turn, tend to favor an industry concentration.

Cette thèse a pour objectif d’étudier les effets de l’Endettement public sur la Croissance économique en présencede Non Linéarité. L’étude est appliquée aux pays membres de l’Union Économique et Monétaire Ouest Africaine. Uneétude théorique des caractéristiques et de l’évolution des agrégats macroéconomiques est faite dans le premier Chapitre.Dans le Chapitre 2, l’étude de la non linéarité entre Endettement Public et Croissance économique conclue á l’existenced’un seuil d’endettement optimal d’environ 80%. Ce seuil est obtenu grâce á la méthodologie de transaction brutal et detransaction lisse mais aussi une méthodologie d’estimation sur panel dynamique. Par la suite, une étude de la solvabilitéet de la soutenabilité est effectuée. Ce chapitre a permis de faire une étude approfondie de la stationnarité de la detteet de la cointégration des séries de recettes et de dépenses courantes. L’objectif de ce Chapitre étant d’étudier lescapacités de remboursements des pays de l’UEMOA. Enfin, le lien entre structure des dépenses publiques et Croissanceéconomique est étudier dans le dernier Chapitre.Un modèle à correction d’erreur a été utilisé pour étudier l’impact de lacomposition des dépenses publiques sur la Croissance économique. / This thesis aims to study the effects of public debt on the Economic Growth in the presence of Non Linearity. Thestudy is applied to the member countries of the Economic and Monetary Union of West Africa. A theoretical study ofthe characteristics and evolution of macroeconomic aggregates is made in the first chapter. In Chapter 2, the studyof the non-linearity between Public Debt and Economic Growth concluded in the existence of an optimal debt level ofabout 80%. This threshold is achieved through the methodology of brutal transaction and smooth transaction but also amethodology of estimation of dynamic panel. Subsequently, a study of solvency and sustainability is made. This chapterhas allowed a thorough study of the stationarity of the debt and cointegration series of revenue and expenses. Thepurpose of this chapter is to study the WAEMU countries repayment capacity. Finally, the link between the structure ofpublic expenditure and Economic Growth is studied in the last chapter. An error correction model was used to study theimpact of the composition of public expenditures on Economic Growth.

nÃo hà / Considerando o atendimento à restriÃÃo orÃamentÃria intertemporal do governo, analisa-se a solvÃncia das administraÃÃes pÃblicas municipais no Cearà a partir da proposta de Hamilton e Flavin (1986) e dos avanÃos de Levin et. al. (2002) e Im, Pesaran, and Shin (2003). Na impossibilidade de se praticar um jogo de Ponzi, uma administraÃÃo à considerada solvente se o dÃficit pÃblico segue uma trajetÃria estacionÃria. Para o exercÃcio empÃrico, dois testes de raiz unitÃria em painel sÃo utilizados e o perÃodo de anÃlise compreende os anos 2002 a 2008. Constata-se que as administraÃÃes pÃblicas municipais no Cearà sÃo solventes, muito embora uma anÃlise para oito macrorregiÃes tenha indicado que em duas delas a polÃtica fiscal seja insustentÃvel. Finalmente, a condiÃÃo de insolvÃncia nÃo parece ser determinada pelo tamanho econÃmico, jà a solvÃncia parece estar associada à afinidade polÃtica entre as prefeituras e as esferas maiores de governo. / Considering that the intertemporal budget constraint of the government is fulfilled, this work examines the long-run solvency of the public accounts of the municipalities of Ceara following Hamilton and Flavin (1986), Levin et al. (2002) and Im, Pesaran, and Shin (2003). If an administration does not use a Ponzi game it is considered solvent if the budget deficit has a stationary path. As an empirical exercise, two unit root tests in panel are used and the period of analysis covers the years 2002 to 2008. It appears that the municipalities governiments in Ceara are solvents, although an analysis for eight macro-regions has indicated that in two of them the fiscal policy is unsustainable. Finally, the condition of insolvency does not seem to be determined by economy size, since the solvency appears to be associated with political affinity between the municipalities and the larger spheres of government.

nÃo hà / Este estudo trata da solvÃncia do Regime PrÃprio da PrevidÃncia Social do Estado do Cearà (RPPS), um sistema que invariavelmente necessita de aportes financeiros pÃblicos para pagar os seus aposentados e pensionistas. O estudo utilizou modelos economÃtricos para avaliar a sustentabilidade do regime previdenciÃrio no perÃodo de 2003 a 2012, com dados bimestrais coletados dos RelatÃrios Resumidos da ExecuÃÃo OrÃamentÃria. Os resultados mostram que de acordo com o modelo utilizado a dÃvida contraÃda pela previdÃncia no estado do Cearà à insolvente. / This article studies the solvency of the Social Security System in Cearà State, a system invariably requires public financial contributions to pay their retirees. The study is based in econometric models to measure the sustainability between 2003- 2012 years, with bimonthly data collected from the RelatÃrio Resumido da ExecuÃÃo OrÃamentÃria. The results demonstrate that the debt incurred by âcearenseâ pension system is technically insolvent, based in econometric models used.

The financial stability of the insurers is important to fulfil its role as a risk transfer mechanism and to protect the purchasers of their products. The European Union is introducing the Solvency II to modernise the current Solvency I regime and to harmonise the different insurance legislation of the members of the European Union. Solvency II introduces an architecture consisting of three pillars, with Pillar I setting the solvency capital requirements, Pillar II the governance and risk management requirements and Pillar III the reporting requirements. The South African Regulator initiated Solvency Assessment and Management for implementation in 2016 to align the South African prudential regulatory framework to meet the Solvency II requirements for third country equivalence. The problem that this study addressed is the possible effect that the introduction of Solvency Assessment and Management may have on the sustainability of short-term insurers in South Africa. The results of a empirical component of the study indicated that small and medium short-term insurers may be negatively impacted due to the costs incurred to implement and comply with the requirements of the new regulatory framework. The effect on the South African short-term industry can be that cover is concentrated among a few large short-term insurers. / Business Management / M. Com. (Business Management)