This thesis concerns measurement and management of operational risk within banks. First the Basel II concept is described. Following part focuses on definition of operational risk, description of its subparts, methods of how to measure it and phases of the management process. Methods of how to control and mitigate the operational risk are also defined in this section. Last part focuses on analysis of principles and standards which every bank should follow to effectively identify, assess, monitor and control/mitigate the operational risk. A questionaire which can be used to identify the level of operational risk within a bank is proposed in this section.

Mezi jedno z nejvíce diskutovaných témat posledních roků týkající se regulace finančních institucí bezpochyby patří Basel II. Konceptu Basel II v spojení s bankami se v posledních letech věnovalo mnoho článků a publikací. Málo se však psalo o dopadech této Nové basilejské dohody na obchodníky s cennými papíry. Právě to bude hlavním cílem této práce. Na úvod budou shrnuty důvody a význam regulace obchodníků s cennými papíry a její vývoj v České republice. Dále bude následovat vymezení finančních rizik a způsob jejich řízení. Komplexní řízení rizik obchodníka s cennými papíry je v současnosti založeno především na sledování kapitálové přiměřenosti. Basel II umožňuje používat základní i speciální přístupy pro její výpočet. Obchodníci s cennými papíry si pravděpodobně nebudou moci dovolit implementovat speciální přístupy. Základní přístupy jsou však přísné a pro mnoho obchodníků to může znamenat výrazné zvýšení kapitálových požadavků.

This thesis is focused on the new basel capital accord - Basel II. The first part of the work deals with financial risks and their regulation. Next part is concerned on Basel I and Basel II. This part defines basic terminology and three pillars - minimum capital requirements, supervisory review process and market discipline. In the last part there is an analysis of impact of Basel II on capital adequacy of czech banks.

The Basel II Framework ensures banks are well capitalized. It is designed to be more risk sensitive than the old Basel Capital Accord and considers operational risk, such as "the risk of loss resulting from inadequate or failed internal procesess, people and systems or from external events." Banks are forced to calculate the regulatory capital charge for operational risk and want to optimize it. IT is a substantial part of operational risk and therefore is a part of the regulatory capital charge for operational risk. The Basel Committee requires banks to implement a framework to manage operational risk. One objective of this study is to provide description of this framework, IT aspects of operational risk and IT governance under Basel II, based on available sources of information. Another objective is to design processes for assessing and managing IT and operational risks under Basel II. Last but not least objective of this study is to disclose recent credit risk data and indicators for consolidated sector and large banks in the Czech republic. The amount of the regulatory capital charge for operational risk is an important part of the overall capital charge. This work increases IT practitioner's understanding of such topics as assessing and managing operational risk under Basel II.

The aims of this thesis are twofold. Firstly, it aims to analyse the new regulatory rules BASEL III, published in December 2010. These were created as a lesson from the previous crisis and following the developments occurring problem areas included in the regulatory rules Basel II. And secondly, it evaluates their impact on the Czech Banking Sector. Regulatory rules BASEL III contain large number of rules aimed at enhancing the quality, quantity and flexibility of regulatory equity capital, reducing the cyclicality of capital requirements, stricter capital requirements for certain risky assets, intensifying surveillance in terms of significantly important financial institutions and international standards of liquidity. Apart from adjustment of the rules that appear in the Basel II, the regulatory rules Basel III also include rules used for the first time. The analysis of the impact on the Czech banking sector is based on the assumption that the Czech banking sector is well equipped with capital and the impact of BASEL III will therefore not have any significant impact on the functioning of Czech banks. This thesis shows that the impacts depend on the size of the banking institutions. A selected sample of six Czech banks (two from each group of large, medium and small banks) is used, inter alia, to demonstrate this.

This work focuses on new regulatory proposals, primarily Basel III accords and analyzes its ability to create a buffer for recurrent credit bubbles. This paper follows a research made by Lis, Pagés and Saurina [2000]. Their paper has illustrated the cyclicality of loan growth and GDP growth for Spain. This cyclicality is supported by cyclical Basel II regulation. In this paper is examined the ability of new regulatory proposals such as Basel III, statistical provisions and change in the approach to the probability of default, to cope with recurrent credit bubbles. According to my critical assessment, Basel III may not be able to create sufficient capital buffer for exceptional credit bubbles such as the current one. This buffer suggested by Basel III has several drawbacks which may decrease its functionality. Statistical provision is not an appropriate measure either, because it could weaken the fair and true view of financial statements principle. Change in approach to probability of default seems to be rational and effective. The only issue may relate to its recovery mechanisms. It doesn't support economic growth in time of economic recession. The author's proposal of new countercyclical buffer, which would be based on credit-to-GDP ratio and GDP growth to loan growth gap is introduced at the end of this work. Although this measure may have negative impact on GDP growth, it may create an appropriate buffer to systematic credit risk.

This dissertation consists of three chapters related to macroeconomic implications of financial frictions, along with an application of macro-finance models to the Chinese economy. The first two chapters focus on government guarantees on business loans to state-owned enterprises (SOEs), a typical practice of the Chinese government. Chapter 1 embeds partial loan guarantees into the loan contracting problem, built upon the costly state verification framework. A larger degree of guarantees dampens the sensitivity of the loan rate to a change in leverage, which incentivizes entrepreneurs to lever up. Also, greater guarantees reduce entrepreneurs' exposures to credit risks, hence altering their choices of investment and leverage in response to an exogenous risk shock. Chapter 2 proceeds to develop a New Keynesian dynamic stochastic general equilibrium (DSGE) model and investigates the effect of government guarantees on capital misallocation and business cycle fluctuations in China. On one hand, government guarantees mitigate the influence of the financial accelerator mechanism on investment and production of both SOEs and private-owned enterprises (POEs). On the other hand, by inducing a time-varying dispersion in returns on capital across SOEs and POEs, government guarantees exert a negative impact on the allocative efficiency of resources and thus cause further losses on total factor productivity (TFP) and output during recessions. Quantitative analyses show that partial loan guarantees to SOEs are counterproductive in moderating the reaction of GDP to both risk and technology shocks. Chapter 3 develops a DSGE model with financial constraints on entrepreneurs and banks, featuring a risk-based bank capital requirement, and discusses the role of Basel II in reinforcing procyclical tendencies of the credit market and the real economy. I study impulse responses of the calibrated model to various shocks. Quantitative results show that the direction and magnitude of cyclical effects arising from Basel II strongly depend on the nature of macroeconomic shocks that hit the economy: only a risk shock can generate noticeable procyclical effect, while the procyclicality under a TFP shock and the countercyclicality under a shock to the marginal efficiency of investment (MEI) are quantitatively insignificant.

This thesis is intended to give an overview of creditvaluation adjustment (CVA) and adjacent concepts. Firstly, the historicalevents that preceded the initiative to reform the Basel regulations and tointroduce CVA as a core component of counterparty credit risk are illustrated.After some conceptual background material, a journey is taken through theregulatory aspects of CVA. The three most commonly used methods for calculatingthe regulatory CVA capital charge are explained in detail and potentialchallenges with the methods are addressed. Further, the document analyses ingreater depth two of the methods; the internal model method (IMM) and thecurrent exposure method (CEM). The differences between these two methods areexplained mathematically and analysed. This comparison is supported bysimulations of portfolios containing interest rate swap contracts with differenttime to maturity and of counterparties with varying credit ratings. Oneconcluding observations is that credit valuation adjustment is a measure of centralimportance within counterparty credit risk. Further, it is shown that IMM has someimportant advantages over CEM, especially when it comes to model connection withreality. Finally, some possible future work to be done within the topic area is suggested.

A credit portfolio where each obligor contributes infinitesimally to the risk is said to be infinitely granular. The risk related to the fact that no real credit portfolio is infinitely granular, is called name concentration risk. Under Basel II, banks are required to hold a capital buffer for credit risk in order to sustain the probability of default on an acceptable level. Credit risk capital charges computed under pillar 1 of Basel II have been calibrated for a specific level of name concentration. If a bank deviates from this benchmark it is expected to address this under pillar 2, which may involve increased capital charges. Here, we look at some of the difficulties that a bank may encounter when computing a name concentration risk add-on under pillar 2. In particular, we study the granularity adjustment for the Vasicek and CreditRisk+ models. An advantage of this approach is that no vendor software products are necessary. We also address the questions of when the granularity adjustment is a coherent risk measure and how to allocate the add-on to exposures in order to optimize the credit portfolio. Finally, the discussed models are applied to real data

The New Capital Accord (henceforth, Basel II), is expected to impose dramatic changes on banks and other providers of corporate financing, as well as companies. Literature indicates that small and medium sized enterprises (henceforth SMEs), in general, and in particular German SMEs seem to be affected: Germany has the highest SME density with SMEs comprising 99.6% of all corporations (IMF, 2008), these SMEs are highly dependent on banks for financing (see Jacobson et al, 2006). However, there is huge controversy in the literature concerning how these changes will look, right before Basel II came into effect in the years 2007 / 2008 in the European Union. In order to explore this effect from a Post-Basel II perspective, the objective of this research project is to establish what effect Basel II will have on corporate financing of SMEs in Germany. The high impact on SMEs (in Germany), combined with controversial evidence from extant Pre-Basel II research, indicates a high relevance to academics and practitioners for this thesis. This thesis is probably the first from a Post-Basel II perspective which covers both the SMEs' as well as the financiers' perspective. Based on a structured literature review using the comparative method (Peters, 1998) 'Most Different Systems' evidence is provided that there is no consistent picture regarding the effect of Basel II. Therefore, further research is needed to determine whether the effect in Germany is consistent, from a Post-Basel II perspective, with regards to the conditions which trigger certain mechanisms, from a 'scientific realism' (Smith, 1998) perspective, because the literature indicates that 'positivist generalising' has limited validity. Building on Creswell (2003), an 'exploratory sequential' design was created to test three initial hypotheses (as confirmation or refutation of a theory, see Gujarati, 2003:8): a multi-method design is best suited to the author's philosophical stance of 'scientific realism' by means of triangulation (Robson, 2002:174). The result of the initial quantitative phase is based on the analysis of questionnaire data from 125 SMEs and financiers (banks, private equity companies, family offices, providers of alternative means of financing) derived from a probabilistic sample frame in the fourth quarter of 2008. Mathematical models for SMEs and financiers regarding the three initial hypotheses were set-up and tested using the appropriate statistical tests. In order to limit bias by means of a spill-over effect from the financial crises, control questions were used. The subsequent qualitative phase by means of semistructured elite interviews (Saunders et al, 2007:312) between March and May 2009 enabled a valid triangulation and provided in-depth insights into how SMEs can cope best with Basel II. The purposive sample, of 17 'important cases', included company owners and top-level financier executives. In a conclusive quantitative and qualitative synopsis, the three initial hypotheses were acknowledged. However, the qualitative in-depth analysis by means of 'causal networks' (Miles and Huberman, 1994) led to an amendment of the hypotheses as follows: 1. Corporate finance has become different for SMEs because the 'house bank principle' has changed to a 'core bank principle' due to Basel II. Shopping around regarding credits will be more difficult which makes financing more difficult. This could be overcompensated by major SMEs, by using non-credit corporate financing which leads to a reduction of the 'house bank' principle. 2. SMEs can cope best with the effect when they: a) proactively engage in rating and improve the parameters, or b) they adjust their strategy as stated in hypothesis 3. 3. Financiers (especially non-bank financiers) will engage in SME corporate finance when they have a sound financial basis / management and when they adjust their strategy in terms of growth with the aim of niche market leadership and when they open up for exit strategies.