Aristotle, Plato, And Rousseau What Is Natural And The...

Professor Graham MPP 601.01 March 19, 2016 Aristotle, Plato, and Rousseau: What is Natural and The Nature of Man As mentioned in the essay prompt, authors in this course have used the term(s) nature/natural in various ways to frame and support their arguments. As I identified in my previous paper, â€Å"In Book 1 of Aristotle s Politics, Aristotle begins by defining the city and or political community while also making the case that nearly everything exist for the sake of achieving some sort of good.† It is here that Aristotle introduces the concept of what is natural. He does this by laying the foundation of his political theory and arguing that 1) the city exist by nature and 2) politics is â€Å"natural† because man is by nature a â€Å"political animal†. In the Republic of Plato, Plato first uses the term â€Å"nature† in describing a state of being. He later uses the term in the context of the identifying the â€Å"nature of justice†; the central theme and purpose of The Republic, the notion that it is better to be just than unjust. In A Discourse on Inequality, Rousseau s first use of the term â€Å"nature† is in the context of describing the way things just are. Over time his use of the term shifts as his philosophy on human nature/the nature of man is expressed. While each of these authors use the term nature/natural in very different ways to support their arguments, they also use them similarly. Throughout their works, their use of the term(s) are both singular and multiple/plural.Show MoreRelatedHuman Nature : Good Or Evil1053 Words   |  5 PagesHuman Nature: Good or Evil All ideologies, including some economic ideologies, produce theories of human nature in order to establish fundamental human rights and to establish a more productive form of government. 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A grand idea but is it so simple? If Man creates society to protect this arbitrary concept, does society have the right to take this right away? John Rawls felt that society was responsible for deciding who properly owns propertyRead MoreThe Good Ghanaian Society 1068 Words   |  5 PagesThe Good Ghanaian Society While the end of that search [of the Good Society] remains elusive, I am convinced that the search itself isn’t illusive. –James O’toole What constitutes a good society to each and every individual within that society would be a different answer. This is because we speak different tongues, desire different ends, and have different basic assumptions about where the Ghanaian society, and the corporations we work in, should be heading. Despite this kaleidoscope of opinionsRead MorePolitical Science And Political Philosophy Essay3559 Words   |  15 Pagespolitical conflict. Political philosophy will help the citizens to understand why things need to be changed.†Political philosophy explores the nature, principles, and rationale that underlie the exercise of government†.[Hudelson,1999] Plato, Aristotle, Machiavelli, Karl Marx, Thomas Hobbes, john Locke, Jean-Jacques Rousseau were well known major political thinkers. Plato gives the concept of ideal state where the state is like a human including three elements-philosophers, soldiers and workers .The philosopherRead MoreThe Political Of Political Science Essay2347 Words   |  10 PagesIntroduction: According to Aristotleâ€Å"Man is by nature a political animal and he only by nature and by mere accident is without state is either above humanity or below it† Political science is ultimately related with the word politics which is derived from the Greek word â€Å"Polis†.The origin of political thought in the west and therefore goes back to the Greece.Political science is the study of the state and the government.And political philosophy is considersd to be a sub discipline of political scienceRead MorePolitical Philosophy and Plato Essay9254 Words   |  38 PagesSocrates 469 BC–399 BC, was a classical Greek Athenian philosopher. 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The Different Types of Marriages Presented in Pride and...

Discuss the different types of marriages presented in Pride and Prejudice and what this tells you about the different attitudes to marriage in the early nineteenth century. Austen opens this book with a cynical commentary on the Eighteenth Century conception of the value of love - It is a truth universally acknowledged that a gentleman in possession of a good fortune must be in want of a wife! Throughout the book, there are many insights into different beliefs on why to marry. Marrying for money was very popular, followed by lust, calculated marriages and arranged marriages. Something not as often thought about were love marriages. â€Å"Happiness in marriage is entirely a matter of chance†. This was mainly because parents†¦show more content†¦with friends or at school. It was deemed very serious to do this and a sign of a drastic change such as entering an illicit relationship or marrying a man who didn’t meet with the approval of the family. All of this made some women want to marry as soon as possible to get financial security and social status, or to get out of an unhappy family situation. Family might also add to the pressure to get married, not wanting their daughter to be an â€Å"old maid†. Being in this situation herself Austen portrays the hard life women had through the women in the story. Darcy and Lizzie’s relationship is the strongest, one based on opposites, where he is rich but she is poor, he is reserved with his feelings where as she is open to tell them, he is intense and serious, and Lizzie has a â€Å"lively, playful disposition†. But within this there is an understanding of themselves and each other. Her feelings for Mr Darcy are more based on physical attraction along with a mutual chemistry. This shows an alternative view to Lizzie’s sister Lydia and her good friend Charlotte Lucas, which is rather superficial. At first Lizzie does not want to fall at his feet just because he is rich. Early on Darcy knows he is attracted to Lizzie but this goes against everything he wants to feel. He does not want to like her because he feels she is beneath him, because her family has no money and â€Å"low connections†. This becameShow MoreRelated Explore Jane Austen’s attitude to marriage in Pride and Prejudice1671 Words   |  7 Pagesattitude to marriage in Pride and Prejudice Looking at the social, historical and cultural context In the 19th century when Austen wrote ‘Pride and Prejudice’, the way in which marriage was viewed was very different. It would have been expected of a young woman to find a ‘suitable’ partner for marriage before they were thirty, as after this they could be seen as an embarrassment to their family. By suitable, it does not mean in the way in which marriage is viewed today. 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As Jane Austen st ates when describing Mrs. Bennet, â€Å"The business of her Vanek 7 life was to get her daughtersRead MoreSimilarities Between Love And Marriage And Pride And Prejudice1248 Words   |  5 PagesThe context of a novel or film can greatly affect the values of society through the key concepts of love and marriage, and feminine appearance of a woman. We can clearly observe the comparisons of Jane Austen’s 1813 novel Pride and Prejudice to Sharon Maguire’s 1997 film Bridget Jone’s Diary. The novel Pride and Prejudice was composed in the Regency period where marriage was vitally important for a woman as it meant a financially comfortable and stable future, and it was not based upon true loveRead More Feminism in Pride and Prejudice by Jane Austen Essay1713 Words   |  7 PagesFeminism in Pride and Prejudice by Jane Austen Jane Austen, the author of Pride and Prejudice, holds feminist views and uses the novel to show her opinions about womens issues. Pride and Prejudice is a personal essay, a statement of Jane Austens feelings about the perfect lady, marriage, and the relationship between the sexes. Jane Austens characters, plot, and dialogue are biased to reflect her beliefs. The biased process and importance of marriage are introduced with the first lineRead MoreThe Attitudes Toward Marriage in Jane Austens Pride and Prejudice844 Words   |  4 PagesThe Attitudes Toward Marriage in Jane Austens Pride and Prejudice Jane Austin wrote the novel Pride and Prejudice in 1813. The novel provides a great deal of information and gives us a detailed insight to the different attitudes towards marriages at the time. Pride and Prejudice is focused and written about the lifestyles among gentry. The gentry was the middle to upper class citizensRead MoreMarriage in Jane Austen ´s Pride and Prejudice1399 Words   |  6 PagesJane Austen is only one example of this type of author who exemplifies a style of repetition by using repetitious themes. 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These themes deal with the subjects of; marriage, good breeding and appearances, socialRead MoreCompare the Presentation of Love in Shakespeare to Pride and Prejudice1074 Words   |  5 Pages‘Romeo and Juliet’ and ‘Pride and Prejudice’ are the two of English literature’s most celebrated and loved stories.   In both cases, the theme of the story is love between a young man and women and the lovers are the main characters about which the rest of the cast or characters in the story revolve.   Although both are romances, in the literal sense of the word, there are numerous differences between them; this essay intends to examine the similarities and differences between the two works, specificallyRead MorePride And Prejudice By Elizabeth Bennet2024 Words   |  9 Pagesindustry portrays marriage as picture perfect, in which every girl has their dream wedding and true love always finds its way. Contrary to the media’s view, marriage was not always a fairy-tale because women had the responsibility to help provide for their family. During the English Regency period, young girls married for financial security and social benefits to improve their family’s status. In Pride and Prejudice, Elizabeth Bennet rebelled against this mainstream idea of marriage set by society

Basel Norms in India free essay sample

Technical Paper – Course on General Management and Communication Skills, Institute of Chartered Accountants of India Batch 129 Basel II Implications on Indian Banks Group Members Rahul Sharma (ERO0097549) Abhishek Tulsyan (CRO0137558) Sikha Kedia (ERO0105399) Gourav Modi (ERO0016925) Praveen Didwania (ERO0110131) Index of Contents Topics Page No. I. Introduction A. B. C. D. E. F. G. Background Functions of Basel Committee The Evolution to Basel II – First Basel Accord Capital Requirements and Capital Calculation under Basel I Criticisms of Basel I New Approach to Risk Based Capital Structure of Basel II First Pillar : Minimum Capital Requirement Types of Risks under Pillar I The Second Pillar : Supervisory Review Process The Third Pillar : Market Discipline 3 3 3 3 3 4 4 II. The Three Pillar Approach A. B. C. D. 5 5 6 6 7 7 7 III. Capital Arbitrage and Core Effect of Basel II A. Capital Arbitrage B. Bank Loan Rating under Basel II Capital Adequacy Framework C. Effect of Basel II on Bank Loan Rating IV. Basel II in India A. Implementation C. Impact on Indian Banks D. Impact on Various Elements of Investment Portfolio of Banks E. Impact on Bad Debts and NPA’s of Indian Banks D. Government Policy on Foreign Investment E. Threat of Foreign Takeover 8 8 9 10 10 10 V. Conclusion A. SWOT Analysis of Basel II in Indian Banking Context B. Challenges going ahead under Basel II 11 11 13 13 VI. VII. References The Technical Paper Presentation Team 2 I. Introduction: A. Background Basel II is a new capital adequacy framework applicable to Scheduled Commercial Banks in India as mandated by the Reserve Bank of India (RBI). The Basel II guidelines were issued by the Basel Committee on Banking Supervision that was initially published in June 2004. The Accord has been accepted by over 100 countries including India. In April 2007, RBI published the final guidelines for Banks operating in India. Basel II aims to create international standards that deals with Capital Measurement and Capital Standards for Banks which banking regulators can use when creating regulations about how much banks need to put aside to guard against the types of financial and operational risks banks face. The Basel Committee on Banking Supervision was constituted by the Central Bank Governors of the G-10 countries in 1974 consisting of members from Australia, Brazil, Canada, United States, United Kingdom, Spain, India, Japan, etc to name a few. The ommittee regularly meets four times a year at the Bank for International Settlements (BIS) in Basel, Switzerland where its 10 member Secretariat is located. B. Functions of the Basel Committee The purpose of the committee is to encourage the convergence toward common approaches and standards. However, the Basel Committee is not a classical multilateral organisation like World Trade Organisation. It has no founding treaty and it does not issue binding regulat ions. It is rather an informal forum to find policy solutions and promulgate standards. C. The Evolution to Basel II – First Basel Accord The First Basel Accord (Basel I) was completed in 1988. The main features of Basel I were: †¢ †¢ †¢ Set minimum capital standards for banks Standards focused on credit risk, the main risk incurred by banks Became effective end-year 1992 The First Basel Accord aimed at creating a level playing field for internationally active banks. Hence, banks from different countries competing for the same loans would have to set aside roughly the same amount of capital on the loans. D. Capital Requirements and Capital Calculation under Basel – I Minimum Capital Adequacy ratio was set at 8% and was adjusted by a loan’s credit risk weight. Credit risk was divided into 5 categories viz. 0%, 10%, 20%, 50% and 100%. Commercial loans, for example, were assigned to the 100% risk weight category. To calculate required capital, a bank would multiply the assets in each risk category by the category’s risk weight and then multiply the result by 8%. Thus, a Rs 100 commercial loan would be multiplied by 100% and then by 8%, resulting in a capital requirement of Rs8. E. Criticisms of Basel – I Following are the criticisms of the First Basel Accord (Basel I):†¢ †¢ It took too simplistic an approach to setting credit risk weights and for ignoring other types of risk. Risks weights were based on what the parties to the Accord negotiated rather than on the actual risk of each asset. Risk weights did not flow from any particular insolvency probability standard, and were for the most part, arbitrary. 3 †¢ †¢ †¢ The requirements did not account for the operational and other forms of risk that may also be important. Except for trading account activities, the capital standards did not account for hedging, diversification, and differences in risk management techniques. Advances in technology and finance allowed banks to develop their own capital allocation models in the 1990’s. This resulted in more accurate calculation of bank capital than possible under Basel I. These models allowed banks to align the amount of risk they undertook on a loan with the overall goals of the bank. Internal models allow banks to more finely differentiate risks of individual loans than is possible under Basel – I. It facilitates risks to be differentiated within loan categories and between loan categories and also allows the application of a capital charge to each loan, rather than each category of loan. F. New Approach to Risk-Based Capital †¢ †¢ †¢ By the late 1990’s, growth in the use of regulatory capital arbitrage led the Basel Committee to begin work on a new capital regime (Basel II) Effort focused on using banks’ internal rating models and internal risk models June 1999: The Basel Committee issued a proposal for a new capital adequacy framework to replace Basel I. In order to overcome the criticisms of Basel – I and for adoption of the new approach to riskbased capital, Basel II guidelines were introduced. G. Structure of Basel – II Basel – II adopts a three pillar approach: †¢ †¢ †¢ Pillar I Minimum Capital Requirement (Addressing Credit Risk, Operational Risk Market Risk) Pillar II Supervisory Review (Provides Framework for Systematic Risk, Liquidity Risk Legal Risk) Pillar III Market Discipline Disclosure (To promote greater stability in the financial system) II. The Three Pillar Approach The first pillar establishes a way to quantify the minimum capital requirements. The main objective of Pillar I is to align capital the adequacy ratios to the risk sensitivity of the assets affording a greater flexibility in the computation of banks individual risk. Capital Adequacy Ratio is defined as the amount of regulatory capital to be maintained by a bank to account for various risks inbuilt in the banking sy stem. The focus of Capital Adequacy Ratio under Basel I norms was on credit risk and was calculated as follows: Capital Adequacy Ratio = Tier I Capital+Tier II Capital Risk Weighted Assets Basel Committee has revised the guidelines in the year June 2001 known as Basel II Norms. Capital Adequacy Ratio in New Accord of Basel II: Capital Adequacy Ratio = Total Capital (Tier I Capital+Tier II Capital) Market Risk(RWA) + Credit Risk(RWA) + Operation Risk(RWA) *RWA = Risk Weighted Assets Calculation of Capital Adequacy Ratio: Total Capital: Total Capital constitutes of Tier I Capital and Tier II Capital less shareholding in other banks. Tier I Capital = Ordinary Capital + Retained Earnings Share Premium Intangible assets. Tier II Capital = Undisclosed Reserves + General Bad Debt Provision+ Revaluation Reserve+ Subordinate debt+ Redeemable Preference shares Tier III Capital: Tier III Capital includes subordinate debt with a maturity of at least 2 years. This is addition or substitution to the Tier II Capital to cover market risk alone. Tier III Capital should not cover more than 250% of Tier I capital allocated to market risk. A. First Pillar : Minimum Capital Requirement B. Types of Risks under Pillar I . Credit Risk Credit risk is the risk of loss due to a debtors non-payment of a loan or other line of credit (either the principal or interest (coupon) or both). Basel II envisages two different ways of measuring credit risk which are standarised approach, Internal Rating-Based Approach. The Standardised Approach The standardized approach is conceptually the same as the present Accord, but is more risk sensitive. Un der this approach the banks are required to use ratings from External Credit Rating Agencies to quantify required capital for credit risk. The Internal Ratings Based Approach (IRB) Under the IRB approach, different methods will be provided for different types of loan exposures. Basically there are two methods for risk measurement which are Foundation IRB and Advanced IRB. The framework allows for both a foundation method in which a bank estimate the probability of default associated with each borrower, and the supervisors will 5 supply the other inputs and an advanced IRB approach, in which a bank will be permitted to supply other necessary inputs as well. Under both the foundation and advanced IRB approaches, the range of risk weights will be far more diverse than those in the standardized approach, resulting in greater risk sensitivity. 2. Operational Risk An operational risk is a risk arising from execution of a companys business functions. As such, it is a very broad concept including e. g. fraud risk, legal risk, physical or environmental risks, etc. Basel II defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. Although the risks apply to any organization in business, this particular risk is of particular relevance to the banking regime where regulators are responsible for establishing safeguards to protect against systematic failure of the banking system and the economy. Banks will be able to choose between three ways of calculating the capital charge for operational risk – the Basic Indicator Approach, the Standardized Approach and the advanced measurement Approaches. 3. Market Risk Market risk is the risk that the value of a portfolio, either an nvestment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices. The preferred approach is VAR(value at risk). C. The Second Pillar : Supervisory Review Process Supervisory review process has been introduced to ensure not only that banks have adequate capital to support all th e risks, but also to encourage them to develop and use better risk management techniques in monitoring and managing their risks. The process has four key principles – a) Banks should have a process for assessing their overall capital adequacy in relation to their risk profile and a strategy for monitoring their capital levels. b) Supervisors should review and evaluate bank’s internal capital adequacy assessment and strategies, as well as their ability to monitor and ensure their compliance with regulatory capital ratios. c) Supervisors should expect banks to operate above the minimum regulatory capital ratios and should have the ability to require banks to hold capital in excess of the minimum. ) Supervisors should seek to intervene at an early stage to prevent capital from falling below minimum level and should require rapid remedial action if capital is not mentioned or restored. D. The Third Pillar : Market Discipline Market discipline imposes strong incentives to banks to conduct their business in a safe, sound and effective manner. It is proposed to be effected through a series of disclosure requirements on capital, risk exposure etc. so that market participants can assess a bank’s capital adequacy. These disclosures should be made at least semiannually and more frequently if appropriate. Qualitative disclosures such as risk management objectives and policies, definitions etc. may be published annually. 6 III. Capital Arbitrage and Core Effect of Basel II Regulatory arbitrage is where a regulated institution takes advantage of the difference between its real (or economic) risk and the regulatory position. Securitization is the main means used by Banks to engage in Regulatory Capital Arbitrage. Example of Capital Arbitrage is given below: A. Capital Arbitrage †¢ Assume a bank has a portfolio of commercial loans with the following ratings and internally generated capital requirements – AA-A: 3%-4% capital needed – B+-B: 8% capital needed – B- and below: 12%-16% capital needed Under Basel I, the bank has to hold 8% risk-based capital against all of these loans To ensure the profitability of the better quality loans, the bank engages in capital arbitrage, it securitizes the loans so that they are reclassified into a lower regulatory risk category with a lower capital charge Lower quality loans with higher internal capital charges are kept on the bank’s books because they require less risk-based capital than the bank’s internal model indicates. †¢ †¢ †¢ B. Bank Loan Rating under Basel – II Capital Adequacy Framework †¢ On April 27, 2007, the Reserve Bank of India released the final guidelines for implementation of the New Capital Adequacy Framework (Basel II) applicable to the Banking system of the country The new framework mandates that the amount of capital provided by a bank against any loan and facility will be based on the credit rating assigned to the loan issue by an external rating agency. This means that a loan and a facility with a higher credit rating will attract a lower risk weight than one with a lower credit rating. †¢ †¢ Illustration of capital-saving potential by banks on a loan of Rs 1000 million Rating Basel I Basel II Capital Saved (Rs Long Short Risk Capital Risk Capital Million) Term Term Weight Required* Weight Required Rating Rating (Rs Million) (Rs Million) AAA P1+ 100% 90 20% 18 72 AA P1 100% 90 30% 27 63 A P2 100% 90 50% 45 45 BBB P3 100% 90 100% 90 0 BB P4 P5 100% 90 150% 135 (45) below Unrated Unrated 100% 90 100% 90 0 *Capital required is computed as Loan Amount ? Risk Weight ? 9% C. Effect of Basel – II on Bank Loan Rating †¢ †¢ Banks would either prefer that the Borrower should get itself rated, or, It would prefer that the borrowing institution should pay a higher rate of interest to compensate for the loss. 7 To substantiate the above fact, following example is taken in respect of a strong company: Loan of Rating AAA is taken of Rs 100 Crores @ 12% interest rate Capital Adequacy Rating Risk % Capital Required Opportunity Ratio (Rs Crores) Interest lost by the Bank (Rs Crores) C. A. R. Unrated 100% 9. 00 1. 08 C. A. R. New 20% 1. 80 0. 22 Total Opportunity Interest lost by the Bank (Rs Crores) 0. 86 Hence, Banks would resort to the above-mentioned measures in order to reduce or curb this loss on opportunity interest. Worse affected by this action taken by Banks would be the weaker companies. They would either be charged a higher rate of interest on loans to compensate for the loss or would alternatively have to approach another bank charging a lower rate of interest. The ideal solution to this problem would be that a weaker company should get itself rated and also take steps in order to have a better credit rating. Credit Rating is an evaluation of credit worthiness of a person, company or instrument. Thus, it indicates their willingness to pay for the obligation and the net worth. IV. Basel II in India A. Implementation The deadline for implementing the base approach of Basel II norms in India, was originally set for March 31, 2007. Later the RBI extended the deadline for Foreign banks in India and Indian banks operating abroad to meet those norms by March 31, 2008, while all other scheduled commercial banks were to adhere to the guidelines by March 31, 2009. Later the RBI confirmed that all commercial banks were Basel II compliant by March 31, 2009. Keeping in view the likely lead time that may be needed by the banks for creating the requisite technological and the risk management infrastructure, including the required databases, the MIS and the skill up-gradation, etc. , RBI has proposed the implementation of the advanced approaches under Basel II in a phased manner starting from April 1, 2010 B. Impact on Indian Banks Basel II allows national regulators to specify risk weights different from the internationally recommended ones for retail exposures. The RBI had, therefore, announced an indicative set of weights for domestic corporate long-term loans and 8 bonds subject to different ratings by international rating agencies such as Moodys Investor Services which are slightly different from that specified by the Basel Committee (Table 1). C. Impact on various elements of the investment portfolio of banks The bonds and debentures portfolio of the banks consist of investments into higher rated companies, hence the corporate assets measured using the standardised approach may be exposed to slightly lower risk weights in comparison with the 100 per cent risk weights assigned under Basel I. The Indian banks have a large short-term portfolio in the form of cash credit, overdraft and working capital demand loans, which were un-rated, and carried a risk weight of 100 per cent under the Basel I regime. They also have short-term investments in commercial papers in their investment portfolio, which also carried a 100 per cent risk weight. The RBIs capital adequacy guidelines has prescribed lower risk weights for short-tem exposures, if these are rated (Table 2). This provides the banks with an opportunity to benefit from their investments in commercial paper (which are typically rated in A1+/A1 category) and give them the potential to exploit the proposed short-term credit risk weights by obtaining short-term ratings for exposures in the form of cash credit, overdraft and working capital loans. The net result is that the implementation of Basel II provided Indian banks with the opportunity to significantly reduce their credit risk weights and reduce their required regulatory capital, if they suitably adjust their portfolio by lending to rated but strong corporate and increase their retail lending. According to some reports, most of the Indian banks who have migrated to Basel II have reported a reduction in their total Capital Adequacy Ratios (CARs). However, a few banks, those with high exposures to higher rated corporate or to the regulatory retail portfolio, have reported increased CARs. However, a recent study by New Delhi-based industry lobby group Assocham has concluded that Capital Adequacy Ratio (CAR) of a group of commercial banks, which were part of the study improved to 13. 48% in 2008-09 from 12. 35% in 2007-08, due to lower risk weights, implementation of Basel II norms and slower credit growth. 9 D. Bad debts and requirement of additional capital In this context, the situation regarding bad debts and NPA’s is very pertinent. The proportion of total NPAs to total advances declined from 23. 2 per cent in March 1993 to 7. per cent in March, 2004. The improvement in terms of NPAs has been largely the result of provisioning or infusion of capital. This meant that if the banks required more capital, as they would to implement Basel II norms, they would have to find capital outside of their own or the governments re sources. ICRA has estimated that, Indian banks would need additional capital of up to Rs. 12,000 crore to meet the capital charge requirement for operational risk under Basel II. Most of this capital would be required by PSBs Rs. 9,000 crore, followed by the new generation private sector banks Rs. 1,100 crore, and the old generation private sector bank Rs. 750 crore. In practice, to deal with this, a large number of banks have been forced to turn to the capital market to meet their additional regulatory capital requirements. ICICI Bank, for example, has raised around Rs. 3,500 crore, thus improving its Tier I capital significantly. Many of the PSBs, namely, Punjab National Bank, Bank of India, Bank of Baroda and Dena Bank, besides private sector banks such as UTI Bank have either already tapped the market or have announced plans to raise equity capital in order to boost their Tier I capital. E. Government Policy on foreign investment The need to go public and raise capital challenged the government policy aimed at restricting concentration of share ownership, maintaining public dominance and limiting foreign influence in the banking sector. One immediate fallout was that PSBs being permitted to dilute the governments stake to 51 per cent, and the pressure to reduce this to 33 per cent increased. Secondly, the government allowed private banks to expand equity by accessing capital from foreign investors. This put pressure on the RBI to rethink its policy on the ownership structure of domestic banks. In the past the RBI has emphasised the risks of concentrated foreign ownership of banking assets in India. Subsequent to a notification issued by the Government, which had raised the FDI limit in private sector banks to 74 per cent under the automatic route, a comprehensive set of policy guidelines on ownership of private banks was issued by the RBI. These guidelines stated, among other things, that no single entity or group of related entities would be allowed to hold shares or exercise control, directly or indirectly, in any private sector bank in excess of 10 per cent of its paid-up capital. F. Threat of foreign takeover There has been growing pressure to consolidate domestic banks to make them capable of facing international competition. Indian banks are pigmies compared with the global majors. Indias biggest bank, the State Bank of India, which accounts for onefifth of the total banking assets in the country, is roughly one-fifth as large as the worlds biggest bank Citigroup. Given this difference, even after consolidation of 10 omestic banks, the threat of foreign takeover remains if FDI policy with respect to the banking sector is relaxed. Not surprisingly, a number of foreign banks have already evinced an interest in acquiring a stake in Indian banks. Thus, it appears that foreign bank presence and consolidation of bankin g are inevitable post Basel II. V. Conclusion A. SWOT Analysis of Basel II in Indian Banking Context Strenghts †¢ †¢ Aggression towards development of the existing standards by banks. Strong regulatory impact by central bank to all the banks for implementation. Presence of intellectual capital to face the change in implementation with good quality. †¢ †¢ †¢ Weaknesses Poor Technology Infrastructure Ineffective Risk Measures Presence of more number of Smaller banks that would likely to be impacted adversely. †¢ Opportunities †¢ †¢ Increasing Risk Management Expertise. Need significant connection among business,credit and risk management and Information Technology. Advancement of Technologies. Strong Asset Base would help in bigger growth. †¢ †¢ Threats Inability to meet the additional Capital Requirements Loss of Capital to the entire banking system, due to Mergers and acquisitions. Huge Investments in technologies †¢ †¢ †¢ B. Challenges going ahead under Basel II †¢ The new norms will almost invariably increase capital requirement in all banks across the board. Although capital requirement for credit risk may go down due to adoption of more risk sensitive models such advantage will be more than offset by additional capital charge for operational risk and increased capital requirement for market risk. This partly explains the current trend of consolidation in the banking industry. Competition among banks for highly rated corporates needing lower amount of capital may exert pressure on already thinning interest spread. Further, huge implementation cost may also impact profitability for smaller banks. The biggest challenge is the re-structuring of the assets of some of the banks as it would be a tedious process, since most of the banks have poor asset quality leading to significant proportion of NPA. This also may lead to Mergers Acquisitions, which itself would be loss of capital to entire system. The new norms seem to favor the large banks that have better risk management and measurement expertise, who also have better capital adequacy ratios and geographically diversified portfolios. The smaller banks are also likely to be hurt by the rise in weightage †¢ †¢ †¢ 11 of inter-bank loans that will effectively price them out of the market. Thus, banks will have to re-structure and adopt if they are to survive in the new environment. †¢ Since improved risk management and measurement is needed, it aims to give impetus to the use of internal rating system by the international banks. More and more banks may have to use internal model developed in house and their impact is uncertain. Most of these models require minimum historical bank data that is a tedious and high cost process, as most Indian banks do not have such a database. The technology infrastructure in terms of computerization is still in a nascent stage in most Indian banks. Computerization of branches, especially for those banks, which have their network spread out in remote areas, will be a daunting task. Penetration of information technology in banking has been successful in the urban areas, unlike in the rural areas where it is insignificant. An integrated risk management concept, which is the need of the hour to align market, credit and operational risk, will be difficult due to significant disconnect between business, risk managers and IT across the organizations in their existing set-up. Implementation of the Basel II will require huge investments in technology. According to estimates, Indian banks, especially those with a sizeable branch network, will need to spend well over $ 50-70 Million on this. Computation of probability of default, loss given default, migration mapping and supervisory validation require creation of historical database, which is a time consuming process and may require initial support from the supervisor. With the implementation of the new framework, internal auditors may become increasingly involved in various processes, including validation and of the accuracy of the data inputs, review of activities performed by credit functions and assessment of a banks capital assessment process. Pillar 3 purports to enforce market discipline through stricter disclosure requirement. While admitting that such disclosure may be useful for supervisory authorities and rating agencies, the expertise and ability of the general public to comprehend and interpret disclosed information is open to question. Moreover, too much disclosure may cause information overload and may even damage financial position of bank. Basel II proposals underscore the interaction between sound risk management practices and corporate good governance. The banks board of directors has the responsibility for setting the basic tolerance levels for various types of risk. It should also ensure that management establishes a framework for assessing the risks, develop a system to relate risk to the banks capital levels and establish a method for monitoring compliance with internal policies. The risk weighting scheme under Standardised Approach also creates some incentive for some of the bank clients to remain unrated since such entities receive a lower risk weight of 100 per cent vis-a-vis 150 per cent risk weight for a lowest rated client. This might specially be the case if the unrated client expects a poor rating. The banks will need to be watchful in this regard. †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ We can conclude by saying that the Basel II framework provides significant incentives to banks to sharpen their risk management expertise to enable more efficient risk-return tradeoffs, it also presents a valuable opportunity to gear up their internal processes to the 12 international best standards. This would require substantial capacity building and commitment of resources through close involvement of the banks’ Top Management in guiding this arduous undertaking. Notwithstanding intense competition, the expansionary phase of the economy is expected to provide ample opportunities for the growth of the banking industry. The growth trajectory, adherence to global best practices and risk management norms are likely to catapult the Indian Banks onto the global map, making them a force to reckon with. VI. References 1. The Evolution to Basel II by Donald Inscoe, Deputy Director, Division of Insurance and Research, US Federal Deposit Insurance Corporation. 2. Basel II – Challenges Ahead of the Indian Banking Industry by Jagannath Mishra and Pankaj Kumar Kalawatia. 3. Basel II Norms and Credit Ratings by CA Sangeet Kumar Gupta. 4. The Business Line Magazine. 5. The Chartered Accountant – Journal of the Institute of Chartered Accountants of India. 6. www. bis. org 7. www. rbi. org. in 8. www. wikipedia. org 9. www. google. com VII. The Technical Paper Presentation Team Name of Member Email ID’s [emailprotected] org tulsyan. [emailprotected] co. in sikha. [emailprotected] com ca. [emailprotected] com [emailprotected] com 1. Rahul Sharma 2. Abhishek Tulsyan 3. Sikha Kedia 4. Gourav Modi 5. Praveen Didwania 13

Proposition 19 free essay sample

The legality of marijuana has been the subject for debate and controversy for decades. With the new generation, the number of supporters of marijuana legalization has increased dramatically. In the United States, legalizing marijuana is a major concern because it is the most frequently used illegal drug. Nearly 98 million Americans over the age of 12 have tried marijuana at least once. Politicians have thought of legalizing marijuana to increase revenue by imposing taxes. At the forefront of this idea is California, which is currently the most populous state in the United States yet has the highest budget deficit of all states. Also, California has the 5th highest unemployment rates exceeding 12 percent. In 2009, the California economic crisis became severe as the state faced bankruptcy. This budget shortfall has caused the state to look for ways out. Californias way out of a huge budget deficit begins with Proposition [5] Proposition 19 also known as the Regulate, Control and Tax Cannabis Act of 2010 would legalize various marijuana activities, allow local government to regulate these activities, allow for marijuana related government axes, and authorizes various criminal and civil penalties by local government. The California ballot for Proposition 19 opened on November 2, 2010 in California, hoping to change the fate of marijuana legalization in America forever. The bill failed, but only trailed the outcome by nearly 500 votes. 4] Among the arguments for the passing of Proposition 19 was that legalizing marijuana in California could reduce drug-related violence, based on a study conducted by the International Centre for Science in Drug Policy. In addition some believe that it would help alleviate the drug war in Mexico. Based on the theory adopted by the White House Office of National Drug Control Policy that up to 60% of Mexican drug cartels profits come from sales of marijuana, legalizing the drug in nearby California would drastically cut their funding. As a result, supporters of this argument believed that legalization would lead to a decrease in drug-related violent crime in Mexico. [3] Also cited were a savings of $960 million per year in law enforcement costs, and a generation of $350 million a year in state and local tax revenues. Supporters also argued that passing the measure would result in additional benefits including tourism and spinoff ndustries such as cafes and paraphernalia. Based on Californias wine industry, proponents of this theory anticipated that legalizing marijuana in the state could generate up to $18 billion, including the creation of 60,000-110,000 Jobs. [4] Perhaps one of the most well-known arguments for the legalization of Marijuana is to treat conditions including pain and nausea caused by HIV/AIDS, cancer and other conditions. When presented with all the information above its easy to see why so many people can rationalize their decision to support Proposition 19. Increasing revenue and employment rates while decreasing law enforcement costs and crime, ll by providing the public with a safe wonder drug to aid in a variety of ailments. What could e better? Untortunately though all these claims seem viable none ot them can escape scrutiny. To address Marijuana as a potential drug, scientific evidence needs to be provided to substantiate the claims. To date the evidence is not sufficient for the marijuana plant to gain FDA approval, for two main reasons. First, there have not been enough clinical trials showing that marijuanas benefits outweigh its health risks in patients with the symptoms it is meant to treat. The FDA equires carefully conducted studies in large numbers of patients (hundreds to thousands) to accurately assess the benefits and risks of a potential medication. [5] Also, to be considered a legitimate medicine, a substance must have well-defined and measureable ingredients that are consistent from one unit (such as a pill or injection) to the next. This consistency allows doctors to determine the dose and frequency. As the marijuana plant contains hundreds of chemical compounds that may have different effects and that vary from plant to plant, its use as a medicine is difficult to evaluate. However, THC-based drugs to treat pain and nausea are already FDA approved and prescribed, and scientists continue to investigate the medicinal properties of cannabinoids. Regarding the supposed economic benefits of taxing marijuana, some comparison with two drugs that are already regulated and taxed, alcohol and tobacco is worth considering. People dont typically grow their own tobacco or distill their own spirits, so consumers accept high taxes on them as retail products. Marijuana, though, is easy and cheap to cultivate, indoors or out, and Proposition 19 would allow individuals to grow as much as 25 square feet of arijuana for personal consumption. Why would people volunteer to pay high taxes on marijuana if it were legalized? The answer is that many would not, and the underground market, adapting to undercut any new taxes, would barely diminish at all. This bill also implied that marijuana would be regulated and controlled by the initiative. In fact, the law provides for no regulation or control, but leaves it up to local governments to initiate such controls and or regulations. In addition, there are no provisions to tax marijuana cultivation or use in the initiative. Instead, such taxation, f it ever happens will be left to local governments. In fact, a provision of the initiative specifically prevents the state of California from taxing marijuana sales any more than the usual sales tax in contrast to cigarettes and liquor. 1] Since the enforcement of locally enacted taxation will be next to impossible, there will never be any significant revenue produced through this initiative. Another major conflict is that this bill would create a state law that conflicts with federal drug laws. On the surface, this does not seem to be a big deal, since President Obama has stated that e wont enforce the federal law in California. However, the re is another issue that could cause the loss of billions of dollars to the state. Public contracts and grants require grantees to effectively enforce the drug-free workplace requirements (which includes marijuana use) outlined by the federal governments Federal Workplace Act of 1988. Not only may schools lose their federal grants, but medical research institutions, could lose millions of dollars annually The current healthcare and criminal Justice costs associated with alcohol and tobacco far surpass the tax revenue hey generate, and very little of the taxes collected on these substances is contributed to offsetting their substantial social and health costs. For every dollar society collects in taxes on alcohol, for example, we end up spending eight more in social cos ts That is hardly a recipe tor fiscal health A recent Rand Corp. report, Altered State, found that it is difficult to predict estimated revenue from marijuana taxes, and that legalization would increase consumption but could also lead to widespread tax evasion and a race to the bottom in terms of local tax rates. Perhaps the biggest concern is safety on the roads. In 2010 a comment was made by a formal General Sergeant that driving under the influence of Marijuana is much like being under the influence of Alcohol. In response an experiment was conducted by two local Los Angeles Journalists who decided to take a car and drive stoned. With the help from the California Highway Patrol the highway was closed to the public and several obstacles were arranged simulating how a driver might need to operate in heavy traffic. The experiment, said one of the Journalists was to see how impaired I was after smoking pot California has more drivers than any other state, 22 million of hem. So the big concern was if legalizing marijuana would make the roads less safe. The proponents of Proposition 19 insist it wont. The common conception among supporters is that the impairment is rather slight like taking an antihistamine. The journalists certainly found that driving and drugs dont mix. One of them nearly veered off the highway through a test course. l wasnt 0k, so that was kind of shocking to me said one of the drivers. But safety seems to be a big reason support for proposition 19 dropped. 1 percent opposed and 39 percent supported in a poll conducted before the bill was denied in 2010. 5] To give credibility to the tests conducted by the Journalists we can explore the affects Marijuana has on the brain. When marijuana is smoked, THC rapidly passes from the lungs into the bloodstream, which carries the chemical to the brain and other organs throughout the body. THC acts upon specific molecular targets on brain cells, called cannabinoid receptors. These receptors are o rdinarily activated by chemicals similar to THC called endocannabinoids, such as anandamide. These are naturally occurring in the body and are part of a neural communication network (the endocannabinoid system) that lays an important role in normal brain development and function The highest density of cannabinoid receptors is found in parts of the brain that influence pleasure, memory, thinking, concentration, sensory and time perception, and coordinated movement. Marijuana over activates the endocannabinoid system, causing the high and other effects that users experience. These include distorted perceptions, impaired coordination, difficulty with thinking and problem solving, and disrupted learning and memory. Because it seriously impairs Judgment and motor coordination, marijuana also contributes to accidents while driving. A recent analysis of data from several studies found that marijuana use more than doubles a drivers risk of being in an accident. Further, the combination of marijuana and alcohol is worse than either substance alone with respect to driving impairment. As a recreational drug, marijuana is not quite as benign as most of its proponents would claim. Heavvy marijuana use results in long-term effects on the brain, including lower responses in those areas which are affected by THC. Although users are able to compensate somewhat through the use of other brain areas, the long term effects of his damage, as users age, has not been determined. This damage may be responsible for impairments noted in short-term and long-term memory, along with a host of possible other psychiatric illnesses. Regular use of marijuana use by young people can nave especially negative long lasting impact on the structure and tunction of their brains. A recent study of marijuana users who began using in adolescence revealed a profound deficit in connections between brain areas responsible for learning and memory. And a large prospective study (following individuals across ime) showed that people who began smoking marijuana heavily in their teens lost as much as 8 points in IQ between age 13 and age 38; importantly, the lost cognitive abilities were not restored in those who quit smoking marijuana as adults. [4] A proportion of marijuana users become addicted and suffer from classic withdrawal symptoms upon abstinence. For a minority of users, marijuana is a gateway drug, and they proceed to use and abuse more powerful psychostimulants. Besides its effects upon the brain, Marijuana raises heart rate by 20-100 percent shortly after smoking; this effect can last up to 3 hours. In one study, it was estimated that marijuana users have a 4. 8-fold increase in the risk of heart attack in the first hour after smoking the drug. This may be due to increased heart rate as well as the effects of marijuana on heart rhythms, causing palpitations and arrhythmias. Marijuana use can lead to increased risks for respiratory cancers and may have some adverse cardiovascular and cerebrovascular effects in some users. Marijuana smoke has been placed on the California Proposition 65 list of carcinogenic materials, as required by California law for materials proven to cause cancer. 5] Marijuana use during pregnancy has been shown to result in lower child intelligence, while increasing the incidence of mental health problems. The idea that marijuana is a harmless recreational pastime has been disproved through continuing scientific research. Although this bill was denied the continued support for legalizing Marijuana is great, ensuring that this is a topic that will be an issue of debate for years to come. In my opinion we dont need all the problems that will result from the passage of Proposition 19 . This bill would established a legal right to use marijuana, potentially endangering the lives of thers through allowing intoxicated individuals to perform crucial driving Jobs. In addition, this bill could result in the loss of billions of dollars in federal grants and contracts to schools and hospitals, which would be unable to comply with federal drug-free workplace requirements. Contrary to the claims of proponents, Prop 19 would neither regulate, control, nor tax marijuana, but merely provides the legal right of local governments to create their own hodgepodge of local laws and ordinances, which would be virtually impossible to enforce. Although marijuana use does not egatively impact all users, it does have numerous adverse health effects on a significant percentage of individuals, which will result in increased medical and social costs to the people of California. This was a poorly written initiative that needs to make drastic revisions before it can be considered, in addition to the conduction of more scientific research needs to be done to determine future health risks for the users.