Do you agree with the given view and explain your views

Reference no: EM13924892

One of your credit colleagues mentions that one of the major drawbacks of the Basel Accords is the excessive reliance on ratings (AAA, AA, BBB, etc.) by external rating agencies to decide the risk weighted assets and hence influencing the quantum of capital to be maintained against such assets. Since external rating agencies have no direct stake in the deal, he argues that it is not logical to commit vast amounts of funds into riskier transactions based on third party ratings. If the Basel Accords want an external rating, it must be done by a rating agency established and supervised by the Basel Committee. Do you agree with this view? Explain your views.

Reference no: EM13924892

Questions Cloud

Financial analysis of dpr construction inc : The Final Project will involve applying the concepts learned in class to an analysis of a company using data from its annual report. Using the concepts from this course, you will analyze the strengths and weaknesses of the company and write a repo..

What is the function of restrictive covenants : What is the function of restrictive covenants attached to bond issues?

Adding robotic paint sprayer to its production line : The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer’s base price is $1,080,000, and it would cost another $22,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold af..

Discuss the major changes proposed under basel iii : Discuss the major changes proposed under Basel III? Do you believe the latest version of the Basel Accords (Basel III) can prevent future financial crises similar to the 2008 Global Credit Crisis? Explain your views.

Do you agree with the given view and explain your views : If the Basel Accords want an external rating, it must be done by a rating agency established and supervised by the Basel Committee. Do you agree with this view? Explain your views.

What is the difference between term bonds and serial bonds : What is the difference between term bonds and serial bonds?

Require investors have homogeneous expectations : The CAPM does not require investors have homogeneous expectations, but rather that they have:

What will firms cost of equity be if the firm makes switch : An all equity firm has a cost of capital of 15 percent. The firm is considering switching to a debt-equity ratio of .65 with a pretax cost of debt of 7.5 percent. What will the firm's cost of equity be if the firm makes the switch? Ignore taxes.

Domestic cars along with the population standard deviations : The following data shows the sample size and the average age of cars for import and domestic cars along with the population standard deviations.

User Account

All Pages