The Relevance and Authority of Scripture Essay - 952 Words

The relevance and authority of scripture from three different viewpoints first evangelical with its strong emphasis on the Word of God it left little room to advance with the ever changing culture. Second the Liberal movement was all about cultural relevance and used only as a record of history. Each holds a valid argument Neo-Orthodox however is a good blend of both cultural relevance and scriptural foundation. The Issues Evangelical Evangelicalism carried a strong emphasis on the Word of God. Which is in its own right a positive to the movement. Bible is used as the center of the Christian faith, however where they went wrong was saying that God is not moving anymore and what we have in this book is all that there is. There is no need†¦show more content†¦They degraded the authority and importance of the Holy Scriptures keeping Christianity relevant to a changing society, even at the expense of its traditional practices this was the premise of the liberal movement. Friedrich Schleiermacher believed that a person’s private revelations of God took precedence over their revelations from Scripture. Neo-Orthodox Neo-Orthodox was established immediately after World War 1 by Karl Barth and Emil Brunner, it directly opposed the liberal movement. It said that experience is not everything, you must have the foundation of the Bible. The main focus was on the gospel message which the Bible relayed, not on the book itself (Lane 271) Neo-Orthodox stands on the fact that sin is imamate and only God can free one from sin. Karl Barth, the forerunner of Neo-Orthodox thought, viewed the Bible not as a history book or instructional for doctrine (2 Tim 2:15), but as a constantly changing event that spoke to the heart of humanity (Lane 274) The Implications Liberalism was under the influence of cultural relevance and made every attempt to show that that experience and not necessarily the factual part of religion is what made it real. 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Theu.s. Is A Unique And Special Country - 1507 Words

The fact that some Mexicans send money back to Mexico to their families causes Americans to speculate and, as a result, believe that they are too unattached to the pride that they should have while living in this country because of their close ties still with Mexico. In contrast to that, eighty percent said in the survey that, if they had to go through the process of immigration all over again, they would because â€Å"the U.S. is a unique and special country† (Farkas). Based on that high percentage alone, there can be no real debate on the intentions of Mexicans moving here other than those that are encouraging. Donald Trump, of course, attempted to challenge that statistic. During his campaign, he claimed, â€Å"The worst elements in Mexico are being pushed into the United States by the Mexican government†¦ They’re sending people that have lots of problems, and they’re bringing those problems to us. They’re bringing drugs. They’re bringing crime. They’re rapists† (Walker). It seems that Donald may have a slightly narrow view of the number of people who actually fit into these categories versus the total number of people attempting to enter the country. Based on previously stated evidence, their intentions for moving to the United States were to gain a higher quality of life by getting a job, not solely to sell drugs and act as rapists. Now that he has been elected as our president, many Mexicans are currently living in fear of what the next step in his plan of action is. They now

Financial Analysis of Bank of America Free Essays

Financial Statement Analysis of Bank of America Group 1 Chen, Yelin Dong, Xiaoxu Gransbach, Jennifer Shuai, Wang Weiss, Charles 1Financial Statements of Bank of America1 1. 1Balance sheet1 1. 2Income statement2 1. We will write a custom essay sample on Financial Analysis of Bank of America or any similar topic only for you Order Now 3Regulatory capital ratios2 1. 4Investment portfolio2 1. 5Impact of the FSP FAS 115-2 and FAS 124-2 on OTTI3 1. 5. 1Bank of America3 1. 5. 2JP Morgan Chase3 1. 5. 3Citi Group3 1. 6Netting Financial Instruments3 1. 6. 1Bank of America4 1. 6. 2Comparable banks4 1. 6. 3Analysis of the impact4 2Fair Value Accounting for Financial Instruments4 2. Fair value accounting4 Table 6 Summary of the Fair Value Income5 2. 2Opinions about fair value accounting5 3Interest Rate Risk and Net Interest Earnings6 3. 1Net interest margin6 3. 2Interest rate risk7 4Credit Risk and Losses7 4. 1Main loss reserve adequacy ratios8 4. 2Policy to designate past due loans as non-performing8 4. 3Adequacy of the bank’s allowance for loan losses8 4. 4Disclosure policies relating to loans8 5Appendix9 * Part 1 Financial Statements of Bank of America . 1. 1 Balance sheet Bank of America’s balance sheet has total assets of $2,129,046 million in 2011, which is less than last year’s $2,264,909 million, a fairly significant decline. There are a few primary assets on the balance sheet. The largest asset is loans and leases which makes up 41. 92% of the total assets. The next largest asset was Available-For-Sale securities making up 12. 97% of total assets. Total liabilities on the balance sheet were $1,898,945 million, with the primary liability being deposits in U. S. offices both interest bearing and noninterest bearing, at 50. 4% of total liabilities. The next largest liability was long-term debt at 19. % of total liabilities. In millions| 2011| % of total assets| 2010| % of total assets| % chg from 2010-2011| Total asset| 2,029,046 | 100. 00%| 2,264,909 | 100. 00%| -10. 41%| Loans and leases| 892,417 | 43. 98%| 898,555 | 39. 67%| -0. 68%| Available-for-sale| 276,151 | 13. 61%| 337,627 | 14. 91%| -18. 21%| Total liabilities| 1,898,945 | 9 3. 59%| 2,036,661 | 89. 92%| -6. 76%| Total deposits| 1,033,041 | 50. 91%| 1,010,430 | 44. 61%| 2. 24%| Deposits in U. S. offices| 957,042 | 47. 17%| 930,913 | 41. 10%| 2. 81%| Long-term debt| 372,265 | 18. 35%| 448,431 | 19. 80%| -16. 98%| Leverage ratio| 14. 0 | ? | 8. 92 | ? | 63. 58%| Table 1 Selected Financial Data from Balance Sheet of Bank of America Chase and Citi are fairly similar in size and distribution of their balance sheets. Chase and Citi have total assets of 2,265,792 and 1,873,878( ) respectively, both with slightly lower loans as a percentage of total assets at slightly over 30%, while AFS securities are around 16% of total assets for each. Liabilities are also very similar, with Chase having total liabilities of $2,082,219 million and Citi $1,694,305 million. The primary line items are also very similar once again with Chase’s total deposits 54. 6% and long-term debt 22. 77% of total liabilities, while Citi has deposits 51. 11% and long-term debt of 19. 09 %. According to the deposits in U. S. offices, BOA focus more in U. S market and Citi focus more on market outside U. S. In millions| Bank of America| % of total assets| JP Morgan Chase| % of total assets| Citi Group| % of total assets| Total asset| 2,129,046 | 100. 00%| 2,265,792 | 100. 00%| 1,873,878 | 100. 00%| Loans and leases| 892,417 | 41. 92%| 696,111 | 30. 72%| 617,127 | 32. 93%| Available-for-sale| 276,151 | 12. 97%| 364,793 | 16. 10%| 293,413 | 15. 66%| ? | ? | ? | ? | ? | ? | ? | In millions| Bank of America| % of total liabilities| JP Morgan Chase| % of total liabilities| Citi Group| % of total liabilities| Total liabilities| 1,898,945 | 100. 00%| 2,082,219 | 100. 00%| 1,694,305 | 100. 00%| Total deposits| 1,033,041 | 54. 40%| 1,127,806 | 54. 16%| 865,936 | 51. 11%| Long-term debt| 372,265 | 19. 60%| 256,775 | 22. 77%| 3,235,050 | 190. 94%| Leverage ratio| 8. 25 | ? | 11. 34 | ? | 9. 44 | ? | | | | | | | | In millions| Bank of America| % of total deposits| JP Morgan Chase| % of total deposits| Citi Group| % of total deposits| Deposits in U. S. offices| 957,042 | 92. 64%| 851,534 | 75. 0%| 343,288 | 39. 64%| Table 2 Selected Financial Data from Balance Sheets of Three Banks in 2011 In the event of a bank run, Bank of America will be in trouble due to its high leverage, similar to many banks. Bank of America has deposits of $1,033,041 million, among which liquid assets only have $314,425 million, including cash and cash equivalents of $120,102 million, time de posits and other short-term investments of $26,004 million and trading assets of $169,319 million. Even with the ability to liquidate those non-cash assets, it will still only be able to honor slightly more than 30% of its depositors. Income statement The primary line item on Bank of America’s income statement is net income of $1,446 million, which increased compared to a net loss of 2,238 in 2010. Interest income was $66,236 million, down from $75,497 million in 2010. Total interest expense was $21,620 million, which makes the net interest income become $44,616 million, down 13. 4% from the previous year. Lastly, total noninterest income was $48,838 million, decreased by 16. 8% from 2010. This is partly due to the big loss of mortgage banking income, decreasing from $2,734 million in 2010 to $(8,830) million in 2011. Chase and Citi had similar trends, both slightly increasing their bottom line while having net interest income decrease slightly. Regulatory capital ratios 2011| Bank of America| JP Morgan Chase| Citi Group| To be well capitalized| Leverage ratio| 7. 53%| 6. 80%| 7. 19%| 5%| Tier 1 risk-based capital ratio| 12. 40%| 12. 30%| 13. 55%| 6%| Total risk-based| 16. 75%| 15. 40%| 16. 99%| 10%| Table 3 Regulatory Capital Ratios of Three Banks in 2011 In 2011, Bank of America was considered well capitalized for all three regulatory ratios–Tier 1 capital, risk-based capital and leverage. Bank of America slightly increased all of its ratios from 2010 to 2011. Its tier 1 capital ratio was 12. 4% while 6% is considered well capitalized, its risk based capital ratio was 16. 75% while 10% is considered well capitalized, and its leverage ratio was 7. 53% while 5% is considered well capitalized. ( Table 4, Table 3) Chase and Citi had very similar ratios to Bank of America. Chase was slightly below Bank of America and Citi for all three ratios but still well above the floor to be well capitalized. Citi had a slightly lower leverage ratio and slightly higher tier 1 capital and risk based capital ratios. Regulatory ratios are fairly important; however there are some issues with them. The ratios are backwards looking, so there could be a large amount of change since in the numbers. There are also lots of adjustments made by the company to the different numbers that make up the ratio that might not even make sense such as ignoring AFS losses. The current risk weighting is also very simplistic currently and might not reflect the actual risk of the assets. One important thing to note is that the newly released Basel III norms by Basel Committee on Banking Supervision (BCBS) would require a higher regulatory capital ratio on banks. It is recommended that Basel III be implemented by January 1, 2015. According to the new rules, the mandatory Tier 1 common capital ratio would be 7%. Banks should maintain conservation buffer of 2. 5% and reserves amounting to 8. 5% of assets. Therefore, in order for Bank of America to meet the future requirements and be well capitalized in face of potential financial meltdowns, it should hold more and better quality capital, carry more liquid ssets, and limit leverage. ( , ) Investment portfolio The net unrealized gains on HTM securities of $177 million = $181 million + ($4) million that have not been recognized in OCI as of the end of 2011 are attributable to HTM securities that have not been deemed other than temporarily (OTT) impaired, so that amortized cost is the carrying value. Amortized cost is a hi ghly limited valuation basis for risky securities. There was very little mention of reclassification in Bank of America’s 10-K. There was a mention of a reclassification of $26. billion primarily due to noninterest earning equity securities being moved from trading account assets to other assets, but no mention of anything else. Impact of the FSP FAS 115-2 and FAS 124-2 on OTTI Bank of America According to FSP FAS 115-2 and FAS 124-2, banks are allowed to report non-credit related OTTI in Other Comprehensive Income (OCI). Only credit-related OTTI is recognized in net income. The Total OTTI losses (unrealized and realized) for 2011 is $360 million, and portion of other-than-temporary impairment losses recognized in other comprehensive income is about $61 millions. The net amount is $299 million which is recognized in earnings on AFS debt securities in 2011, compared to $970 million on AFS debt and marketable equity securities in 2010. When we compute the regulatory Tier One Capital, the unrealized losses on AFS investments are (added back) excluded. Thus, the $61 million is added back to calculate the Tier One Capital. With adding back, Tier 1 risk-based capital ratio is 12. 40% as shown on 2011 Y9C. In absence of adding back, the ratio is (159,231,999-61,000)/ 1,284,466,933=12. 39%. JP Morgan Chase For JP Morgan Chase, the10K shows Total other-than-temporary impairment losses for are 27, 94, nd 946 million for year 2011, 2010 and 2009 respectively. ( ) However, it doesn’t divide these amounts into credit-related portion and non-credit related portion. Based on the other two banks examples, we can infer that the Tier One Capital for JP Morgan Chase will go up after adoption. Citi Group Citigroup also adopted the same rules above in fir st quarter of 2009. As a result of the FSP, Company’s Consolidated Statement of Income reflects the full impairment on debt securities that the Company intends to sell or would more-likely-than-not be required to sell before the expected recovery of the amortized cost basis. As a result of the adoption of the FSP, Citigroup’s income in the first quarter of 2009 was higher by $631 million on a pretax basis ($391 million on an after-tax basis) and AOCI was decreased by a corresponding amount. However, 2011 10K does not gives details about regarding the credit loss component of OTTI in 2011. When we compute the regulatory Tier One Capital for Citigroup, the unrealized losses from non-credit loss component on debt securities are (added back) excluded, which leads to an increase in Tier One Capital. Netting Financial Instruments | Â  | Bank of America| JP Morgan Chase| Citi Group| IFRS(Before netting)| Total assets| 2,130,796| 3,976,317| 2,749,470| | Total debt| 1,900,695| 3,792,742| 2,564,671| | Total equity| 230,101| 183,575| 184,799| | Leverage ratio| 8. 26| 20. 66| 13. 88| GAAP(After netting)| Total assets| 2,129,046| 2,265,792| 1,873,878| | Total debt| 1,898,945| 2,082,219| 1,694,305| | Total equity| 230,101| 183,573| 179,573| | Leverage ratio| 8. 25| 11. 34| 9. 44| Table 4 Netting Adjustments for Three Banks in 2011 Bank of America According to Note 4—Derivatives, Bank of America had legally enforceable master netting agreement that would reduce both derivative assets and derivative liabilities by the same amount of 1,749. 9 million, respectively. Moreover, cash collateral was applied to net off derivative assets by 58. 9 million and derivative liabilities by 51. 9 million, respectively. However, the reduction caused by cash collateral wouldn’t affect total assets and total liabilities. If Band of America were to adopt IFRS, it would report higher gross derivative assets and liabilities by an increase of 1,749. million. However, the adjustment (1,749. 9 million) was insignificant compared to Bank of America’s total asset base (2,129,046 million, about 0. 08%). Therefore, the leverage ratio would only increase slightly due to this change, from 8. 25 under GAAP to 8. 26 under IFRS. Comparable banks J. P. Morgan Chase’s gross derivative assets were offset by 1,710,525 million netting ad justments and gross derivative liabilities by 1,710,523. Such adjustments almost made up of 75% of Chase’s total asset base which is 2,265,792 million. Therefore, if to adopt IFRS, Chase would record a much higher assets and liabilities up to 3,976,317 million and 3,792,742 million, respectively. Leverage ratio, accordingly, would rise from 11. 34 to 20. 66, with an almost doubled increase. Citi Group’s netting adjustments of 875,592 million against derivative assets made up 46. 7% of total assets, and 870,366 million against derivative liabilities made up 33. 9% of total liabilities. When adopting IFRS, Citi would report a higher assets and liabilities, with its leveraging ratio growing from 9. 44 to 13. 88 due to the significant amount of the netting adjustments. Analysis of the impact From the above table, we can see that Bank of America was merely affected by the presentation of netting financial instruments, while the other two banks were greatly affected in terms of leverage ratio. The main reason to such a distinguished difference is that Bank of America had the smallest investment in derivative instruments, compared to Chase and Citi. The gross approach would definitely give a more comprehensive picture of banks’ derivative instruments; however, it would overstate risk to some extent. Market risk of the derivative positions can be better evaluated using the gross presentation which is more detailed. Firstly, net figures are by far more relevant metrics than the gross amounts. Naturally, this comes about from looking to the way that derivatives are traded under an enforceable master netting agreement. The master netting agreement allows for the aggregation of all trades and the replacement by a single net amount. Secondly, another metric to measure derivative portfolios is volatility which is driven by the risk of open market positions and the potential changes in net asset values and not the size of gross derivatives amounts. Therefore, gross balance sheet amounts are not particularly useful indicators of how much net derivative asset values would have to change before solvency is affected. Finally, as the third most important metric when evaluating the risks, collateral together with cash settlement procedures results in a liquidity profile that is more aligned with net presentation. Collateral amounts further reduce the risks and have to be taken into consideration for reporting derivatives Fair Value Accounting for Financial Instruments Fair value accounting From table 5 and the three computation tables in Appendix, we can see that under Full Fair Value method, Bank of America’s net income would grow from 1,446 million to 2,750 million, an increase of 90. 2%. Similarly, Citi would experience an increase of 128. 2% in net income from 11,067 million to 25,257 million. However, full fair value method had insignificant impact on Chase, with a total adjustment of 1,773 million compared to its pre-adjustment net income of 18,976 million. In millions| Bank of America| JP Morgan Chase| Citi Group| Adjustments for assets and liabilities at HC on balance sheet| 6,127 | 1,140 | 12,000 | Adjustments for assets and liabilities at FV on balance sheet with gains and losses in OCI| -4,819 | 633 | 2,190 | Total adjustment| 1,308 | 1,773 | 14,190 | Net income as per financial statements| 1,446 | 18,976 | 11,215 | Full fair value income with information available| 2,754 | 20,749 | 25,405 | * Table 5 Summary of the Fair Value Income Another thing to note is that BOA stands out as it had a significant unrealized loss of 4,819 million on AFS, while its comparable banks, Chase and Citi, had a positive gain of 633 million and 2,190 million, respectively. Based on our analysis, such difference was driven by the following factors. (1). According to its disclosure, Bank of America recognized $299 million of other-than-temporary impairment (OTTI) losses in earnings on AFS debt securities in 2011 compared to $970 million on AFS debt and marketable equity securities in 2010, which contributes greatly in such a large amount of unrealized loss on AFS. The recognition of OTTI losses on AFS debt and marketable equity securities is based on a variety of factors, including the length of time and extent to which the market value has been less than amortized cost, the financial condition of the issuer of the security including credit ratings and any specific events affecting the operations of the issuer, underlying assets that collateralize the debt security, other industry and macroeconomic conditions, and management’s intent and ability to hold the security to recovery. (2). According to its disclosure, Bank of America presents debt securities purchased for longer term investment purposes which are as part of asset and liability management (ALM) and other strategic activities, as available-for-sale (AFS) securities, and report these securities at fair value with net unrealized gains and losses included in accumulated OCI. In 2011, the fair value of net ALM contracts decreased $7. 9 billion to a gain of $4. 7 billion, compared to $12. 6 billion in 2010. The decrease was primarily attributable to changes in the value of U. S. dollar-denominated pay-fixed interest rate swaps of $9. billion, foreign exchange contracts of $1. 8 billion and foreign exchange basis swaps of $1. 4 billion. The decrease was partially offset by a gain from the changes in the value of U. S. dollar-denominated receive-fixed interest rate swaps of $6. 6 billion. Opinions about fair value accounting Fair Value Accounting has many advantages and disadvantages as listed below. FVA advant ages include the following: FVA depicts a clearer picture of the company’s financial situation, as it provides an accurate asset and liability valuation as the prices are reflected in the market price. Fair value accounting limits managers’ ability to manipulate the reported net income, as the gains and losses are reported in the period they occur, not when they are realized as the result of a transaction. For Level 1 2, the price for financial instruments, are available in a liquid market. While under amortized accounting method, firms can manage their income through the selective realization of cumulative unrealized gains and losses on positions, an activity referred to as gains trading. FVA provides investors with more accurate, timely, and comparable financial information versus other alternative accounting approaches, even during extreme market conditions. Gains losses resulting from changes in fair value estimates indicate economic events that companies and investors may find worthy of additional disclosures. Under amortized accounting, income typically is persistent for as long as firms hold positions, but becomes transitory when positions mature or are disposed of and firms replace them with new positions at current market terms. Disadvantages of FVA include: The price for certain assets and liabilities may fluctuate often, resulting in higher volatility than other accounting methods. When the market is volatile, the price for financial instruments may change a lot, so companies may recognize gains/losses. This volatility of earnings would make it more difficult for users to predict future performance and make regulatory capital ratio vary dramatically across periods. A solution for this disadvantage is regulatory capital should be delinked from fair value and reported by using historic cost information. After the market stabilizes, the price may change back to the normal level. Not every asset or liability can be easily fair valued. For financial instruments in level 3, there is no fair value in the liquidity market. Managers need model to estimate the value of financial instruments in level 3. Using fair value accounting may have adverse effect on a down market. Companies may sell some financial instruments whose value decreased because of the drop in the current market price. They may not realize the drop without the fair value accounting. The market may stabilize over time, and the price for the financial instruments will return to their normal level. Another issue with fair value accounting is that when the market for instruments freezes up and there’s no liquidity in the market, financial instruments would have to be valued by using mark-to-model which in many situations are not reliable and transparent to investors. A solution to this is that regulators provide more specific guidance on how to determine fair value for financial statements. Disclosure requirements would include disclosure of fair value of all financial instruments along with method adopted to determine fair values, any significant assumptions used in their estimation, some indications of the sensitivity of the estimated fair value to these assumptions, and discussion of risk exposure and issues associated with the estimation of fair value. In addition, fair value accounting has very significant feedback effects, especially during financial crisis. Fair value accounting would further contribute to the deterioration in the value of a company’s financial instruments or assets and make it more difficult for companies to recover from the crisis. Recommendation here is that in special situations, regulators would allow companies that face severe crisis to adopt other accounting methods temporarily and minimize the loss of these companies. In summary, fair value has both advantages and disadvantages under today’s economy. FVA provides better insight of the financial statements, in ddition to limiting the potential for manipulation. However, in my opinion, under today’s economy situation, it is hard to fully implement the fair value accounting. Every disadvantage has proposed solutions to resolve the issues identified. Overall, FVA is recommended for use. Interest Rate Risk and Net Interest Earnings Net interest margin The net interest yield on a FTE basis was 2. 48 percent for 2011 compared to 2. 78 percent for 2 010. Net interest income on a FTE basis decreased $7. 1 billion in 2011 to $45. 6 billion. The decline was primarily due to: (1). There’s a noticeable decrease in the yield on consumer loans from 6. 04% in 2010 to 5. 37% in 2011, which reduces net interest income by about 4,244 million (633,507 million * 0. 57%). * Debt securities and residential mortgage mainly contributed to the decline. The yield rate for debt securities decreased from 3. 66% to 2. 85%, and the residential mortgage from 4. 78% to 4. 18%. (2). Noninterest income declined from the previous year due to lower mortgage banking income, reflecting$11. 6 billion in representations and warranties costs and decline of $3. billion income from trading account profits. Noninterest income being the major source of Bank of America’s income drastically impacts the profitability of the company. (3). In 2011 Bank of America had a decreased investment security yields, including the acceleration of purchase premium amortization from an increase in modeled prepayment expectations, and increased hedge ineffectiveness. (4). Bank of America’s d eclining net interest margin was partially offset by ongoing reductions in its debt footprint and lower rates paid on deposits. The total U. S interest-bearing deposits had an average yield of 0. 36%, compared to 0. 55% in 2008. Such downward trend in net interest margin can be observed in other banks as well. The following table presents total interest-earning assets rate and total interest-bearing liabilities for all three banks over 2009 to 2011. As shown, all banks experienced a decline in interest-earning assets rate over three years: 1) BOA from 4. 31% in 2009 to 3. 65% in 2011, with an average decrease of 8% every year; 2) Chase from 4. 04% to 3. 1%, with an average decrease of 6. 8%; 3) Citi from 4. 78% to 4. 27%, with an average decrease of 5. 5%. The main reasons for the other two banks’ declining net interest margin were higher deposit balances with lower loan yields. | Bank of America| JP Morgan Chase| Citi Group| | 2011| 2010| 2009| 2011| 2010| 2009| 2011| 2010| 2009| Total interest-earning assets rate| 3. 65%| 4. 02%| 4. 31%| 3. 51%| 3. 83%| 4. 04%| 4. 27%| 4. 55%| 4. 78%| Total interest- bearing liabilities| 1. 39%| 1. 39%| 1. 77%| 0. 86%| 0. 84%| 1. 02%| 1. 63%| 1. 61%| 1. 3%| Table 6 Net Interest Margin of Three Banks Interest rate risk BOA’s net interest income decreased by $2,122 million in 2011 and $998 million in 2010 from a 1% downward parallel shift in interest rate. 1% downward change in interest rate results in a bigger decrease in net interest income in 2011 than in 2010. However, according Chase’s 10K, downward 100bps parallel shocks result in a Federal Funds target rate of zero and negative three- and six-month treasury rates. The earnings-at-risk results of such a low-probability scenario are not meaningful. For Citi, a 100 bps decrease in interest rates would imply negative rates for the yield curve, so not meaningful either. 1% downward shift| 2011| 2010| BOA| ($2,122)| ($998)| JP Morgan Chase| NM| NM| Citi Group| NM| NM| Table 7 The Impact of 1% downward shift on Net Interest Income BOA’s net interest income would increase by $1,505 million in 2011 and $601 million in 2010 from a 1% upward parallel shift in interest rate. The same as downward change, 1% upward change in interest rate also would result in a bigger increase in the net interest income in 2011 than in 2010. Compared with BOA, 1% upward shift in interest rate has a bigger impact for Chase and smaller impact for Citi. 1% upward shift| 2011| 2010| Bank of America| $1,505 | $601 | JP Morgan Chase| $2,326 | $1,483 | Citi Group| $97 | ($105)| Table 8 The Impact of 1% Upward Shift on Net Interest Income Credit Risk and Losses Main loss reserve adequacy ratios Policy to designate past due loans as non-performing Adequacy of the bank’s allowance for loan losses Disclosure policies relating to loans Appendix BOA In $ millions| 2011| 2011| 2010| 2010| 2011| 2010| 2011| ? | Carrying Value| Fair Value| Carrying Value| Fair Value| CURG| CURG| URG| Adjustments for assets and liabilities at HC on balance sheet| Assets:| ? | ? | ? | ? | ? | ? | ? | Held-to maturity debt securities| 35,265 | 35,442 | 427 | 427 | 177 | – | 177 | Loans| 870,520 | 843,392 | 876,739 | 861,695 | (27,128)| (15,044)| (12,084)| Total assets| 905,785 | 878,834 | 877,166 | 862,122 | (26,951)| (15,044)| (11,907)| Liabilities:| ? ? | ? | ? | ? | ? | ? | Deposits| 1,033,041 | 1,033,248 | 1,010,430 | 1,010,460 | 207 | 30 | 177 | Long-term debt| 372,265 | 343,211 | 448,431 | 441,672 | (29,054)| (6,759)| (22,295)| Total liabilities| 1,405,306 | 1,376,459 | 1,458,861 | 1,452,132 | (28,847)| (6,729)| (22,118)| Pretax adjustments before AFS securities and CFH derivatives| ? | ? | ? | ? | 1,896 | (8,315)| 10,211 | Aftertax adjustments before AFS securities and CFH derivatives| ? | ? | ? | ? | ? ? | 6,127 | Adjustments for assets and liabilities at FV on balance sheet with gains and losses in OCI? | Aftertax adjustment for AFS securities| ? | ? | ? | ? | ? | ? | (4,270)| Aftertax adjustment for CFH derivatives| ? | ? | ? | ? | ? | ? | (549)| Total adjustment to net income| ? | ? | ? | ? | ? | ? | 1,308 | Net income as per financial statements| ? | ? | ? | ? | ? | ? | 1,446 | Full fair value income with information available| ? | ? | ? | ? | ? | ? | 2,754 | JP Morgan Chase In $ millions| 2011| 2011| 2010| 2010| 2011| 2010| 2011| ? | Carrying Value| Fair Value| Carrying Value| Fair Value| CURG| CURG| URG| Adjustments for assets and liabilities at HC on balance sheet| Assets:| ? | ? | ? | ? | ? | ? | ? | Loans| 696,100 | 695,800 | 660,700 | 663,500 | (300)| 2,800 | (3,100)| Other| 66,300 | 66,800 | 64,900 | 65,000 | 500 | 100 | 400 | Total assets| 762,400 | 762,600 | 725,600 | 728,500 | 200 | 2,900 | (2,700)| Liabilities:| ? | ? | ? | ? | ? | ? | ? | Deposits| 1,127,800 | 1,128,300 | 930,400 | 931,500 | 500 | 1,100 | (600)| Accounts payable and other liabilities| 167,000 | 166,900 | 138,200 | 138,200 | (100)| – | (100)| Beneficial interests issued by consolidated VIEs| 66,000 | 66,200 | 77,600 | 77,900 | 200 | 300 | (100)| Long-term debt and junior subordinated deferrable interest debentures| 256,800 | 254,200 | 270,700 | 271,900 | (2,600)| 1,200 | (3,800)| Total liabilities| 1,617,600 | 1,615,600 | 1,416,900 | 1,419,500 | (2,000)| 2,600 | (4,600)| Pretax adjustments before AFS securities and CFH derivatives| ? | ? ? | ? | 2,200 | 300 | 1,900 | Aftertax adjustments before AFS securities and CFH derivatives| ? | ? | ? | ? | ? | ? | 1,140 | Adjustments for assets and liabilities at FV on balance sheet with gains and losses in OCI| Aftertax adjustment for AFS securities| ? | ? | ? | ? | ? | ? | 1,067 | Aftertax adjustment for CFH derivatives| ? | ? | ? | ? | ? | ? | (279)| Cash flow hedge| ? | ? | ? | ? | ? | ? | (155)| Total adjustment to net income| ? | ? | ? | ? | ? | ? | 1,773 | Net income as per financial statements| ? | ? | ? | ? | ? | ? | 18,976 | Full fair value income with information available| ? ? | ? | ? | ? | ? | 20,749 | Citi Group In $ millions| 2011| 2011| 2010| 2010| 2011| 2010| 2011| ? | Carrying Value| Fair Value| Carrying Value| Fair Value| CURG| CURG| URG| Adjustments for assets and liabilities at HC on balance sheet? | Assets:| ? | ? | ? | ? | ? | ? | ? | Investment| 293,400 | 292,400 | 318,200 | 319,000 | (1,000)| 800 | (1,800)| Loans| 614,600 | 603,900 | 605,500 | 584,300 | (10,700)| (21,200)| 10,500 | Total assets| 908,000 | 896,300 | 923,700 | 903,300 | (11,700)| (20,400)| 8,700 | Liabilities:| ? ? | ? | ? | ? | ? | ? | Deposits| 865,900 | 865,800 | 845,000 | 843,200 | (100)| (1,800)| 1,700 | Long-term debt| 323,500 | 313,800 | 381,200 | 384,500 | (9,700)| 3,300 | (13,000)| Total liabilities| 1,189,400 | 1,179,600 | 1,226,200 | 1,227,700 | (9,800)| 1,500 | (11,300)| Pretax adju stments before AFS securities and CFH derivatives| ? | ? | ? | ? | (1,900)| (21,900)| 20,000 | Aftertax adjustments before AFS securities and CFH derivatives| ? ? | ? | ? | ? | ? | 12,000 | Adjustments for assets and liabilities at FV on balance sheet with gains and losses in OCI| Aftertax adjustment for AFS securities| ? | ? | ? | ? | ? | ? | 2,360 | Cash flow hedge| ? | ? | ? | ? | ? | ? | (170)| Total adjustment to net income| ? | ? | ? | ? | ? | ? | 14,190 | Net income as per financial statements| ? | ? | ? | ? | ? | ? | 11,215 | Full fair value income with information available| ? | ? | ? | ? | ? | ? | 25,405 | How to cite Financial Analysis of Bank of America, Papers Financial Analysis of Bank of America Free Essays Financial Statement Analysis of Bank of America Group 1 Chen, Yelin Dong, Xiaoxu Gransbach, Jennifer Shuai, Wang Weiss, Charles 1Financial Statements of Bank of America1 1. 1Balance sheet1 1. 2Income statement2 1. We will write a custom essay sample on Financial Analysis of Bank of America or any similar topic only for you Order Now 3Regulatory capital ratios2 1. 4Investment portfolio2 1. 5Impact of the FSP FAS 115-2 and FAS 124-2 on OTTI3 1. 5. 1Bank of America3 1. 5. 2JP Morgan Chase3 1. 5. 3Citi Group3 1. 6Netting Financial Instruments3 1. 6. 1Bank of America4 1. 6. 2Comparable banks4 1. 6. 3Analysis of the impact4 2Fair Value Accounting for Financial Instruments4 2. Fair value accounting4 Table 6 Summary of the Fair Value Income5 2. 2Opinions about fair value accounting5 3Interest Rate Risk and Net Interest Earnings6 3. 1Net interest margin6 3. 2Interest rate risk7 4Credit Risk and Losses7 4. 1Main loss reserve adequacy ratios8 4. 2Policy to designate past due loans as non-performing8 4. 3Adequacy of the bank’s allowance for loan losses8 4. 4Disclosure policies relating to loans8 5Appendix9 * Part 1 Financial Statements of Bank of America . 1. 1 Balance sheet Bank of America’s balance sheet has total assets of $2,129,046 million in 2011, which is less than last year’s $2,264,909 million, a fairly significant decline. There are a few primary assets on the balance sheet. The largest asset is loans and leases which makes up 41. 92% of the total assets. The next largest asset was Available-For-Sale securities making up 12. 97% of total assets. Total liabilities on the balance sheet were $1,898,945 million, with the primary liability being deposits in U. S. offices both interest bearing and noninterest bearing, at 50. 4% of total liabilities. The next largest liability was long-term debt at 19. % of total liabilities. In millions| 2011| % of total assets| 2010| % of total assets| % chg from 2010-2011| Total asset| 2,029,046 | 100. 00%| 2,264,909 | 100. 00%| -10. 41%| Loans and leases| 892,417 | 43. 98%| 898,555 | 39. 67%| -0. 68%| Available-for-sale| 276,151 | 13. 61%| 337,627 | 14. 91%| -18. 21%| Total liabilities| 1,898,945 | 9 3. 59%| 2,036,661 | 89. 92%| -6. 76%| Total deposits| 1,033,041 | 50. 91%| 1,010,430 | 44. 61%| 2. 24%| Deposits in U. S. offices| 957,042 | 47. 17%| 930,913 | 41. 10%| 2. 81%| Long-term debt| 372,265 | 18. 35%| 448,431 | 19. 80%| -16. 98%| Leverage ratio| 14. 0 | ? | 8. 92 | ? | 63. 58%| Table 1 Selected Financial Data from Balance Sheet of Bank of America Chase and Citi are fairly similar in size and distribution of their balance sheets. Chase and Citi have total assets of 2,265,792 and 1,873,878( ) respectively, both with slightly lower loans as a percentage of total assets at slightly over 30%, while AFS securities are around 16% of total assets for each. Liabilities are also very similar, with Chase having total liabilities of $2,082,219 million and Citi $1,694,305 million. The primary line items are also very similar once again with Chase’s total deposits 54. 6% and long-term debt 22. 77% of total liabilities, while Citi has deposits 51. 11% and long-term debt of 19. 09 %. According to the deposits in U. S. offices, BOA focus more in U. S market and Citi focus more on market outside U. S. In millions| Bank of America| % of total assets| JP Morgan Chase| % of total assets| Citi Group| % of total assets| Total asset| 2,129,046 | 100. 00%| 2,265,792 | 100. 00%| 1,873,878 | 100. 00%| Loans and leases| 892,417 | 41. 92%| 696,111 | 30. 72%| 617,127 | 32. 93%| Available-for-sale| 276,151 | 12. 97%| 364,793 | 16. 10%| 293,413 | 15. 66%| ? | ? | ? | ? | ? | ? | ? | In millions| Bank of America| % of total liabilities| JP Morgan Chase| % of total liabilities| Citi Group| % of total liabilities| Total liabilities| 1,898,945 | 100. 00%| 2,082,219 | 100. 00%| 1,694,305 | 100. 00%| Total deposits| 1,033,041 | 54. 40%| 1,127,806 | 54. 16%| 865,936 | 51. 11%| Long-term debt| 372,265 | 19. 60%| 256,775 | 22. 77%| 3,235,050 | 190. 94%| Leverage ratio| 8. 25 | ? | 11. 34 | ? | 9. 44 | ? | | | | | | | | In millions| Bank of America| % of total deposits| JP Morgan Chase| % of total deposits| Citi Group| % of total deposits| Deposits in U. S. offices| 957,042 | 92. 64%| 851,534 | 75. 0%| 343,288 | 39. 64%| Table 2 Selected Financial Data from Balance Sheets of Three Banks in 2011 In the event of a bank run, Bank of America will be in trouble due to its high leverage, similar to many banks. Bank of America has deposits of $1,033,041 million, among which liquid assets only have $314,425 million, including cash and cash equivalents of $120,102 million, time de posits and other short-term investments of $26,004 million and trading assets of $169,319 million. Even with the ability to liquidate those non-cash assets, it will still only be able to honor slightly more than 30% of its depositors. Income statement The primary line item on Bank of America’s income statement is net income of $1,446 million, which increased compared to a net loss of 2,238 in 2010. Interest income was $66,236 million, down from $75,497 million in 2010. Total interest expense was $21,620 million, which makes the net interest income become $44,616 million, down 13. 4% from the previous year. Lastly, total noninterest income was $48,838 million, decreased by 16. 8% from 2010. This is partly due to the big loss of mortgage banking income, decreasing from $2,734 million in 2010 to $(8,830) million in 2011. Chase and Citi had similar trends, both slightly increasing their bottom line while having net interest income decrease slightly. Regulatory capital ratios 2011| Bank of America| JP Morgan Chase| Citi Group| To be well capitalized| Leverage ratio| 7. 53%| 6. 80%| 7. 19%| 5%| Tier 1 risk-based capital ratio| 12. 40%| 12. 30%| 13. 55%| 6%| Total risk-based| 16. 75%| 15. 40%| 16. 99%| 10%| Table 3 Regulatory Capital Ratios of Three Banks in 2011 In 2011, Bank of America was considered well capitalized for all three regulatory ratios–Tier 1 capital, risk-based capital and leverage. Bank of America slightly increased all of its ratios from 2010 to 2011. Its tier 1 capital ratio was 12. 4% while 6% is considered well capitalized, its risk based capital ratio was 16. 75% while 10% is considered well capitalized, and its leverage ratio was 7. 53% while 5% is considered well capitalized. ( Table 4, Table 3) Chase and Citi had very similar ratios to Bank of America. Chase was slightly below Bank of America and Citi for all three ratios but still well above the floor to be well capitalized. Citi had a slightly lower leverage ratio and slightly higher tier 1 capital and risk based capital ratios. Regulatory ratios are fairly important; however there are some issues with them. The ratios are backwards looking, so there could be a large amount of change since in the numbers. There are also lots of adjustments made by the company to the different numbers that make up the ratio that might not even make sense such as ignoring AFS losses. The current risk weighting is also very simplistic currently and might not reflect the actual risk of the assets. One important thing to note is that the newly released Basel III norms by Basel Committee on Banking Supervision (BCBS) would require a higher regulatory capital ratio on banks. It is recommended that Basel III be implemented by January 1, 2015. According to the new rules, the mandatory Tier 1 common capital ratio would be 7%. Banks should maintain conservation buffer of 2. 5% and reserves amounting to 8. 5% of assets. Therefore, in order for Bank of America to meet the future requirements and be well capitalized in face of potential financial meltdowns, it should hold more and better quality capital, carry more liquid ssets, and limit leverage. ( , ) Investment portfolio The net unrealized gains on HTM securities of $177 million = $181 million + ($4) million that have not been recognized in OCI as of the end of 2011 are attributable to HTM securities that have not been deemed other than temporarily (OTT) impaired, so that amortized cost is the carrying value. Amortized cost is a hi ghly limited valuation basis for risky securities. There was very little mention of reclassification in Bank of America’s 10-K. There was a mention of a reclassification of $26. billion primarily due to noninterest earning equity securities being moved from trading account assets to other assets, but no mention of anything else. Impact of the FSP FAS 115-2 and FAS 124-2 on OTTI Bank of America According to FSP FAS 115-2 and FAS 124-2, banks are allowed to report non-credit related OTTI in Other Comprehensive Income (OCI). Only credit-related OTTI is recognized in net income. The Total OTTI losses (unrealized and realized) for 2011 is $360 million, and portion of other-than-temporary impairment losses recognized in other comprehensive income is about $61 millions. The net amount is $299 million which is recognized in earnings on AFS debt securities in 2011, compared to $970 million on AFS debt and marketable equity securities in 2010. When we compute the regulatory Tier One Capital, the unrealized losses on AFS investments are (added back) excluded. Thus, the $61 million is added back to calculate the Tier One Capital. With adding back, Tier 1 risk-based capital ratio is 12. 40% as shown on 2011 Y9C. In absence of adding back, the ratio is (159,231,999-61,000)/ 1,284,466,933=12. 39%. JP Morgan Chase For JP Morgan Chase, the10K shows Total other-than-temporary impairment losses for are 27, 94, nd 946 million for year 2011, 2010 and 2009 respectively. ( ) However, it doesn’t divide these amounts into credit-related portion and non-credit related portion. Based on the other two banks examples, we can infer that the Tier One Capital for JP Morgan Chase will go up after adoption. Citi Group Citigroup also adopted the same rules above in fir st quarter of 2009. As a result of the FSP, Company’s Consolidated Statement of Income reflects the full impairment on debt securities that the Company intends to sell or would more-likely-than-not be required to sell before the expected recovery of the amortized cost basis. As a result of the adoption of the FSP, Citigroup’s income in the first quarter of 2009 was higher by $631 million on a pretax basis ($391 million on an after-tax basis) and AOCI was decreased by a corresponding amount. However, 2011 10K does not gives details about regarding the credit loss component of OTTI in 2011. When we compute the regulatory Tier One Capital for Citigroup, the unrealized losses from non-credit loss component on debt securities are (added back) excluded, which leads to an increase in Tier One Capital. Netting Financial Instruments | Â  | Bank of America| JP Morgan Chase| Citi Group| IFRS(Before netting)| Total assets| 2,130,796| 3,976,317| 2,749,470| | Total debt| 1,900,695| 3,792,742| 2,564,671| | Total equity| 230,101| 183,575| 184,799| | Leverage ratio| 8. 26| 20. 66| 13. 88| GAAP(After netting)| Total assets| 2,129,046| 2,265,792| 1,873,878| | Total debt| 1,898,945| 2,082,219| 1,694,305| | Total equity| 230,101| 183,573| 179,573| | Leverage ratio| 8. 25| 11. 34| 9. 44| Table 4 Netting Adjustments for Three Banks in 2011 Bank of America According to Note 4—Derivatives, Bank of America had legally enforceable master netting agreement that would reduce both derivative assets and derivative liabilities by the same amount of 1,749. 9 million, respectively. Moreover, cash collateral was applied to net off derivative assets by 58. 9 million and derivative liabilities by 51. 9 million, respectively. However, the reduction caused by cash collateral wouldn’t affect total assets and total liabilities. If Band of America were to adopt IFRS, it would report higher gross derivative assets and liabilities by an increase of 1,749. million. However, the adjustment (1,749. 9 million) was insignificant compared to Bank of America’s total asset base (2,129,046 million, about 0. 08%). Therefore, the leverage ratio would only increase slightly due to this change, from 8. 25 under GAAP to 8. 26 under IFRS. Comparable banks J. P. Morgan Chase’s gross derivative assets were offset by 1,710,525 million netting ad justments and gross derivative liabilities by 1,710,523. Such adjustments almost made up of 75% of Chase’s total asset base which is 2,265,792 million. Therefore, if to adopt IFRS, Chase would record a much higher assets and liabilities up to 3,976,317 million and 3,792,742 million, respectively. Leverage ratio, accordingly, would rise from 11. 34 to 20. 66, with an almost doubled increase. Citi Group’s netting adjustments of 875,592 million against derivative assets made up 46. 7% of total assets, and 870,366 million against derivative liabilities made up 33. 9% of total liabilities. When adopting IFRS, Citi would report a higher assets and liabilities, with its leveraging ratio growing from 9. 44 to 13. 88 due to the significant amount of the netting adjustments. Analysis of the impact From the above table, we can see that Bank of America was merely affected by the presentation of netting financial instruments, while the other two banks were greatly affected in terms of leverage ratio. The main reason to such a distinguished difference is that Bank of America had the smallest investment in derivative instruments, compared to Chase and Citi. The gross approach would definitely give a more comprehensive picture of banks’ derivative instruments; however, it would overstate risk to some extent. Market risk of the derivative positions can be better evaluated using the gross presentation which is more detailed. Firstly, net figures are by far more relevant metrics than the gross amounts. Naturally, this comes about from looking to the way that derivatives are traded under an enforceable master netting agreement. The master netting agreement allows for the aggregation of all trades and the replacement by a single net amount. Secondly, another metric to measure derivative portfolios is volatility which is driven by the risk of open market positions and the potential changes in net asset values and not the size of gross derivatives amounts. Therefore, gross balance sheet amounts are not particularly useful indicators of how much net derivative asset values would have to change before solvency is affected. Finally, as the third most important metric when evaluating the risks, collateral together with cash settlement procedures results in a liquidity profile that is more aligned with net presentation. Collateral amounts further reduce the risks and have to be taken into consideration for reporting derivatives Fair Value Accounting for Financial Instruments Fair value accounting From table 5 and the three computation tables in Appendix, we can see that under Full Fair Value method, Bank of America’s net income would grow from 1,446 million to 2,750 million, an increase of 90. 2%. Similarly, Citi would experience an increase of 128. 2% in net income from 11,067 million to 25,257 million. However, full fair value method had insignificant impact on Chase, with a total adjustment of 1,773 million compared to its pre-adjustment net income of 18,976 million. In millions| Bank of America| JP Morgan Chase| Citi Group| Adjustments for assets and liabilities at HC on balance sheet| 6,127 | 1,140 | 12,000 | Adjustments for assets and liabilities at FV on balance sheet with gains and losses in OCI| -4,819 | 633 | 2,190 | Total adjustment| 1,308 | 1,773 | 14,190 | Net income as per financial statements| 1,446 | 18,976 | 11,215 | Full fair value income with information available| 2,754 | 20,749 | 25,405 | * Table 5 Summary of the Fair Value Income Another thing to note is that BOA stands out as it had a significant unrealized loss of 4,819 million on AFS, while its comparable banks, Chase and Citi, had a positive gain of 633 million and 2,190 million, respectively. Based on our analysis, such difference was driven by the following factors. (1). According to its disclosure, Bank of America recognized $299 million of other-than-temporary impairment (OTTI) losses in earnings on AFS debt securities in 2011 compared to $970 million on AFS debt and marketable equity securities in 2010, which contributes greatly in such a large amount of unrealized loss on AFS. The recognition of OTTI losses on AFS debt and marketable equity securities is based on a variety of factors, including the length of time and extent to which the market value has been less than amortized cost, the financial condition of the issuer of the security including credit ratings and any specific events affecting the operations of the issuer, underlying assets that collateralize the debt security, other industry and macroeconomic conditions, and management’s intent and ability to hold the security to recovery. (2). According to its disclosure, Bank of America presents debt securities purchased for longer term investment purposes which are as part of asset and liability management (ALM) and other strategic activities, as available-for-sale (AFS) securities, and report these securities at fair value with net unrealized gains and losses included in accumulated OCI. In 2011, the fair value of net ALM contracts decreased $7. 9 billion to a gain of $4. 7 billion, compared to $12. 6 billion in 2010. The decrease was primarily attributable to changes in the value of U. S. dollar-denominated pay-fixed interest rate swaps of $9. billion, foreign exchange contracts of $1. 8 billion and foreign exchange basis swaps of $1. 4 billion. The decrease was partially offset by a gain from the changes in the value of U. S. dollar-denominated receive-fixed interest rate swaps of $6. 6 billion. Opinions about fair value accounting Fair Value Accounting has many advantages and disadvantages as listed below. FVA advant ages include the following: FVA depicts a clearer picture of the company’s financial situation, as it provides an accurate asset and liability valuation as the prices are reflected in the market price. Fair value accounting limits managers’ ability to manipulate the reported net income, as the gains and losses are reported in the period they occur, not when they are realized as the result of a transaction. For Level 1 2, the price for financial instruments, are available in a liquid market. While under amortized accounting method, firms can manage their income through the selective realization of cumulative unrealized gains and losses on positions, an activity referred to as gains trading. FVA provides investors with more accurate, timely, and comparable financial information versus other alternative accounting approaches, even during extreme market conditions. Gains losses resulting from changes in fair value estimates indicate economic events that companies and investors may find worthy of additional disclosures. Under amortized accounting, income typically is persistent for as long as firms hold positions, but becomes transitory when positions mature or are disposed of and firms replace them with new positions at current market terms. Disadvantages of FVA include: The price for certain assets and liabilities may fluctuate often, resulting in higher volatility than other accounting methods. When the market is volatile, the price for financial instruments may change a lot, so companies may recognize gains/losses. This volatility of earnings would make it more difficult for users to predict future performance and make regulatory capital ratio vary dramatically across periods. A solution for this disadvantage is regulatory capital should be delinked from fair value and reported by using historic cost information. After the market stabilizes, the price may change back to the normal level. Not every asset or liability can be easily fair valued. For financial instruments in level 3, there is no fair value in the liquidity market. Managers need model to estimate the value of financial instruments in level 3. Using fair value accounting may have adverse effect on a down market. Companies may sell some financial instruments whose value decreased because of the drop in the current market price. They may not realize the drop without the fair value accounting. The market may stabilize over time, and the price for the financial instruments will return to their normal level. Another issue with fair value accounting is that when the market for instruments freezes up and there’s no liquidity in the market, financial instruments would have to be valued by using mark-to-model which in many situations are not reliable and transparent to investors. A solution to this is that regulators provide more specific guidance on how to determine fair value for financial statements. Disclosure requirements would include disclosure of fair value of all financial instruments along with method adopted to determine fair values, any significant assumptions used in their estimation, some indications of the sensitivity of the estimated fair value to these assumptions, and discussion of risk exposure and issues associated with the estimation of fair value. In addition, fair value accounting has very significant feedback effects, especially during financial crisis. Fair value accounting would further contribute to the deterioration in the value of a company’s financial instruments or assets and make it more difficult for companies to recover from the crisis. Recommendation here is that in special situations, regulators would allow companies that face severe crisis to adopt other accounting methods temporarily and minimize the loss of these companies. In summary, fair value has both advantages and disadvantages under today’s economy. FVA provides better insight of the financial statements, in ddition to limiting the potential for manipulation. However, in my opinion, under today’s economy situation, it is hard to fully implement the fair value accounting. Every disadvantage has proposed solutions to resolve the issues identified. Overall, FVA is recommended for use. Interest Rate Risk and Net Interest Earnings Net interest margin The net interest yield on a FTE basis was 2. 48 percent for 2011 compared to 2. 78 percent for 2 010. Net interest income on a FTE basis decreased $7. 1 billion in 2011 to $45. 6 billion. The decline was primarily due to: (1). There’s a noticeable decrease in the yield on consumer loans from 6. 04% in 2010 to 5. 37% in 2011, which reduces net interest income by about 4,244 million (633,507 million * 0. 57%). * Debt securities and residential mortgage mainly contributed to the decline. The yield rate for debt securities decreased from 3. 66% to 2. 85%, and the residential mortgage from 4. 78% to 4. 18%. (2). Noninterest income declined from the previous year due to lower mortgage banking income, reflecting$11. 6 billion in representations and warranties costs and decline of $3. billion income from trading account profits. Noninterest income being the major source of Bank of America’s income drastically impacts the profitability of the company. (3). In 2011 Bank of America had a decreased investment security yields, including the acceleration of purchase premium amortization from an increase in modeled prepayment expectations, and increased hedge ineffectiveness. (4). Bank of America’s d eclining net interest margin was partially offset by ongoing reductions in its debt footprint and lower rates paid on deposits. The total U. S interest-bearing deposits had an average yield of 0. 36%, compared to 0. 55% in 2008. Such downward trend in net interest margin can be observed in other banks as well. The following table presents total interest-earning assets rate and total interest-bearing liabilities for all three banks over 2009 to 2011. As shown, all banks experienced a decline in interest-earning assets rate over three years: 1) BOA from 4. 31% in 2009 to 3. 65% in 2011, with an average decrease of 8% every year; 2) Chase from 4. 04% to 3. 1%, with an average decrease of 6. 8%; 3) Citi from 4. 78% to 4. 27%, with an average decrease of 5. 5%. The main reasons for the other two banks’ declining net interest margin were higher deposit balances with lower loan yields. | Bank of America| JP Morgan Chase| Citi Group| | 2011| 2010| 2009| 2011| 2010| 2009| 2011| 2010| 2009| Total interest-earning assets rate| 3. 65%| 4. 02%| 4. 31%| 3. 51%| 3. 83%| 4. 04%| 4. 27%| 4. 55%| 4. 78%| Total interest- bearing liabilities| 1. 39%| 1. 39%| 1. 77%| 0. 86%| 0. 84%| 1. 02%| 1. 63%| 1. 61%| 1. 3%| Table 6 Net Interest Margin of Three Banks Interest rate risk BOA’s net interest income decreased by $2,122 million in 2011 and $998 million in 2010 from a 1% downward parallel shift in interest rate. 1% downward change in interest rate results in a bigger decrease in net interest income in 2011 than in 2010. However, according Chase’s 10K, downward 100bps parallel shocks result in a Federal Funds target rate of zero and negative three- and six-month treasury rates. The earnings-at-risk results of such a low-probability scenario are not meaningful. For Citi, a 100 bps decrease in interest rates would imply negative rates for the yield curve, so not meaningful either. 1% downward shift| 2011| 2010| BOA| ($2,122)| ($998)| JP Morgan Chase| NM| NM| Citi Group| NM| NM| Table 7 The Impact of 1% downward shift on Net Interest Income BOA’s net interest income would increase by $1,505 million in 2011 and $601 million in 2010 from a 1% upward parallel shift in interest rate. The same as downward change, 1% upward change in interest rate also would result in a bigger increase in the net interest income in 2011 than in 2010. Compared with BOA, 1% upward shift in interest rate has a bigger impact for Chase and smaller impact for Citi. 1% upward shift| 2011| 2010| Bank of America| $1,505 | $601 | JP Morgan Chase| $2,326 | $1,483 | Citi Group| $97 | ($105)| Table 8 The Impact of 1% Upward Shift on Net Interest Income Credit Risk and Losses Main loss reserve adequacy ratios Policy to designate past due loans as non-performing Adequacy of the bank’s allowance for loan losses Disclosure policies relating to loans Appendix BOA In $ millions| 2011| 2011| 2010| 2010| 2011| 2010| 2011| ? | Carrying Value| Fair Value| Carrying Value| Fair Value| CURG| CURG| URG| Adjustments for assets and liabilities at HC on balance sheet| Assets:| ? | ? | ? | ? | ? | ? | ? | Held-to maturity debt securities| 35,265 | 35,442 | 427 | 427 | 177 | – | 177 | Loans| 870,520 | 843,392 | 876,739 | 861,695 | (27,128)| (15,044)| (12,084)| Total assets| 905,785 | 878,834 | 877,166 | 862,122 | (26,951)| (15,044)| (11,907)| Liabilities:| ? ? | ? | ? | ? | ? | ? | Deposits| 1,033,041 | 1,033,248 | 1,010,430 | 1,010,460 | 207 | 30 | 177 | Long-term debt| 372,265 | 343,211 | 448,431 | 441,672 | (29,054)| (6,759)| (22,295)| Total liabilities| 1,405,306 | 1,376,459 | 1,458,861 | 1,452,132 | (28,847)| (6,729)| (22,118)| Pretax adjustments before AFS securities and CFH derivatives| ? | ? | ? | ? | 1,896 | (8,315)| 10,211 | Aftertax adjustments before AFS securities and CFH derivatives| ? | ? | ? | ? | ? ? | 6,127 | Adjustments for assets and liabilities at FV on balance sheet with gains and losses in OCI? | Aftertax adjustment for AFS securities| ? | ? | ? | ? | ? | ? | (4,270)| Aftertax adjustment for CFH derivatives| ? | ? | ? | ? | ? | ? | (549)| Total adjustment to net income| ? | ? | ? | ? | ? | ? | 1,308 | Net income as per financial statements| ? | ? | ? | ? | ? | ? | 1,446 | Full fair value income with information available| ? | ? | ? | ? | ? | ? | 2,754 | JP Morgan Chase In $ millions| 2011| 2011| 2010| 2010| 2011| 2010| 2011| ? | Carrying Value| Fair Value| Carrying Value| Fair Value| CURG| CURG| URG| Adjustments for assets and liabilities at HC on balance sheet| Assets:| ? | ? | ? | ? | ? | ? | ? | Loans| 696,100 | 695,800 | 660,700 | 663,500 | (300)| 2,800 | (3,100)| Other| 66,300 | 66,800 | 64,900 | 65,000 | 500 | 100 | 400 | Total assets| 762,400 | 762,600 | 725,600 | 728,500 | 200 | 2,900 | (2,700)| Liabilities:| ? | ? | ? | ? | ? | ? | ? | Deposits| 1,127,800 | 1,128,300 | 930,400 | 931,500 | 500 | 1,100 | (600)| Accounts payable and other liabilities| 167,000 | 166,900 | 138,200 | 138,200 | (100)| – | (100)| Beneficial interests issued by consolidated VIEs| 66,000 | 66,200 | 77,600 | 77,900 | 200 | 300 | (100)| Long-term debt and junior subordinated deferrable interest debentures| 256,800 | 254,200 | 270,700 | 271,900 | (2,600)| 1,200 | (3,800)| Total liabilities| 1,617,600 | 1,615,600 | 1,416,900 | 1,419,500 | (2,000)| 2,600 | (4,600)| Pretax adjustments before AFS securities and CFH derivatives| ? | ? ? | ? | 2,200 | 300 | 1,900 | Aftertax adjustments before AFS securities and CFH derivatives| ? | ? | ? | ? | ? | ? | 1,140 | Adjustments for assets and liabilities at FV on balance sheet with gains and losses in OCI| Aftertax adjustment for AFS securities| ? | ? | ? | ? | ? | ? | 1,067 | Aftertax adjustment for CFH derivatives| ? | ? | ? | ? | ? | ? | (279)| Cash flow hedge| ? | ? | ? | ? | ? | ? | (155)| Total adjustment to net income| ? | ? | ? | ? | ? | ? | 1,773 | Net income as per financial statements| ? | ? | ? | ? | ? | ? | 18,976 | Full fair value income with information available| ? ? | ? | ? | ? | ? | 20,749 | Citi Group In $ millions| 2011| 2011| 2010| 2010| 2011| 2010| 2011| ? | Carrying Value| Fair Value| Carrying Value| Fair Value| CURG| CURG| URG| Adjustments for assets and liabilities at HC on balance sheet? | Assets:| ? | ? | ? | ? | ? | ? | ? | Investment| 293,400 | 292,400 | 318,200 | 319,000 | (1,000)| 800 | (1,800)| Loans| 614,600 | 603,900 | 605,500 | 584,300 | (10,700)| (21,200)| 10,500 | Total assets| 908,000 | 896,300 | 923,700 | 903,300 | (11,700)| (20,400)| 8,700 | Liabilities:| ? ? | ? | ? | ? | ? | ? | Deposits| 865,900 | 865,800 | 845,000 | 843,200 | (100)| (1,800)| 1,700 | Long-term debt| 323,500 | 313,800 | 381,200 | 384,500 | (9,700)| 3,300 | (13,000)| Total liabilities| 1,189,400 | 1,179,600 | 1,226,200 | 1,227,700 | (9,800)| 1,500 | (11,300)| Pretax adju stments before AFS securities and CFH derivatives| ? | ? | ? | ? | (1,900)| (21,900)| 20,000 | Aftertax adjustments before AFS securities and CFH derivatives| ? ? | ? | ? | ? | ? | 12,000 | Adjustments for assets and liabilities at FV on balance sheet with gains and losses in OCI| Aftertax adjustment for AFS securities| ? | ? | ? | ? | ? | ? | 2,360 | Cash flow hedge| ? | ? | ? | ? | ? | ? | (170)| Total adjustment to net income| ? | ? | ? | ? | ? | ? | 14,190 | Net income as per financial statements| ? | ? | ? | ? | ? | ? | 11,215 | Full fair value income with information available| ? | ? | ? | ? | ? | ? | 25,405 | How to cite Financial Analysis of Bank of America, Essay examples

Advantages and Disadvantages of Remote Working †Free Samples

Question: Discuss about the Advantages and Disadvantages of Remote Working. Answer: Introduction: Competencies refers to the behaviors that are observed and entails skills, knowledge and individual traits that distinguish performance levels at work place. Personality traits refers to the distinguishing qualities that make up an individual. The statement is thus partly true as competencies in jobs requires both the personality traits and attributes as well as the knowledge. The use of position descriptions to define jobs is limiting and act as a disincentive for performance. They should be thrown away, allowing roles to be more fluid; Debate this statement. Job description refers to a document that gives the description of tasks and responsibilities of a position. Disincentive for performance refers to things that are demotivating to achieve a specific goal. Position description is responsible for laying out roles in terms of their objectives, outcomes and responsibilities, how they behave and their capability and the needed effort to perform them in terms of experience and knowledge. Position description is useful in giving clarity as to the expectations of a given position, monitoring of work performance and ensuring of manageable workload. It is therefore clear that position description is key in achieving the organization goals as it defines an individuals effort required to help achieve the overall organizational goals (Gallant, 2011). How can you manage a virtual team that you cant see? There are a number of ways which are useful in connecting with remote and mobile employees. They include; Use of technology. Through the internet platform, companies can set up blogs where members discuss work related issues. The organization can also connect with the employees through the use of mobile phones and laptops (Mitchell, 2014). Video conferencing. This helps in telling the tone, facial expression as well as body language that are key in effective communication. Planning and organizing a head of time. This entails taking care of all possible disruptions that may affect the operations of the employees in good time. Trusting the employees. Since there is difference in geographical locations, developing trust is key in giving motivation to the employees in order to perform their duties effectively. Managing by objectives. Set up objectives for the employees and evaluate them based on the results or outcomes. Constant interaction. Its important to ensure calls are made and any issues of concerns are addressed amicably. Outline the advantages and disadvantages of working remotely from the perspectives of both employees and employers. Remote working refers to employees operating in new locations that are different from their businesses. Such places include; abroad and home among other places. The key advantages for being a remote worker include; Minimized cost. The employee will cut cost on transport, feeding and purchasing of clothing to meet the required dress code. Employers will equally enjoy similar benefits. Increased production level. One is able to perform a number of tasks as they tend to get minimal distractions as well as saving on the time used to travel to the various offices to perform the various roles. The employer equally saves a lot of time in having to be physically present for work to be done and can use that time for other activities (Elliot, 2017). Minimal absenteeism. In case of sickness one is able to seek medication and carry on with their expected responsibilities. The employer equally gets the work done without any worries of missing on some day as duties are already delegated to the employees. The disadvantages that are associated with remote working include; Minimal connection with colleagues. When employees cannot see their colleagues around sometimes there is less motivation to undertake their roles. For employers, they miss the opportunity to monitor work progress at different stages as well as be available for consultation when there is need by the employees. Distractions. When out of office, employees are tempted to engage in other non-related work issues that may affect their performance. The employers may also be tempted to pursue other pressing issues at home and therefore ends up losing track of work and the employees. Challenge to balance life and work. It is hard for most employees to stop engaging in home activities during working time while at home. This affects their productivity as they continually have to assume different roles. The employers equally face a similar challenge of having to balance between the two (Dittman, 2015). There are no generational differences and employers should not be expected to design jobs any differently for any employee, irrespective of age. Debate this statement. Generational difference impacts on the general outcomes of given duties at work place and thus affects the organizational goals. For instance interns at organization are viewed by administrators to be less committed to their jobs since they only work in a specified timeline. This results from their need to balance work and their professional lives. On the contrary, the interns feel discouraged by the older administrators to dismiss new ideas and proposed changes. It is therefore important to design jobs differently to suit the different generations in order to avoid constant wrangles and misunderstandings which may affect the performance of the employees (Alan et al., 2014). The implementation of work-life balance strategies in the work place only creates more equity and discrimination issues among employees. Employees with children and families get all the benefits, while the single employees get no benefits-it unfair. Debate this statement. Work life balance strategies is key in organizations since employees with children and families have other urgent issues that require their attention. This eventually affect their productivity and thus when not addressed, the organization may suffer losses. Single employees may have less commitments and thus have much focus on the job and hence work-life balance strategies helps put the employees at equal levels in order to effectively deliver at workplace. References Alan, N., Marian, B., Jane, C. John, S. (2014). Human Resource Management. Strategy and Practice. Dittman, M. (june, 2015). Monitor on Psychology. Generational differences at work. Elliot, G. (Feb, 06, 2017). Display note technologies. Advantages and Disadvantages of Remote working. Gallant, M. (april, 6, 2015). SABA HALOGEN. 7 best practises for managing remote employees. Gateway, R. (25, September, 2014). The People Experience, well being at Work. Hampshire, U. o. (n.d.). Guide to job Competencies. Heathfield, S. M. (october, 02, 2016). What is Human Resource Management? Beyond Hiring and Firing : What is HR management. Mitchell, S. (2014). American generations: who they are,how they live,what they think. New York: New Strategists Publications. Zemke, R. (2014). Generations at Work: Managing the clash of veterans, boomers, Xers and nexters in your work place. New York: AMACOM Books.

Environment Devastation Essays - Carbon Finance,

Environment Devastation The impact of people on their environment can be devastating. This is where the respective role of governments can make decisions that shape environmental policy and responsibilities. These governments can be broken up into four different levels: local, state, federal and international. Air quality and biodiversity are two current issues that can be related to the role of governments. Global warming is also another implication that has a devastating effect on the environment. Current examples include the rise in sea levels, polar meltdowns, the melting of ice sheets and glaciers and human deaths due to disease from the effects of global warming. Firstly the environment can be defined as the natural features of our surroundings such as plant and animal life and their habitats, water, soils and the atmosphere. A local government named Rockdale Municipal Council has implemented certain actions to deal with the quality in that region. They have recognized that the main source of poor air quality originates from air pollution sources such as motor vehicles, industrial premises and aircraft emissions. The solutions to these problems include improvements to Ryde and Botany Bay cycle way, integration of land use and transport planning strategies, production of "Air Quality - the Facts" booklet for community, investigation of complaints regarding odours and dust, tree planting and preparation of a Local Air Quality Management Plan in 1999. Air quality is a major issue in most states within Australia that affects our greenhouse, to tackle the implications state governments have created policies and responsibilities. For instance Cities for Climate Protection (CCP) is a program that enables mainly state governments to take action on greenhouse. CCP provides these state governments with a strategic framework to diminish greenhouse gas emissions by helping them identify and recognize the emissions of their council and community, set a reduction goal and develop and utilize an action plan to reach that goal. State actions include: capturing the methane from landfill sites and public and non-car transport into urban planning. On a federal or national basis Australia has employed policies to increase the air quality. For example the Commonwealth Government will guarantee that Australia carries its fair-share of the burden in worldwide efforts to combat global air pollution through policy development and implementation. They have also supported the National Greenhouse Strategy (NGS) which began in late 1996. The government will also support the development of a national strategy to observe and manage "air toxics". The air toxics strategy will monitor, establish the levels of community exposure to, and manage emissions of selected air toxics. The federal government will even consider the inclusion of air toxics in a future National Environmental Protection Measure. Further measures include the leading of the development of national ambient air quality standards through the National Environmental Protection Council and the assistance of the establishment of a National Pollutant Inventory which will require large companies to publicly report their emission of 90 pollutants. Local government Rockdale Municipal Council has introduced responsibilities and policies to reduce the loss of biodiversity. This local government has learned that the cause involves the introduction of species, pollution of land and water, weed invasion and urban encroachment. Their solutions to these problems comprise of the planting of over 3,500 plants and shrubs in Bardwell Valley and Scotts Reserve, bush regeneration and planting in Scarborough Reserve, involvement in Cooks River Foreshores Working Party and preparation of a flora and fauna study in 2000. Policies towards the community include controlling noxious weeds on your property, planting native trees indigenous to the area and applying to the council prior to removing any trees. The Labor Tasmanian Government has created a new Environment Policy on biodiversity that hopes to preserve native plants and animals. The policies commit the government to encourage community involvement in biological diversity programs, proclaim the Tasman National Park, establish a State Biodiversity Committee with community representation to arrange a Tasmanian Biodiversity Strategy, support the development of a State Policy on the protection of remnant native vegetation, examine the possibility of incorporating the Biodiversity Strategy into legislation and seeking the co-operation of local government and the community in including and enforcing biological diversity guidelines in development criteria. The federal government has enabled several policies to deal with conservation of Australia's biodiversity. The government will support the National Reserve System program to expand Australia's National Parks, support off-reserve biodiversity conservation including the planting of trees and the protection of vegetation through the Bushcare program and work with the States to reduce unsustainable land clearing, develop an "alert list" of introduced plants and animals that pose a risk to our environment. The government

How to Avoid Common Mistakes in English - Good vs. Well

How to Avoid Common Mistakes in English - Good vs. Well Good is often mistakenly used in place of well by both native and non-native speakers. Take a look at the differences between the adjective and adverb form which is certainly one of the most common mistakes in English. The most important distinction is that well describes how someone does something, whereas good is used to describe a noun such as good times, good food, etc. Good or Well Good is an adjective and well is an adverb. Many people, including many native speakers, incorrectly use the adjective form good, rather than the adverb well. Examples: I did good on the test. INCORRECT! - Correct form: I did well on the test.She played the game good. INCORRECT! - Correct form: She played the game well. Use the adjective form good when describing something or someone. In other words, use good when stating how something or someone is. Examples: She is a good tennis player.Tom thinks he is a good listener. Use the adverb form well when describing how something or someone does something. Examples: She did extremely well on the exam.Our parents think we speak English well.

Marketing Essay Example | Topics and Well Written Essays - 500 words - 68

Marketing - Essay Example The magazine environment on the mailbox is a business environment. The magazine is for business purposes where it highlights the company products and their categories and where the company operates from as well as its branches. The editorial environment  of the magazine is a marketing environment. The magazine seeks to highlight the products offered by DuPont registry, their performance, their location, their prices, customer care services, the contacts and working hours of the company, how to subscribe to the company online, and the delivery procedures of bought products. In addition, the pictures on the magazine are adverts for marketing the company products. The consistent general theme on the magazine advert is the offering of the DuPont registry products for sale. The advert describes the company as a buyer’s gallery for many automobiles (DuPont registry 1). The consistent features of the DuPont registry magazine advert include the name and picture of the product, fine details of the product, the manufacturer, and the manufacturing date of the product, the price of the product, and the buying procedure. The leading title article relates to the advert in that the leading title article refers to DuPont registry as a buyer gallery of fine automobiles a statement that is evident from the various and classic automobiles that the company offers for sale as seen in the magazine. As such, potential buyers have a wide range of fine products to choose from in DuPont registry. The weight on the advert suggests the existence of other companies who offer closely related products to those of DuPont registry. As such, this advert seeks to catch the attention and commitment of new willing and able customers who are interested in buying fine automobiles, fine boats, and fine homes all over the world. The advert also targets the customers of DuPont registry where it notifies them on new products and after sale services with an

The Yellow Wallpaper Essay Example | Topics and Well Written Essays - 1000 words

The Yellow Wallpaper - Essay Example (Gilman, 28) Drowning, however, transpires not only death or thrashing of self, but also a pursuit for discovering the self. Discussion The narrator's flaking away the wallpaper for finding the ensnared woman within is symbolic of her plunge into her own psyche, from which revisiting, rebirth, "surfacing," is doable. This rebirth connotes again the recurrent image of dying and death that is prevalent in The Yellow Wallpaper. The narrator moves down into madness before she can appear as justly and divinely sane. In her jump deep into the wallpaper, bearing the ‘repellent’ color that was almost ‘revolting’ (Gilman, 32), she discovers not only repugnant images of suffocation and imprisonment but also a mirror figure of her own ripped psyche. This equates death to some extent. The woman in "The Yellow Wallpaper" has a very slow demise. The story covers the summer months. She reveals several glimpses of her perceptions of her husband and his treatment of her. Alt hough she never mentions physical abuse, the reader is lead to believe John is very indifferent to his wife's feelings and needs. He seems to have very little time for her and does not really even believe she is sick. This gives some insight into why she might feel a need to escape. The writings about her slight hysteria give way to very disturbing images of her creeping along the walls of her room as though desperately seeking an escape. Because "The Yellow Wallpaper" is told in first-person format and from the central character's point of view, the reader is confronted with a vast amount of information about her emotions. In "The Yellow Wallpaper" the central character is a woman who feels trapped and is searching for an escape. That escape comes for both of them in the end, although it is not an expected form of escape. After all, nobody would expect to escape an unhappy life by plunging into insanity or by dying. Insanity may be called in some ways the intellectual death. But th at is the escape found by these two women. It is based on the repression of women in the 19th century and also exposes the pitiable state of equality of women in societies. Women have been considered the creature that can be suppressed and oppressed in the desired manner by the male dominating societies. Male chauvinism has always been exercised on women which is parallel to death of a real feministic survival in society. A woman has been considered a tool or instrument of satisfaction and no more than that. This is what may be called the death of a whole gender. Undeniably, this touches the topic of feminism and liberation of women from social stratification. The woman who was confined in the room fundamentally represents all women in society who strive for equal rights. However, the wallpaper replicates what the major character and women was passing through. By shredding the wallpaper down, the protagonist held that she could win her self-determination, which indeed happened at th e conclusion. The very title bears a great significant image of death or dying. Yellow is an emblem of lifelessness or in other words death. The fissures and markings on the wallpaper demonstrate the moans of women and the color yellow represent death or dying. The bed represents their marriage and the woman she saw behind the bars in the wallpaper

Public Administration and business management Research Paper

Public Administration and business management - Research Paper Example They are involved in the business of making policies and rules and regulations through which they manage the private and the public sector. Businesses have to ensure that they abide by the policies set by the public administrators in order to ensure that they do not cross the line and fall in the category of anti-social organizations (Denhardt, 2011, p.51). Business management even involves the facet of managing people but they can only control behavior of those people that are working within the organizations and set policies to govern these individuals (Denhardt, 2009, p.5). Those students who are involved in the study of public management learn about managing the macro level of the common population and those individuals who are enrolled in business management courses are involved in the learning of how to manage people at a micro level. Another reason due to which business management cannot be referred to as public administration is that the rules of business management are obtai ned from the policies and guidelines created by the people who are related to the field of public

Impact Of Od Interventions On Employee Engagement Management Essay

Impact Of Od Interventions On Employee Engagement Management Essay Organizations are now experiencing profound and wide reaching change. In the context of globalization, the need to respond to the numerous challenges emerging from the dynamic and ever-changing business environment is a daunting task. Indeed the changes that organizations are facing are more multifaceted than ever. Engaging workforce to a clearly articulated strategy by means of the change management process is therefore a real challenge for local and international organizations. In todays economy, motivated and committed employees is fundamental key to the success of an organization. Organizing and routing employee competencies and energy is not only an essential requirement for successfully achieving corporate success and enabling change, it is also directly linked with employee satisfaction. Thus, the need to align and integrate Culture, processes, systems, Technology, strategy should with peoples KSAs to energize their talents in the pursuit of their own self-interest and making the quality of work more satisfying. This paper is based on action research. The focus is on evaluating whether OD interventions is a reality and applied science in the Mauritian organization and the end result of OD interventions in the Mauritian context and and to assess the extent to which it has affected commitment of employees. Research Objectives and questions Since the main objective is to evaluate the impact of OD interventions on employee engagement, to obtain appropriate results various objectives can be set. To further be able to reach the objectives, some questions can be set appropriately. The objectives and questions are: To highlight if company X promotes OD. Is there any OD consultant at the company? What are his duties and competencies? What were the discomforts felt by the company, which brought about the practice of OD? To determine the OD interventions used at Company X. What are the different diagnosis tools of OD, which have been used at the company? What is the basis of using these specific tools? What is the role of top management in the implementation? To investigate how the interventions affected employee engagement. What have been the drivers of engagement at the company? What are the variables of measurement of engagement at company X? To evaluate effectiveness of the interventions. Are there any past data for comparison purpose? What are the findings and outcomes of the intervention on engagement? What can be proposed from the analysis? Conceptual background Organization development is a process of planned change for the purpose of enhancing individual development and improving organizational performance. It is a long term effort led and supported by top management , to improve an organizations visioning, empowerment learning, and problem solving processes, through an on-going, collaborative management of organizational structure-with special emphasis of the culture of intact work and teams and other team configurations-using the consultant-facilitator role and the theory and technology of applied behavioral science , including action research. (Wendell L.French et al.1999) The definition provided above implies a number of elements which are considered essential for the practical application of the science in the organization. Characteristics of OD OD emphases on culture and processes Specifically, OD encourages collaboration between organization leaders and members in the managing culture and processes. Teams are all kinds are particularly important for accomplishing tasks and are targets for OD activities. Participation and involvement in problem solving and decision making by all levels of the organizations are hallmarks of OD. OD recognizes the importance of top management commitment, support and involvement. It also affirms a bottom approach when the culture of the organizations supports such efforts to improve an organization. The key emphasis of OD is on the total system and its inter-reliant parts. OD practionners are facilitators, collaborators and co-learners with client system. It is a development-based program aimed to develop values, attitudes, norms and management practices that would result in a healthy organization.. It involves planned interventions and improvements in an organizations processes and structures which rely on action research. OD takes a developmental view that seeks the betterment of both individuals and the organization. Attempting to create win-win solutions is standard practice in OD programs. OD Interventions OD interventions address a wide range of specific problems and opportunities. The intervention strategy integrates the problem or opportunity to be addressed, the desired outcomes and the sequencing and timing of various interventions. As such, OD interventions are sets of structures activities in which selected organizational units (targets groups or individuals) engage in a task or a sequence of tasks with the goals of organizational improvement and individual development. The classification of OD interventions is quite extensive; Burk and Horstein (1972) listed only six categories: Team building Managing conflict Survey Feedback Techno-structural Training All purpose miscellaneous French and Bell (1999) developed the typology of OD target groups and designed interventions to improve effectiveness. The target group comprises of individuals, Dyads, teams and groups, intergroup relations and the overall organization. Significance of OD interventions In Mauritius as in other countries, the significance of Organizational Development has been of such importance to respond to the internal and external changes occurring in our business environment as a result of globalization. Anderson and Anderson (2001a, p.1) note that in todays market place, change is a requirement for continued success, and competent change leadership is the most coveted executive skills. The underlying principle for change will be the transformation of the organization for the benefit of all. OD interventions enable the optimization of the system by ensuring that systems elements are harmonious and congruent. Employee Engagement In todays World, Key elements to business success are engaged employees who are aligned with organizational culture and goals. The commitment and the involvement of the workforce is crucial due to the emergence of human capital as a competitive advantage. The main characteristics of an engaged employees are as follows: Believes in the organization Is positive about the job and the organization Works actively to make things better Treats others with respect, and help colleagues to perform more effectively Can be relied upon and goes beyond the requirements of the job Identifies with the organization Keep up to date with developments in his/her field Sees the bigger picture even at personal cost OD and Employee Engagement The practical tool of an OD practionners a possess high-engagement change process in consideration with collaboration flow and effective problem solving under the employee involvement. Konrad (2006) supports the notion that employee involvement is key to employee involvement by stating employees who conceive design and implement workforce and process changes are engaged employees The increasing of employee engagement is a difficult process as it is rather a psychological contract than a physical one. Saks (2006) also stresses the point that engagement is a broad organizational and cultural strategy that involves all levels of the organization. Employee engagement as such is considered as a primary requirement to implement organizational change thus contributing to bring about organizational development. Methodology For the purpose of the study, both qualitative and quantitative research will be done. As mentioned in the previous section, the aim of the study is to evaluate the impact of employee engagement by indentifying the variables that would enable to identify the correlation and impact of OD interventions. Collection of data For collecting data, different sources are envisaged, mainly: Primary data Secondary data Primary data Both qualitative and quantitative research will be used to gather an in-depth understanding of the application of interventions and eventually study how these interventions impact on employee engagement defined in the objectives. This approach will explore the how and why of interventions and not just the what, where and when relating to the behavioral aspect of workforce engagement. A survey using questionnaire will be implemented complemented with interviews to capture both qualitative and quantitative intent of the study. Secondary data To achieve the aim of the study fully, the availability of past data records of previous years for comparison, in the published or non-published form can be useful. This secondary data is for interpretation purposes so as to be able to compare values and relate the effectiveness of OD interventions on employee engagement. Survey Unstructured and Structured questions will be asked to top management and employees to record their feedback and opinions. Questionnnaire The use of the questionnaire is to provide in-depth explanation to the questions. To begin with, to be able to respond to the first two Objectives, a preliminary questionnaire will be addressed to OD consultant or HR of the company to set the study into the context of the company and to gather background and fundamental data. Afterwards, a second questionnaire will be addressed to the employees addressing their engagement that is to evaluate their involvement and attachment to the company, but also to define the determinants of employee at the company. Population of relevance The population of relevance shall be the employees of the company, and top management