No abstract

As a result of the new regulatory prescripts for banks, known as the Basel II Capital Accord, there has been a heightened interest in the auditing process. Our paper considers this issue with a particular emphasis on the auditing of reserves, assets and capital in both a random and non-random framework. The analysis relies on the stochastic dynamic modeling of banking items such as loans, reserves, Treasuries, outstanding debts, bank capital and government subsidies. In this regard, one of the main novelties of our contribution is the establishment of optimal bank reserves and a rate of depository consumption that is of importance during an (random) audit of the reserve requirements. Here the specific choice of a power utility function is made in order to obtain an analytic solution in a Lévy process setting. Furthermore, we provide explicit formulas for the shareholder default and regulator closure rules, for the case of a Poisson-distributed random audit. A property of these rules is that they define the standard for minimum capital adequacy in an implicit way. In addition, we solve an optimal auditing time problem for the Basel II capital adequacy requirement by making use of Lévy process-based models. This result provides information about the optimal timing of an internal audit when the ambient value of the capital adequacy ratio is taken into account and the bank is able to choose the time at which the audit takes place. Finally, we discuss some of the economic issues arising from the analysis of the stochastic dynamic models of banking items and the optimization procedure related to the auditing process.

We study the stochastic dynamics of banking items such as assets, capital, liabilities and profit. A consideration of these items leads to the formulation of a maximization problem that involves endogenous variables such as depository consumption, the value of the bank's investment in loans, and provisions for loan losses as control variates. A solution to the aforementioned problem enables us to maximize the expected utility of discounted depository consumption over a random time interval, [t,τ], and profit at terminal time τ. Here, the term depository consumption refers to the consumption of the bank's profits by the taking and holding of deposits. In particular, we determine an analytic solution for the associated Hamilton-Jacobi-Bellman (HJB) equation in the case where the utility functions are either of power, logarithmic, or exponential type. Furthermore, we analyze certain aspects of the banking model and optimization against the regulatory backdrop offered by the latest banking regulation in the form of the Basel II capital accord. In keeping with the main theme of our contribution, we simulate the financial indices return on equity and return on assets that are two measures of bank profitability.

There exists a challenge in achieving equity within urban areas-urban neighbourhoods' spatial and socioeconomic inequalities remain considerably ambiguous in regard to urban form and quality of life. A point of departure in urban planning and development is sustainable development, as it has emerged as the principal expression and application of sustainability. It asserts its importance as the main topic of many international conferences. Notably, urban (spatial) planning and sustainable development dimensions need to dovetail their sustainability efforts for the transformation and integration of urban areas. In the interest of quality of life and urban form, from the technical assessment perspective, urban developments, (service) delivery strategies and accessibility generate parallel socioeconomic benefits, enabling households and communities to improve their quality of living, and they are further linked to spatial planning processes. Spatial planning requires that sustainable modes of living, social services and economic opportunities be provided spatially in a manner that is rationally based on people's needs and the access distance norms and standards. From this spatial planning perspective, the importance of adopting a measuring system is highlighted-it is difficult to achieve sustainable urban development without determining the degree of sustainability initiatives and/or sustainable modes of living. On this basis, this paper aims to use a model approved for evaluating low-income neighbourhoods' sustainability in South Africa (Successful Neighbourhood Model (SNM)) to integrate strategies and to build the information and knowledge base from which the trajectories of different types of neighbourhoods can be assessed for quality of life. Thus, neighbourhood sustainability indicators are used as the main framework for the analysis in this study, and as a way of implementing SNM. The paper concludes by outlining the potential implementation opportunities/solutions that SNM can offer to achieve desired/satisfactory quality of life and to deliver support to capacitate local and national governments in the development and implementation of urban strategies and policies.

To this end, sustainability has progressively become a core principle and prerequisite in the urban planning and development. The application of sustainability and/or its principal expression is being threatened by neighbourhoods' inequality such as segregation in land use and varying levels of income in developing countries. From sustainable development perspective and strictly linked to spatial contexts, this reflects inadequate urban planning as these spatial and socio-economic inequalities translate to fragmented spatial systems, unsustainable urban form and low quality of life. The analysis of these variables depicts that between the rich neighbourhoods and poor neighbourhoods very little space is afforded for connectivity and integration, local facilities, environmental quality and spatial components which are themselves pillars of sustainable urban form and desired quality of life are not preferentially factored into poor neighbourhoods. Thus, bringing multiple and multifaceted adverse impacts on poor people such as living in the unsafe and unhealthy areas. In essence, locally provided community facilities, infrastructure and services are mechanisms of spatial transformation and integration thus promote social and economic development. When drawing up social services to act as the basis from which sustainability in urban areas could be determined -central contention is that urban sustainability cannot be achieved without adequate social facilities that are differentiated by neighbourhoods varying development densities, community size, mobility levels and socio-economic variations. As a result, this research paper evaluates the sustainability level of low-income neighbourhood living spaces which urban system requires in order to achieve urban sustainability. Evaluating neighbourhood sustainability requires a modelling and integrated approach that bring forward all aspects of urban development and quality of life. The Successful Neighbourhood Model (SNM) developed as the comprehensive sustainability assessment tool for low income neighbourhoods in pursuit of neighbourhood sustainability in South Africa is used. The application of SNM procedure embrace metric benchmarking methodology and this quantitative nature of sustainability assessment is employed to conclude and recommend timely integration of new urban sustainability issues in the planning policies, strategies and instruments. SNM has demonstrated that it is possible to identify barriers that hinder poor neigbourhoods to be sustainable and presents possibilities of aiding urban policy decisions regarding sustainability.