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As climate change is projected to alter both temperature and precipitation, snow-controlled mid-latitude catchments are expected to experience substantial shifts in their seasonal regime, which will have direct implications for water management. In order to provide authoritative projections of climate change impacts, the uncertainty inherent to all components of the modelling chain needs to be accounted for. This study assesses the uncertainty in potential impacts of climate change on the hydro-climate of a headwater sub-catchment of New Zealand's largest catchment (the Clutha River) using a fully distributed hydrological model (WaSiM) and unique ensemble encompassing different uncertainty sources: general circulation model (GCM), emission scenario, bias correction and snow model. The inclusion of snow models is particularly important, given that (1) they are a rarely considered aspect of uncertainty in hydrological modelling studies, and (2) snow has a considerable influence on seasonal patterns of river flow in alpine catchments such as the Clutha. Projected changes in river flow for the 2050s and 2090s encompass substantial increases in streamflow from May to October, and a decline between December and March. The dominant drivers are changes in the seasonal distribution of precipitation (for the 2090s +29 to +84 % in winter) and substantial decreases in the seasonal snow storage due to temperature increase. A quantitative comparison of uncertainty identified GCM structure as the dominant contributor in the seasonal streamflow signal (44–57 %) followed by emission scenario (16–49 %), bias correction (4–22 %) and snow model (3–10 %). While these findings suggest that the role of the snow model is comparatively small, its contribution to the overall uncertainty was still found to be noticeable for winter and summer.

With major alterations in the regimes of snow-fed mid-latitude rivers projected for the end of this century, the output from hydroelectric river run-off schemes will potentially be affected to a similar extent. While resulting changes in the annual and seasonal power output have been investigated for a number of catchments, more transparency is needed in terms of dominant mechanisms driving these changes and model component-specific uncertainty. In this study an ensemble of 32 hydrological simulations is used to investigate the hydroelectric power potential of the Clutha River (Southern Alps, New Zealand) under 21st century climate change. The ensemble encompasses two emission scenarios, four General Circulation Models, two bias correction methods and two snow models. The fully distributed hydrological model WaSiM is used to model both the main natural processes and major forms of water management in the catchment. The catchment’s largest hydroelectric scheme is modelled by an external component. In the 2090s the results show substantial increases in the output for winter (18%) and spring (7%), followed by reductions in summer (-19%) and autumn (-4%). A net increase in annual streamflow does not lead to a corresponding increase in annual output, which is attributed to excess water being spilled during high flow events. The driving controls behind this are identified as more winter precipitation, a reduction in the solid fraction of precipitation and an increase in extreme precipitation events. The relatively large variation in the projected seasonal output is found to be primarily caused by the General Circulation Model and the emission scenario, while bias correction and the snow model made a smaller contribution to the overall uncertainty.

The following article reviews the recent regulatory efforts in defining systemic risk in the insurance sector and the designation of systemically important insurers. Although current evidence suggests that core insurance activities are unlikely to cause or propagate systemic risk, the characteristics and business models of insurance firms vary by country and might require a more nuanced examination, with a particular focus on non-traditional and/or non-insurance activities. The article also includes the assessment of identified vulnerabilities from liquidity risk in the context of the Bermuda market, which provides valuable insights into systemic risk analysis in the domestic context of an insurance market dominated by non-life underwriting.

Derivatives are few and far between in countries where the compatibility of financial transactions with Islamic law requires the development of shari'ah-compliant structures. However, as Islamic finance continues to develop rapidly, the rising opportunity cost of limited shari'ah-compliant risk transfer mechanisms has raised questions about the scope of religious restrictions on the use of derivatives, and the scope for efficient risk management techniques for investors. Islamic finance is governed by the shari'ah, which bans speculation and gambling, and stipulates that income must be derived as profits from the shared generation of goods and services between counterparties rather than interest or a guaranteed return. The article explains the fundamental legal principles underpinning Islamic derivatives by reviewing accepted contracts and the scholastic debate surrounding existing financial innovation in this area, in order to generate an axiomatic perspective on a principle-based permissibility of derivatives under Islamic law. An overview of recent standardization efforts also is provided. [PUBLICATION ABSTRACT]

Purpose - The most popular form of Islamic finance is commonly referred to as sukuk - wholesale, asset-based capital market securities. The purpose of this paper is to enhance the general understanding of essential policy considerations in the creation and development of sukuk markets.Design methodology approach - This policy paper reviews the key developments in the sukuk market and informs a debate about challenges and opportunities going forward. The paper presents a qualitative analysis of economic, regulatory and legal issues that warrant consideration.Findings - The paper finds that while the sukuk market continues to generate strong interest by new issuers in Muslim and non-Muslim countries alike, some critical constraints arising from continued legal uncertainty and regulatory divergences still need to be overcome. As issuers weigh the costs and benefits of sukuk issuance in a broad policy context, continued efforts will be required to overcome a series of economic, legal and regulatory issues.Originality value - The paper presents, for the first time, a structured analysis of sukuk markets aimed at identifying key considerations for sovereign debt managers, especially in non-Muslim countries.

Over the last decade, stress testing has become a central aspect of the Fund’s bilateral and multilateral surveillance work. Recently, more emphasis has also been placed on the role of insurance for financial stability analysis. This paper reviews the current state of system-wide solvency stress tests for insurance based on a comparative review of national practices and the experiences from Fund’s FSAP program with the aim of providing practical guidelines for the coherent and consistent implementation of such exercises. The paper also offers recommendations on improving the current insurance stress testing approaches and presentation of results.

Cold extrusion is an established technology for the production of dimensionally accurate components in large series. Due to the high material and energy efficiency, a resource-saving manufacturing of high-performance parts is possible. Forming at room temperature leads to an advantageous grain structure and work hardening of the material, resulting in components with favorable operating characteristics. Nevertheless, a challenge is the generation of residual stresses during forming, which are influencing the fatigue behavior. The modification of the tribological conditions is one method for influencing the parts’ residual stress state. However, the high strength and work hardening of the materials formed at room temperature leads to high tribological loads between billet and die. These challenges are intensified by the increasing use of stainless steels due to growing demands for corrosion resistant components. The aim followed within this paper is therefore to investigate the applicability of typical lubricant coatings in the forward rod extrusion of stainless steels. For this purpose, the ferritic stainless steel X6Cr17 (DIN 1.4016) and the ferritic-austenitic stainless steel X2CrNiMoN22-5-3 (DIN 1.4462) are extruded with an equivalent plastic strain of ε̅ ≈ 1. The research is performed with a molybdenum disulfide (MoS2), a soap and a polymer-based lubricant coating. For reproducing different contact conditions, the die geometry is varied with die opening angles of 60°, 90° and 120°. The suitability of the lubricants is evaluated using the integrity of the lubricant coating after forming. From the correlations between process forces, temperatures and surface integrity, recommendations for the application of the researched lubricants are derived.

Purpose - Amid increased size and complexity of the banking industry, operational risk has a greater potential to occur in more harmful ways than many other sources of risk. This paper seeks to provide a succinct overview of the current regulatory framework of operational risk under the New Basel Accord with a view to inform a critical debate about the influence of data collection, loss reporting, and model specification on the consistency of risk-sensitive capital rules.Design methodology approach - The paper's approach is to investigate the regulatory implications of varying characteristics of operational risk and different methods to identify operational risk exposure.Findings - The findings reveal that effective operational risk measurement hinges on how the reporting of operational risk losses and the model sensitivity of quantitative methods affect the generation of consistent risk estimates.Originality value - The presented findings offer tractable recommendations for a more coherent and consistent regulation of operational risk.

The fallout from the financial crisis has illustrated that many sources of systemic risk were triggered or at least propagated by vulnerabilities in operational risk management (ORM), which has not kept pace with financial innovation, and an excessive focus of regulation on prudential requirements without recognition of substantial operational risk in market-based liquidity transformation. At the same time, institutions are at different stages of systems development and show considerable dispersion in ORM practices while falling short of integrating operational risk as a horizontal process. This is troubling in light of continued regulatory shortcomings. This paper highlights the increased importance of operational risk amid greater systemic risk concerns and reviews the current situation of ORM. In conclusion, it provides some suggestions on the future development of ORM - both from an organizational and industry perspective. [PUBLICATION ABSTRACT]

The move of international banking supervision away from rigid controls towards market discipline, prudential oversight and risk-based capital guidelines has widened the scope of regulation and has steered much attention to operational risk, which has a greater potential to transpire in more harmful ways than many other sources of risk. This paper provides a selective discussion of critical constraints on the consistent and cohesive implementation of the existing capital rules under the New Basel Capital Accord. We explain the working concept of the current regulatory treatment of operational risk. In particular, we show how the characteristics of operational risk and flexible operational risk measurement influences the consistency of risk-sensitive capital rules. The implications of our findings offer advice for a more effective regulatory framework.