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Lecture 1, fundamental finance (bank (Key trends in financial‐services…

- - - - retail banking, wholesale banking,
      - private banking, investment banking,
      - insurance protection, financial planning,
      - corporate advice, risk-management services
      - and other financial products
  - - - Industry leaders
      - Cover whole regions, nations and continents
      - Offer the widest possible menu of financial services
      - Acquire smaller businesses
      - Face tough global competition
    - - Much smaller
      - Service local communities and towns
      - Offer a narrower, but often more personalised, menu of financial services
  - - - A bank is any business offering deposits subject to withdrawal on demand and making loans of a commercial or business nature
      - The US Congress then defined a bank as any institution qualified for deposit insurance cover from the Federal Deposit Insurance Corporation (FDIC)
      - So banks have come to be defined, not so much by their services, but by the government agency insuring its deposits
  - - - Because banks are highly leveraged via their deposit taking and other borrowings, the income is often divided by total equity which gives its return on equity
    - - The relationship between the bank's operating costs and its revenue, or cost to income ratio (CIR), provides another insight to bank management and strategy. A high CIR may reflect poor management
    - - The sum of interest and non-interest income less expenses divided by the bank s total assets gives its return of assets
    - - The ratio of non-performing loans (NPLs): loans that are not repaying as expected to total loans indicates the bank's risk appetite in this lending and the bank's own riskiness
  - - - banking is not dying but changing its form by offering new services
      - The banks’ largest customers can now raise
        their funds by borrowing in the open market
      - traditional banking is dying
      - Perhaps banking is being “regulated to death”监管致死
    - - Savings associations/building societies
      - Credit unions/credit cooperatives
      - Fringe or shadow banks
      - Money market funds
      - Mutual funds
      - Hedge funds
      - Security brokers and dealers
      - Investment banks
      - Finance companies
      - Financial holding companies
      - Life and property/casualty insurance companies人寿及财产保险公司
  - - - These new sources of revenue service fees - are likely to continue to grow faster than more traditional revenue (such as interest on loans)
    - - Service proliferation服务增值 and greater competitive rivalry has led toward convergence, particularly for the largest financial institutions
      - Convergence refers to the movement of businesses across industry lines so that expands into other product lines to broaden its sales base
      - The larger banks, insurance companies, and security firms have all sought to enter each other‘s markets with parallel service menus and seeking their clients
- - - - Addressing the incentive problems that arise in financial contracting
      - Assisting in the transfer and management of risk
      - Generating information for decision making
      - Providing for the settlement of transactions
      - Facilitating the flow of funds