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FMI week 7 Banking - Coggle Diagram
FMI week 7 Banking
Risk management
Liquidity management
bank's ability to accomodate withdrawals and loan requests and pay off other liabilities as they become due
failure in meeting withdraw needs, can cause bank runs, depositors demand for liquidity at the same time.
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two tools for liquidity
Asset management: sufficient cash and marketable to quickly convert to cash. Through primary reserves, secondary reserves, bank loans, investments.
Liability management: attracting additional funds by increasing interest rate. short term solution, not sustainable.
Bank capital management
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Prudential regulation
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Benefit of Basel III
safer bank, raise capital more cheaply
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Cost of Basel III
higher weighted funding cost, lower ROE
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Credit risk management
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primary risk, requires monitoring, and set reserves aside.
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Bank's operation
Balance sheet
Assets: Use of funds
lending services
individual for residential mortgages, consumer lending, cars etc..
institutional or commercial banking: term loan, using BBSW plus a margin.
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Bank performance
source of income: interest income on loan with supplemented non-interet income e.g. ATM surcharge, Credit card fees, investment service etc.
source of expense: interest paid on deposits with supplemented non-interest expense from bad debts, operating expenses.
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Open banking
main idea
consumer own the data, so free to share with external parties
technologies allow data and processes to be transferred between parties in fast, low cost and secure way via digital channels
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