Risk Management

Download An Introduction to Banking: Liquidity Risk and by Moorad Choudhry PDF

By Moorad Choudhry

An creation to Banking presents an advent to liquidity hazard administration and asset-liability administration. It starts off with an outline of recent banking, the objectives of a financial institution, how they function, and the way a breakdown within the banking procedure contributed to the trouble. next chapters introduce the basic workings of a financial institution and discover ALM and liquidity probability administration in higher element. As regulators circulate to implement liquidity chance administration in banks, and ongoing must larger deal with a bank's resources and liabilities, this booklet is a must have reference for all finance practitioners.

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This would cover lending to individuals as well as 1 There is more to this than just this simple statement, and we consider this in Chapter 10. 2 11 Bank analysis ratios for capital strength Ratio Calculation Notes Core capital ratio Tier 1 capital/ Risk-weighted assets A key ratio monitored, in particular, by rating agencies as a measure of high-quality non-repayable capital, available to absorb losses incurred by the bank Tier 1 capital ratio Eligible Tier 1 capital/ Risk-weighted assets Another important ratio monitored by investors and rating agencies.

While the main focus is on the loan book, the ALM desk will also concentrate on the bank’s investment portfolio. The latter will include coupon receipts from money market and bond market assets, as well as dividends received from any equity holdings. 2 Composition of earnings. Source: Bank financial statements. The cost of funding is a key variable in generating overall NII. 3 Even in an era of high-street competition, the interest payable on short-term 3 These are referred to as NIBLs (non-interest-bearing liabilities).

In this chapter we review the cash instruments traded in the money market. In further chapters we review banking asset and liability management, and the market in repurchase agreements. Finally, we consider the market in money market derivative instruments including interest rate futures and forward rate agreements. THE MONEY MARKETS 25 INTRODUCTION The cash instruments traded in money markets include the following: . . . . time deposits; Treasury bills; certificates of deposit; commercial paper; banker’s acceptances; bills of exchange; repo and stock lending.

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