Download e-book for kindle: An Introduction to Banking: Liquidity Risk and by Moorad Choudhry
By Moorad Choudhry
An advent to Banking offers an advent to liquidity possibility administration and asset-liability administration. It starts with an outline of contemporary banking, the pursuits of a financial institution, how they function, and the way a breakdown within the banking process contributed to the hindrance. next chapters introduce the basic workings of a financial institution and discover ALM and liquidity hazard administration in higher element. As regulators stream to implement liquidity threat administration in banks, and ongoing must higher deal with a bank's resources and liabilities, this ebook is a must have reference for all finance practitioners.
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Additional info for An Introduction to Banking: Liquidity Risk and Asset-Liability Management
However, it is an important information statement. A number 14 AN INTRODUCTION TO BANKING of management information ratios are used when analysing the balance sheet; they are considered in the next chapter. In Chapter 2 we use a hypothetical example to illustrate balance sheets. For a bank, there are usually ﬁve parts to a balance sheet, split up in such a way to show separately . . . lending and deposits, or traditional bank business; trading assets; Treasury and interbank assets; off-balance-sheet assets; long-term assets, including ﬁxed assets, shares in subsidiary companies, together with equity and Tier 2 capital.
All rights reserved. Used with permission. 6 Bloomberg screen GP showing USD overnight Libor for period May–November 2005. P. All rights reserved. Used with permission. 36 AN INTRODUCTION TO BANKING Treasury bills Treasury bills (T-bills) are short-term government ‘IOUs’ of short duration, often 3-month maturity. For example, if a bill is issued on 10 January it will mature on 10 April. Bills of 1-month and 6-month maturity are issued in certain markets, but only rarely by the UK Treasury. On maturity the holder of a T-bill receives the par value of the bill by presenting it to the central bank.
Generally, the higher the ratio, the greater the bank’s sensitivity to changes in interest rates BANK BUSINESS AND CAPITAL 21 subsequently that the size of the reserve built up is in excess of what is currently required, it may write back a percentage of it. The amount of provisioning will vary with the business cycle. During a boom period in the cycle, corporate and retail default rates are at historically lower levels, and so a bank can afford to lower the level of its provisioning. However, prudent management dictates that senior managers are familiar with their markets and are able to judge when provision levels should increase.