Finance (Ch9).pdf - fvl)t MOI{EY}BAIKING AI|ID...

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fvl)t. Ch1(,rol +a,1 2 idz h'MOI{EY}BAI\KING AI|ID T'INA}ICIAL MARIGTS2/2007 P'az @xcellent Center) 081-350E194@!,Commercial Banking (ru-rn-r:yrrfird)tsiol( dlar :)Assets:'/ a'' da \lnrwsilu) :I Four types of bank assets: 1vfinro,:vr:-rrdfiu)1.Cash n^uanl, ,'1,' .i., " nilaL'-2. Loans @rio:ruldilrr nr:#auflt3.Securities Hdo:rul6'dss n:rar:nr:r3u4. Other assets ^incrude banrs'physicar assers. A/R u [email protected]"""r"o u"*uolrLwers in gefaurtft ninrifiufiir6'o r.lr{J rtr ri{ignndn r:fi ,,@ii,fid"uro ro{flruiofinrio r \irhr Land , building and equipmentIncome-earningassetsI Banks cannot use all of their deposits to invest in these income+arning assets, .coz they aresubject to reserve requirements (RR),rurnr:'hiaru:o1{r,r^uri.rrlrs1illunr:a.r4u1un:-r,rtifiufinfr.::ruldr:rcdolfinr:fi,udr:osIITypes of cash: (flu'alonN'ude)(l.l)Reserveslairro.rr j"-.,/:1, t)-... , "r!/1,.., I-]-l_ Agutle{-cash that banks hold to m e.i *r*trs4gLtequiremenrs of customers.Mor.',u r,'r401#4ndr,r ru i:oouffifr ,I Reqgqe<LRqreryes: (d'o.cn.rfludr:o.r) frn,'l;/./'@.C"-ir",l 0--4,I certain xofdeposits that is required to be kept at the Central Bank ( riulifirurnr:nart), fisonrdolunr:rhn?I if actual reserves < requied reserves ---------------+ bonow Federal Funils \AR RR .-- .-a 1' \ ,o /r.:" +-, . /(rirr.r^urii:o.ro?,: r?osn.jrfido,:os1i'udr:o,1 do{l dornruror:oiul,)- 7F -/$ i r""t-,{ t4 [),,,.-' /,.'r' 3:,9-l. Cash assets tilfirrifiufirfluriuaqlProvide banks with the funds to meey'RR ;"rtird-----rrr. LProvide liquidity to meet potential withdrawarsE acEohodate loan demand.( rn'onrrn rnndorrudo rornnr50orJ !lasfl r:rieiosri'lEiros IDownloaded fromABACTODAY.COM
.',., \ r i ,.'t,. :. r'./ ').'.?.. Loans rnrnJciouf,r (gg:t 7r,,,r-s.-r') i, :'''t)'n"l"r':ir'rt2--l ) r ft" @-ri"glp-rpur-.€ of income for banks. ( rfluunri.::ro14ifiurnfiqn),- l**-11Seapersonalrelationshipblwbanker&borro#r. lorfianrlrdrLrluf:vx'jr.ru:r.rri'fru{{'y) 'tr ^l tL.gefuztd {ran other assets--entail greater default risk & higher information costs.: on tnT,uuYnTt:a r4uatil r6un'o lrie trr:otoriun'urrrn{flriouri nrun uoyfinrnldu rlunrr finrin u n v fiu rl ur6 u.: ri'urio ry a fi q,: r1 i -K-r rhus, retulj(s on loans (yierds) arc the hi?hest ^mong bank assets in compensation( ^fuunu -7'1 -ioou,Types of loans:- 1 rfioto.rnr:rJciouf,y- (2.1) Real Estate Loans 1nr: dooflo#snrtlninri;(2.2)Business":*:!duTp,iiq:6oy -) lr,r,1.or Loans (bottig-T IAL-T) to business firms f,ya)r Banks can deal with the probrem of asymmdtic info involved in business borrowins.( arrur:ai'onr:i'rflqnlEii-6,r -?ir{uxu ; ! ; / :1",^^ i^c i',I /-^-.:l^-^J ^^ L:-L --:^,,:4- :- , 4 i^lful'0I Considered * Hgl1f"Lry items. 1rflufifioruqn drniururar: )(23) Consumer Loans ( rftioafluri.rqrJlng lilnn )I Loans to individual consumers, household units-Examples: Instant Credit Lines ( rffunr:rJrioofl#:n: re)r "Credit cards,,: ( rin:rnran ) *:, -- 55 ;1, ,,.lt,t|'l{ 7u '\ tt:.\ tAers a6lra!!;sdJl49-af9!9ill 6uris'rfl urqiudeiludr#lldoi.rrr ili/(.\-lfrom the issuine bank.

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