Ch03 Depository Institutions-CM-salaar

Ch03 Depository Institutions-CM-salaar - Depository...

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Depository Institutions Learning Objectives What is a depository institution? How a DI generates income? What is the Asset/Liability problem for DI’s? What is Funding Risk? What are DI’s funding sources? What are Reserve Requirements?
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Depository Institutions? Include: Institutions which take deposits Deposits represent Liabilities (debt) for DI’s Include: Banks Savings Banks Credit Unions
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How do DI’s make money? 3 ways: Loans Make direct loans to entities Securities investments Fees Charged to their customers
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Importance of DI’s? Heavily regulated because: Their role in financial system a) Creating the financial playing field Principal means of making payments a) Vehicle for Govt monetary policy a) MP implemented through banking system
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Because of their importance, Given special privileges Access to Federal Deposit Insurance Provision of liquidity in emergencies Govt has interest in DI’s stability & survival…
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Asset-Liability Problem of DI’s? 2 Main problems: Funding Risk Liquidity Risk
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Asset-Liability Problem of DI’s? Funding Risk:
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Ch03 Depository Institutions-CM-salaar - Depository...

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