{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

FINS5530, Week 2 - 03:01:01 AM FinS 5530 Financial...

Info iconThis preview shows pages 1–16. Sign up to view the full content.

View Full Document Right Arrow Icon
Click to edit Master subtitle style 5/26/11 03:01:01 AM FinS 5530 Financial institutionS management Ilya Serov Week 2: Introduction to Risk Management
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/26/11 03:01:03 AM Agenda Ø Overview of the Australian Financial System Ø Macroeconomic background Ø Change in FI balance sheet composition Ø Financial system developments Ø Introduction to FI Risk Assessment Ø Interest rate risk, market risk, credit risk, off-balance-sheet risk, foreign exchange risk, country or sovereign risk, 22
Background image of page 2
5/26/11 03:01:03 AM Overview of the Australian Financial System Ø Macroeconomic background Ø Change in FI balance sheet composition Ø Financial system developments For a useful reference, see Ø Ryan, C. and Thompson, C., “Risk and Transformation of the Australian Financial System”, Reserve Bank of Australia ( www.rba.gov.au) 33
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/26/11 03:01:03 AM Macroeconomic trends Ø Last economic recession in 1991 Ø Characterised by: Ø Deregulation and economic reform of 1980- 90’s. Ø Gradual reduction in unemployment & rise in household incomes Ø Lower interest rates and inflation Ø High levels of investment due to expansion and mining boom Ø Direct effects on the financial system: 44
Background image of page 4
5/26/11 03:01:03 AM Deregulation Ø Banking sector: Ø 1982: quantitative lending guidance eliminated Ø These controls restricted credit supply. As a result, only customers with a very good credit record and high income and/or savings were able to obtain a loan. Ø 1986: removal of ceiling on mortgage interest rate Ø Entry of foreign banks during the late 55
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/26/11 03:01:03 AM Household Indebtedness 66
Background image of page 6
5/26/11 03:01:03 AM Non-bank Lenders Ø Securitisation: Ø Packaging and selling of loans and other assets backed by securities. Ø Typically, residential mortgage loans. Ø Allows for funding not reliant on deposits Ø Rapid rise in the 1990’s: Ø Aussie Home Loans, RAMS, Wizard and others Ø Up to ~15% of the mortgage market in 77
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/26/11 03:01:03 AM Investment Banking and Securities Firms Ø Foreign banks entering in 1990’s. Ø Domestic players: Ø Macquarie Bank Ø Initially, infrastructure fund oriented Ø Expansion into other lines of business. Ø Babcock & Brown, Allco Ø ‘Mini-Me’ infrastructure and securitisation strategy Ø Did not survive the GFC 88
Background image of page 8
5/26/11 03:01:03 AM Superannuation and Insurance 99
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/26/11 03:01:03 AM Assets of Financial Institutions 10
Background image of page 10
5/26/11 03:01:03 AM Bank Balance Sheets 11
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/26/11 03:01:03 AM Recent Trends 12
Background image of page 12
5/26/11 03:01:03 AM Recent Trends Ø Greater emphasis on: Ø Deposit funding Ø Longer-term debt Ø Reduction in securitisation following the GFC: Ø 2007: securitisation maarket of AUD 50 billion Ø 2010: AUD 18 billion. Ø Competition in mortgage markets Ø e.g. NAB ‘break up’ campaign. 13
Background image of page 13

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/26/11 03:01:04 AM Recent Trends Ø Slowdown in credit / increase in savings rate: 14
Background image of page 14
5/26/11 03:01:04 AM Regulation Ø Australian Prudential Regulation Authority Ø Adopts International standards for Australia Ø International framework is known as Basel II Ø Provides calculations for different risks Ø Specifies minimum amount of capital that a bank needs to hold for each risk Ø Generally, there are three levels of 15
Background image of page 15

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 16
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}