topic 2 recap - FINS3650 Topic 2 Recap (Lecture 2 & 3)...

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FINS3650 “Banks enjoy a license to print money, taking deposits in a fractional- reserve banking system”. - Gifts of the banks become more apparent here: o Bank practices- reserve ratio, liquidity, capital o Government assurance- banks care about the depository and the tax payer o Lender of last resort- it is a remedial for minimizing the harm. By being a bank, it has the right to go to the central bank and borrow money from the bank for its liquidity purposes The regulatory interest - Risk = transformation - Maturity risk, liquidity risk, credit risk- banks need to take these risks in order to make money - Transformation = intermediation From retail to wholesale Making money on it, and also transforming along it Basel committee on Banking Supervision - Basel Capital Accord- approaches everything through capital (1988, effective year end 1992) - Basel committee: o Doesn’t have regulatory of its own o Not done by voting, done by consensus o If is a member, promise to go back to your country and do what has
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topic 2 recap - FINS3650 Topic 2 Recap (Lecture 2 & 3)...

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