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Unformatted text preview: 1 Banking Basics: Structure, Management Â¡ Commercial Bank Balance Sheet Â¢ Sources and uses of funds Â¡ Bank production process Â¢ Asset transformation Â¢ Provision of services Â¢ Leverage Â¡ Bank Management Concepts 1 Â¢ Liquidity Management Â¢ Asset Management Â¢ Liability Management Â¢ Capital Management Â¢ Credit Risk Management Â¢ Interest Rate Risk Management Â¢ Trading Risk Â¡ Banking Crises In The News 2 Course Issues Â¢ Midterm qs? Â¢ Course ideas â€“ Fri (starts 11/7) Â¢ Extra Credit Wiki Projects - coming 3 coming Â¢ investment game catch up 2 Banking 4 Banks (aka Depository Institutions) Â¡ Depository Institutions Â¢ Financial intermediary S->I Â¢ Deposits -> loans, securities Â¢ Financial deregulation, innovation, globalization Commercial Banks $11 5 trillion in Assets 5 Â¡ Commercial Banks - $11.5 trillion in Assets Â¢ 80% of bank assets Â¢ Role in money creation and monetary policy Â¡ Thrifts â€“ Saving and Loans, Mutual Savings Banks, Credit Unions (and retail banks) What Do Banks Do? Â¢ Earnings from Interest rate spreads, fees, other Â¢ Asset transformation Â¡ savings deposit â†’ loan Â¡ borrow short- lend long Â¢ Lower transactions costs Â¡ Information etc 6 Â¡ Information, etc Â¢ Deal With Asymmetric Information Problems Â¡ adverse selection Â¢ Credit checks, screening, relationships Â¡ moral hazard Â¢ Compensating balances, relationships 3...
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- Fall '10