Week 10 Lecture Summary

Week 10 Lecture Summary - Lecture 10 Capital Adequacy th...

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Lecture 10 – Capital Adequacy Your assignments are due by midnight SUNDAY OCTOBER 9 th (this Sunday!) Send to my email victor.ha@unsw.edu.au Please insert in the subject line which class you are in e.g. Tuesday 10-11am Please check ‘additional guidelines’ on Blackboard for further guidance re: assignments Lecture Summary Capital Adequacy Market value of capital o Net worth = Market Value of Assets – Market Value of Liabilities o As long as net worth is above 0, liability holders and deposit insurance not affected Arguments for MV Accounting o Even with errors, considered superior o Market prices more readily available e.g. growth of loan sales o FIs trading, selling and securitising assets rather than holding Arguments against MV accounting o Untraded assets o Increases volatility of earnings o Bias against holding long term assets Book value is difference of book value of assets and liabilities o BV accounting; more discretion o
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Week 10 Lecture Summary - Lecture 10 Capital Adequacy th...

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