MaxMark_Ch02_Correct_Answers

MaxMark_Ch02_Correct_Answers - MenuItem2(Topic 2 Commercial...

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Unformatted text preview: MenuItem2: (Topic 2) Commercial The bank s ing sector Question 1: Using total assets as a measure of size, the largest group of institutions in all major the Australian financial system s is: A: superannuation funds B: insurance companies C*: commercial banks D: merchant banks . Feedback: T Sinc e 1990, t he banks’ share of the total assets of all financial institutions varies between countries and over time , but , using Australia as an example, it is between 40 and 50 has been relatively stable at about 44 per cent which is clearly the largest share held by any of the institutions. More: More: Financial Institutions, Instruments and Markets 5/e , p. 52 Commercial banks are the main financial institutions operating in all major international financial systems, accounting for the largest share of the assets of all financial institutions. Because of the absolute size of the commercial banks, and their relative importance as the principal institutions in the flow of funds between savers and borrowers, they require detailed study. The banking sector accounts for the largest share of the assets of all financial institutions. Figure 2.1 (see Chapter 2, page 48) shows that, throughout the period reported, banks have clearly been the dominant financial institutions. The banking sector requires detailed study because of the absolute size of banks, and their relative importance as the principal institutions in the flow of funds between savers and borrowers. Banks are the main financial institutions operating in all major international financial systems . Commercial banks are the main financial institutions operating in all major international financial systems, accounting for the largest share of the assets of all financial institutions. Because of the absolute size of the commercial banks, and their relative importance as the principal institutions in the flow of funds between savers and borrowers, they require detailed study. Question 2: Banks have progressively moved from asset management to liability management. Which of the following statements best describes liability management? A: The t he loans portfolio is tailored to match the available deposit base . B: The t he ratio of debt to equity is managed to meet capital adequacy requirements . C: The t he deposit base is managed in order to fund loan demand . D*: The t he deposit base and other funding sources are managed to fund loan demand and other commitments . MaxMark t/a Financial Institutions, Instruments and Markets 5e by Viney 1 Feedback: A bank that focuses on asset management may find that its lending is constrained if the growth of its deposits is not sufficient to fund all the loans that management wishes to make. Instead of declining profitable loan requests, a bank may adopt liability management whereby the bank will actively seek additional funds from deposit and non-deposit sources in order to meet the demand for loans. A and B are clearly incorrect and while C gives a description of liability management, it is incomplete...
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This note was uploaded on 04/04/2012 for the course FINS 1612 taught by Professor Nice during the Three '10 term at University of New South Wales.

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MaxMark_Ch02_Correct_Answers - MenuItem2(Topic 2 Commercial...

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