Unformatted text preview: ver, all FIs are exposed to some degree of liability withdrawal
or liquidity risk, depending on the type of claims they have sold to liability holders. In
addition, most FIs are exposed to some type of underwriting risk, whether through the
sale of securities or the issue of various types of credit guarantees on or off the balance
sheet. Finally, all FIs are exposed to operating cost risks because the production of
financial services requires the use of real resources and back-office support systems
(labor and technology combined to provide services).
Because of these risks and the special role that FIs play in the financial system, FIs
are singled out for special regulatory attention.1 In this chapter, we first examine
questions related to this specialness. In particular, what are the special functions that
FIs—both depository institutions (banks, savings institutions, and credit unions)
and nondepository institutions (insurance companies, securities firms, investment
banks, finance companies, and mutual funds)—provide?...
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This document was uploaded on 03/09/2014 for the course ACC 301 at HELP University.
- Spring '09