Download An Introduction to Banking: Liquidity Risk and by Moorad Choudhry PDF

By Moorad Choudhry

An advent to Banking presents an advent to liquidity possibility administration and asset-liability administration. It starts with an summary of recent banking, the objectives of a financial institution, how they function, and the way a breakdown within the banking method contributed to the challenge. next chapters introduce the basic workings of a financial institution and discover ALM and liquidity chance administration in higher element. As regulators circulate to implement liquidity probability administration in banks, and ongoing must greater deal with a bank's resources and liabilities, this ebook is a must have reference for all finance practitioners.

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When the bank suffers a loss or writes off a loss-making or otherwise economically untenable activity, the capital is used to absorb the loss. This can be done by eating into reserves, freezing dividend payments or (in more extreme scenarios) a writedown of equity capital. In the capital structure, the rights of capital creditors including equity holders are subordinated to senior creditors and deposit holders. Banks occupy a vital and pivotal position in any economy, as the suppliers of credit and financial liquidity, so bank capital is 10 AN INTRODUCTION TO BANKING important.

Continued re-investment of the profits generated by a company’s current operations; selling shares in the company, known as equity capital, equity securities or equity, which confer on buyers a share in ownership of the company. Shareholders as owners have the right to vote at general meetings of the company, as well as the right to share in the company’s profits by receiving dividends; borrowing money from a bank, via a bank loan. This can be a short-term loan such as an overdraft, or a longer term loan over two, three, five years or even longer.

Used with permission. The effective rate on a money market deposit is the annual equivalent interest rate for an instrument with a maturity of less than 1 year. 1 A sum of £250,000 is deposited for 270 days, at the end of which the total proceeds are £261,000. What are the simple and effective rates of return on a 365-day basis?   Total proceeds M À1 Â Simple rate of return ¼ Initial investment n   261,000 365 ¼ À1 Â ¼ 5:9481% 250,000 270  M=n Total proceeds À1 Effective rate of return ¼ Initial investment   261,000 365=270 ¼ À1 ¼ 5:9938% 250,000 Certificates of deposit Certificates of deposit (CDs) are receipts from banks for deposits that have been placed with them.

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