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A short course of lectures

Regulatory-structure principlesCurrency riskThe banking statute: prudential requirementsBibliographyLearning outcomesScreeningManagement of interest rate riskThe banking statute: generalLiquidity riskAsymmetry in liquidity preferenceOff-balance-sheet activities that carry riskConflict-conciliatory principlesThe cash reserve requirementMonetary banking institutionsDevelopment banksRisk in bankingMonitoringDiversificationHuman resources riskIdeal and extreme portfoliosDepositsFundamental issues in bankingGovernment spendsMonetary policy functionInterest rate repricing gap analysisSpecialisation in lendingPromotion of financial stabilityDedicated banksOff-balance sheet activities Price risk lessened for the ultimate lenderLearning outcomesMerchant and investment banksMoney creation is not dependent on a cash reserve requirementIs "money supply" a misnomer?The banking statute: other requirements associated with risk managementReserve requirementOTC versus securities marketsDuration analysisCredit riskCredit rationingLoan commitmentsLarge exposuresMoney creationBank models & prudential requirementsShare capital and unimpaired reserve fundGeneral principlesCounterparty riskPrinciples of banking The concept of riskEfficiency-related principlesNotes and coins depositedPayments systemMoney creationDeposit insuranceLenders and borrowersHow does a central bank maintain a bank liquidity shortage?Uniqueness of banksSupplier demand for regulationRationale, objectives & principles of regulation The central bank and the bank runLegal and documentation riskMoney creationMoney and its roleWhat is money?Measures of moneyCommercial banksBibliographyCentral bank moneyFinancial marketsEnhanced liquidityFinancial instrumentsBibliographyOff-balance-sheet activities that carry no or little riskFinancial intermediariesMoney creation starts with a bank loanCompensating balances and monitoring of business transactionsDefinitionMoney creationPrivate banksThe balance sheet of a bankLearning outcomesMicro-credit banksLiability and asset portfolio managementLearning objectivesBroad functions of banksEfficient allocation of fundsLoansAssets Consumer confidence and consumer demand for regulationConditions for creation of liquidity Principles of regulationBank modelsLong-term relationship buildingAsymmetric information, adverse selection and moral hazardPrudential requirementsExternal riskBalance sheet changes resulting from deposit withdrawals and drawdowns on loan facilitiesBasel II BibliographyImproved diversificationMeasures of a bank's liquidity exposureThe financial system Systemic malfunctionTrading banksLiquid assetsDefinitionPillar 2: supervisory review (regulatory response to Pillar 1)Interest rate riskIslamic banksLoansInformation technology systems riskRole of the central bank in money creationAvoidanceBasel IIIBasic raison d'être for banks: information costs and liquidity Credit derivativesObjectives of regulationStability-related principlesBank liquidity and a "bank run"Information costsDiscount housesThe moral hazard problemShare capital (equity)Sovereign credit riskFacilitation of flow of fundsLiabilities Basel accordsRealityReputation riskMoney creation does not start with a bank receiving a depositAllied participants on the financial systemManagement of credit riskCo-operative banksPillar 3: market discipline (promotes greater stability in the financial system)Economies of scaleImpeccable recordMarket riskRationale for regulationCollateral requirementDefinitionVolume of and the type of liquid assetsOperational riskThe money identity and the creation of moneyPromotion of consumer protectionAssistance in price discoveryActive secondary financial marketsEconomies of scalePillar 1: minimum capital requirementMutual banks / building societiesMarket imperfectionsPromotion of fair and healthy competitionPrice discoveryCompliance riskEssence of bankingReturnsBanking statute returns in respect of credit risk
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