MajorEnglishTest.doc

1. Comment on an argument that the stock market is the best place for State-Owned enterprises to raise money and get rid of their financial burden.Permitting state-owned enterprises to enter stock market and raise money will bring substantial ,sustainable and stable cash flow to them .Also it provide one relatively cheaper way to get money in order to off-load their financial burden. Moreover, it also decreases the loan risk for the four large state-owned bank, which were ever the main lenders for state-owned enterprises .State-owned enterprises can raise substantial money from a wider group of investors through a stock market listing. Raising money by issuing shares is a viable option for a company because investors have to rely on the companys performance in the future to get their money back. If the company borrowed money from the bank instead they would have to make interest repayments on set dates. Besides this , It is rare, however, that companies approach the market just once for money. As you flick through the financial pages of your newspaper you will often read about rights issues, share splits and share buy backs. They provides one free way for state-owned enterprises to go back to the market whenever it pleases to ask for more money. Actually, it provides one sustainable way for them to raise money.When state-owned enterprises raise monkey by issuing shares, many institutional investors, e.g., pension funds and life insurers , hold the shares. In the general those investors are strategic investors, who will hold the shares for long term. On the other hand, The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate. Therefore it attracts lots of investors.In history, state-owned enterprises usually raise money by borrowing money from banks ,especially from four major state-owned banks. In one side, enterprises need pay a lot of interest rates ,which may be one big burden for their business operations .On the other side, banks also take great risks in loan because some borrowers can not pay back their money in time. Apparently , Raising money from stock market ease both sides burden.2. How do you understand Credit risk, market risk and operational risk of banks?One major issue that banks may be exposed to today is the increasing diversity and complexity of risks, which including ,but not limited to Credit risks ,market risks and operational risks.For most banks, loans are the largest and most obvious source of credit risk; however, other sources of credit risk exist throughout the activities of a bank, including in the banking book and in the trading book, and both on and off the balance sheet. Banks are increasingly facing credit risk (or counterparty risk) in various financial instruments other than loans, including acceptances, interbank transactions, trade financing, foreign exchange transactions, financial futures, swaps, bonds, equities, options, and in the extension of commitments and guarantees, and the settlement of transactions. Since exposure to credit risk continues to be the leading source of problems in banks world-wide, banks and their supervisors should be able to draw useful lessons from past experiences. Banks should now have a keen awareness of the need to identify, measure, monitor and control credit risk as well as to determine that they hold adequate capital against these risks and that they are adequately compensated for risks incurred.Currently, market risk arises from the possibility of losses resulting from unfavorable market movements .For most banks, those unfavorable movements includes interest rate, foreign currency exchange rate, share price and commodity price movement. Commercial banks shall adequately identify， accurately measure， continuously monitor and appropriately control the market risks in all trading and non-trading businesses to ensure safe and steady operation below a reasonable market risk level. The level of market risks borne by a commercial bank shall be compatible with its market risk management capability and capital strength. Operational risk was defined as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. It may therefore be quite hard to identify an area in a bank which i