《银行管理》课件chapter12

1、Chapter 12Managing liabilities and the cost of funds,P 421 462,Chapter 12,Contents, The Composition of Bank Liabilities (P422 426) Characteristics of Small Denomination Liabilities (P426) Transactions accounts (P427 433) Calculating the Net Cost of Transaction Accounts (P433 435) Characteristics of

2、Large Denomination Liabilities (P435 442) Measuring the Cost of Funds (P442) Evaluating the Cost of Bank Funds (P443 451) Marginal Cost Analysis: an Application (P451 452) Funding Costs and Banking Risk (P452 455) Borrowing From the Federal Reserve (P455 456) Federal Deposit Insurance (P456 458),Cha

3、pter 12,1 The Composition of Bank Liabilities,Transaction accounts usually pay relatively low explicit interest rates but have higher noninterest processing costs. Other accounts offer limited check writing capabilities but pay higher rates. Thus, the composition and maturity / duration of each bank

4、s liabilities are important determinants of the interest cost and liquidity and interest rate risk associated with performance.,P 422,Chapter 12,Today, virtually all bank liabilities are free of regulatory restrictions on allowable rates, maturities, and minimum denominations. Price competition is t

5、he dominant consideration in attracting new funds.,P 423,Chapter 12,Perhaps the most difficult problem facing bank management is how to develop strategies to compete for funding sources. With no interest rate ceilings on deposits or restrictions on maturities, banks can offer any deposit product tha

6、t customers demand. Although this freedom creates market opportunities, it also presents significant problems. ,P 423,Chapter 12,Generally speaking, small banks relied proportionally more on core deposits and equity compared to the larger banks. Large banks, in turn, relied proportionally more on vo

7、latile funds obtaining more than twice the proportional share of funding from this source versus small banks.,P 423,Chapter 12,Comparisons between different-sized banks reveal key differences in operating style. First, In addition, Finally, .,P 425,Chapter 12,Contents, The Composition of Bank Liabil

8、ities (P422 426) Characteristics of Small Denomination Liabilities (P426) Transactions accounts (P427 433) Calculating the Net Cost of Transaction Accounts (P433 435) Characteristics of Large Denomination Liabilities (P435 442) Measuring the Cost of Funds (P442) Evaluating the Cost of Bank Funds (P4

9、43 451) Marginal Cost Analysis: an Application (P451 452) Funding Costs and Banking Risk (P452 455) Borrowing From the Federal Reserve (P455 456) Federal Deposit Insurance (P456 458),Chapter 12,2 Characteristics of Small Denomination Liabilities,Instruments under 100,000 are normally held by individ

10、ual investors and are not actively traded in the secondary market. Individuals traditionally had few alternatives to banks when selecting interest-bearing deposits.,P 426,Chapter 12,Contents, The Composition of Bank Liabilities (P422 426) Characteristics of Small Denomination Liabilities (P426) Tran

11、sactions accounts (P427 433) Calculating the Net Cost of Transaction Accounts (P433 435) Characteristics of Large Denomination Liabilities (P435 442) Measuring the Cost of Funds (P442) Evaluating the Cost of Bank Funds (P443 451) Marginal Cost Analysis: an Application (P451 452) Funding Costs and Ba

12、nking Risk (P452 455) Borrowing From the Federal Reserve (P455 456) Federal Deposit Insurance (P456 458),Chapter 12,3 Transactions accounts,Most banks offer three different accounts with transactions privileges: demand deposits (DDAs); interest-checking, or formally negotiable orders of withdrawal (

13、NOWs) and automatic transfers from savings (ATS); and money market deposit accounts (MMDAs) .,P 427,Chapter 12,Banks differentiate between deposits in the number of checks permitted, the minimum denomination required to open an account, and the interest rate paid. All carry FDIC insurance up to100,0

14、00 per account.,P 427,Chapter 12,DDA,noninterest-bearing checking accounts no regulatory restrictions on the number of checks and minimum balances commercial customers,P 427,Chapter 12,NOW & ATS,demand deposit that pays interest a DDA and savings account a zero balance individuals and nonprofit orga

15、nizations,P 427,Chapter 12,MMDAs,time deposits limited checking privileges low reserves,P 427,1982 Garn-St. Germain Depository Institutions Act,Chapter 12,The ownership of transaction accounts is changing rapidly as institutions offer new deposit products and refine their pricing schedules. Pricing

16、strategies influence the composition of accounts via service charges, minimum balance requirements, and interest paid.,P 428,Chapter 12,Functional cost analysis,Periodically the FRS conducts a survey called FCA report to collect cost and income data on commercial bank operations.,P 430,Chapter 12,Co

17、ntents, The Composition of Bank Liabilities (P422 426) Characteristics of Small Denomination Liabilities (P426) Transactions accounts (P427 433) Calculating the Net Cost of Transaction Accounts (P433 435) Characteristics of Large Denomination Liabilities (P435 442) Measuring the Cost of Funds (P442)

18、 Evaluating the Cost of Bank Funds (P443 451) Marginal Cost Analysis: an Application (P451 452) Funding Costs and Banking Risk (P452 455) Borrowing From the Federal Reserve (P455 456) Federal Deposit Insurance (P456 458),Chapter 12,4 Calculating the Net Cost of Transaction Accounts,The average histo

19、rical cost of funds is a measure of average unit borrowing costs for existing funds. Average interest cost for the total portfolio is calculated by dividing total interest expense by the average dollar amount of liabilities outstanding and measures the average percentage cost of a single dollar of d

20、ebt.,P 433 -,Chapter 12,P 434,Interest costs alone , however , dramatically understate the effective cost of transaction accounts for several reasons. ,Chapter 12,Contents, The Composition of Bank Liabilities (P422 426) Characteristics of Small Denomination Liabilities (P426) Transactions accounts (

21、P427 433) Calculating the Net Cost of Transaction Accounts (P433 435) Characteristics of Large Denomination Liabilities (P435 442) Measuring the Cost of Funds (P442) Evaluating the Cost of Bank Funds (P443 451) Marginal Cost Analysis: an Application (P451 452) Funding Costs and Banking Risk (P452 45

22、5) Borrowing From the Federal Reserve (P455 456) Federal Deposit Insurance (P456 458),Chapter 12,5 Characteristics of Large Denomination Liabilities,P 435 -,In addition to small denomination deposits, banks purchase funds in the money markets. Because customers move their investments on the basis of

23、 small rate differentials, these funds are labeled “hot money,” volatile liabilities, or short-term noncore funding.,Chapter 12,Jumbo CDs Immediately available funds Federal funds purchased Security repurchase agreements Foreign office deposits Individual retirement accounts Federal home loan bank a

24、dvances,Classification,P 435 -,Chapter 12, Jumbo CDs,large, negotiable certificates of 100,000 or more largest banks businesses and governmental units,P 435,Although CDs come in many varieties, they all possess similar characteristics. ,Chapter 12,Variable-rate CDs Callable CDs Zero coupon CDs Stock

25、 market indexed CDs,P 436437,Classification,Chapter 12, Immediately Available Funds,balances that are accepted as a means of payment within one business day on demand. two types,P 437,Chapter 12, Federal Funds Purchased,excess reserve balances that are traded between banks grossly inaccurate federal

26、 funds monetary policy,P 437,Chapter 12, RPs,Security repurchase agreements are short-term loans secured by government securities that are settled in immediately available funds. Technically, the loans embody a sale of securities with a simultaneous agreement to buy them back later at a fixed price

27、plus accrued interest.,P 438,Chapter 12, Foreign Office Deposits,Eurocurrency Eurodollar,P 439,Chapter 12, IRAs,Individual retirement accounts are savings plans for wage earners and their spouses. The primary attraction of IRAs is their tax benefits.,P 441,Chapter 12, Federal Home Loan Bank Advances

28、,The FHLB system is a government-sponsored enterprise that was originally created to assist individuals in home buying. Today, the FHLB system is one of the largest U.S. financial institutions, which is rated AAA (Aaa) because of the government sponsorship.,P 441,Chapter 12,Contents, The Composition

29、 of Bank Liabilities (P422 426) Characteristics of Small Denomination Liabilities (P426) Transactions accounts (P427 433) Calculating the Net Cost of Transaction Accounts (P433 435) Characteristics of Large Denomination Liabilities (P435 442) Measuring the Cost of Funds (P442) Evaluating the Cost of

30、 Bank Funds (P443 451) Marginal Cost Analysis: an Application (P451 452) Funding Costs and Banking Risk (P452 455) Borrowing From the Federal Reserve (P455 456) Federal Deposit Insurance (P456 458),Chapter 12,6 Measuring the Cost of Funds,Managing liabilities used to be relatively routine for most c

31、ommercial banks as federal regulators dictated maximum rates banks could pay on depositors, and customers had few alternatives for their savings. Banks have almost unlimited opportunities to develop new deposit products with any maturity that pay market rates, but they must now compete with a variet

32、y of firms offering similar products and services.,P 442 -,Chapter 12,Contents, The Composition of Bank Liabilities (P422 426) Characteristics of Small Denomination Liabilities (P426) Transactions accounts (P427 433) Calculating the Net Cost of Transaction Accounts (P433 435) Characteristics of Larg

33、e Denomination Liabilities (P435 442) Measuring the Cost of Funds (P442) Evaluating the Cost of Bank Funds (P443 451) Marginal Cost Analysis: an Application (P451 452) Funding Costs and Banking Risk (P452 455) Borrowing From the Federal Reserve (P455 456) Federal Deposit Insurance (P456 458),Chapter

34、 12,7 Evaluating the Cost of Bank Funds,Accurate cost measurement allows the bank to compare prices between alternative funding sources and to assure that assets are priced high enough to cover costs and pay shareholders a required return.,P 443 -,Chapter 12,Many banks average historical cost add hi

35、storical interest expense with noninterest expense (net of noninterest income) and divide by the investable amount of funds to determine the minimum return required on earning assets.,The average historical cost of funds,P 443,Chapter 12,The marginal cost of funds,marginal cost of debt marginal cost

36、 of equity capital the marginal costs of debt and equity,P 444 ,Chapter 12,P 445 ,Costs of independent sources of funds,Two problems create potentially large measurement errors. ,Chapter 12,Cost of debt Cost of equity Cost of preferred stock Weighted marginal cost of total funds,Chapter 12,Cost of D

37、ebt,The cost of long-term nondeposit debt this cost is the discount rate that equates the present value of expected interest and principal payments with the net proceeds to the bank from the issue.,P 446,Example,Chapter 12,Cost of Equity,Conceptually, the marginal cost of equity equals the required

38、return to shareholders.,P 446,dividend valuation model capital asset pricing model (CAPM) targeted return on equity model,Chapter 12, Dividend Valuation Model,Dividend valuation models discount the expected cash flows from owning stock in determining a reasonable return to shareholders. The cost of

39、equity equals the discount rate (required return ) used to convert future cash flows to their present value equivalent.,P 446,Chapter 12,P 447,Chapter 12, CAPM,This model relates market risk, measured by Beta ,to shareholders required returns. Formally, the required return to shareholders equals the

40、 riskless rate of return plus a risk premium on common stock reflecting nondiversifiable market risk。,P 448,Chapter 12,P 448,Chapter 12, targeted return on equity model,Many banks use based on the cost of debt plus a premium to evaluate the cost of equity.,P 448,Chapter 12,P 449,Chapter 12,Cost of preferred stock,P 449,Chapter 12,Trust preferred stock,P 450,Chapter 12,Weighted marginal cost of total funds,P 450,Chapter 12,Contents, The Compos