Ppt on bank lending interest

Shadow banking in china

-end 2012. Securities held-to-maturity and long-term equity interests together accounted for another 28 percent. In terms of industry segment, industrial and commercial loans (mostly to SMEs), basic industries (mostly infrastructure projects), and real estate accounted for roughly 60 percent of trust assets. LGFVs are now borrowing from trusts as bank lending further tightens. The opacity in the nature of these/


WESTERN PHILOSOPHERS: PLATO “…and no one shall deposit money with another whom he does not trust as a friend, nor shall he lend money upon interest” - Laws, by Plato, Book V, 360 BCE 428/7 - 347 B.C. ANCIENT WESTERN PHILOSOPHERS: ARISTOTLE “…The / of the Princes) and the religious society (the law of the church), weakening the usury laws. BANKING – MONEY OF ACCOUNT: BANKING’S SECRET Early banking had developed a money of account, based on handwritten entries. The Knights Templars brought back to Europe from/

Modeling the Textbook Fractional Reserve Banking System.

Change December 29th 1989 Nikkei reaches peak of 38,597 Japanese Credit Bubble Simulation Model – Establishing a flow relationship Loans & Salary payments Bank A Bank A: Employee/Depositors Bank B Bank B: Employee/Depositors Loan repayments Each Round Bank lends money to employees Bank pays employees each round from interest received on loans Defaults are handled as delays in repayment Model Results Textbook example cannot work as shown/


groups.yahoo.com/group/financial_stability Course on Financial Instability at the Estonian Central Bank, 9-11 December 2009 – Lecture 9 PAPER 1: BANK LENDING AND COMMERCIAL PROPERTY PRICES: some cross-country evidence E Philip Davis and Haibin Zhu Revise and resubmit in Journal of International Money and Finance Introduction Growing interest in commercial property cycles and link to financial stability Likely to be more/

Money and the Banking System & Monetary Policy

the D curve D For given Fed policy E For given Y and P Quantity of Bank Reserves 44 Implementing Monetary Policy Market for bank reserves Interest rate in Fig. 1 is the federal funds rate Interest rate that banks pay/receive when they borrow reserves from one another Banks lend or borrow from one another to maintain a desired level of reserves D (S) for reserves/

Crisis of 2007-2008. Trends in US Banking Decline of Glass-Steagal Act In 1927, interstate banking eliminated. In 1933, Glass-Steagal act created FDIC.

meet HK corporate governance standards. State will retain majority control. Foreign banks will take strategic stakes to help transfer their expertise. Regulation Chinese Banking Regulatory Commission formed to regulate banking system in 2006. People’ Bank of China still regulates interest rates especially deposit rates and prime rates though banks set lending rates by creditworthiness. Foreign banks can set up operations in 8 large cities and can since 2006/


reserve ratio= reserve ratio= reserves in the bank/total deposits reserves in the bank/total deposits this enables them to create credit by lending this enables them to create credit by lending the lower the reserve ratio the more the bank is landing the lower the reserve ratio the more the bank is landing interest revenues will be higher interest revenues will be higher a greater risk of/

Participatory Micro Finance (PMF) and Interest – Free System 1. Background 2. Introduction3. Financial Products 4. Market Conditions 5. What we should.

India. The financial supports by Government agencies help development of Micro Finance Institutions. They grew their businesses through interest based lending from Public institutions or Banks. Micro Finance sector in India is suffering due to lack of equity funds and high interest cost on lending money routed through Banks. Since Majority of Indian being poor and financially excluded from the mainstream financial segment, to let them/

Evaluating Consumer Loans

the size of each payment Consumer Credit Regulations Add-on Rates Applied against the entire principal of installment Gross interest is added to the principal with the total divided by the number of periodic payments to determine the size/ the CRA by: Mandating public disclosure of bank lending policies and regulatory ratings of bank compliance Regulators must also take lending performance into account when evaluating a banks request to charter a new bank, acquire a bank, open a branch, or merge with another/

Principles & Practices of Banking Module A

India (3) Diversification in banking: Banking has moved from deposit and lending to Merchant banking and underwriting Mutual funds Retail banking ATMs Anywhere banking Internet banking Venture capital funds Factoring- Profitability of Banks(1) Reforms has shifted the focus of banks from being development oriented to being commercially viable Prior to reforms, banks were not profitable and in fact made losses for the following reasons: Declining interest income Increasing cost of/

Agenda Overview of J.P. Morgan Private Bank Investment Management

Service Team Manages day-to-day administrative services 5 Agenda Overview of J.P. Morgan Private Bank Investment Management Banking and Lending Credit Trust and Estate Appendix We are organized around serving and meeting your needs Strategy Team/Strategy Team CIO, economists, strategists for asset classes All unbiased and INDEPENDENT Formulate strategy keeping CLIENT’S best interest in mind Completely independent of any product generation Global Solutions Team Takes the strategy “mandate” and craft solutions/

Charts FS 1/06. Chart 1 Banks’ Tier 1 capital ratio and pre-tax profit as a percentage of average total assets 1). Annual figures. 1998 – 2005 Source:

Share of enterprises in various categories of risk. By probability of bankruptcy (=p). Per cent. Yearly figures 1990, 1995, 2000 and 2004 Source: Norges Bank The significance of Norges Bank’s key rate and competitive conditions for banksinterest rates Chart 1 Bankslending rates, the sight deposit rate and 3-month interbank rate (NIBOR). Per cent. 91 Q1– 06 Q1 1) Quarterly average Source: Norges/

Chapter 15 Tools of Monetary Policy. Demand for Reserves  Quantity Demanded for Excess Reserves ( ) provide banks with insurance against big withdrawals.

by increasing . Doing this creates a big collapse in bank lending to businesses and consumers. In addition, the Fed has to make discount loans to banks. So even though total reserves have increased via discount lending ($2 billion in the diagram above), this cash is /also raise and lower the federal funds rate by simply raising IOR and i d simultaneously. SRSR idid i or 0 Interest on Reserves  The Fed’s rescue of the financial system in 2008-2009 included purchasing enough securities to increase the/

House Committee on Pensions, Investments & Financial Services Department of Banking Commissioner Charles G. Cooper April 2, 2009 Savings and Mortgage Lending.

the FDIC with regard to assessments that will impact bank earnings and thus capital Offered by: Texas Department of Banking and Texas Savings and Mortgage Lending April 2009 Banking and S&L Crisis of the 80’s & 90’s 3  Deposit-interest rate ceilings phased out. Federal Reserve Bank restricted the growth rate of money supply and interest rates increased dramatically. Mortgage rates peaked at 15.5/

Unit 3: Macroeconomics Chapter 9: An Introduction to Macroeconomics Chapter 10: The Business Cycle and Fiscal Policy Chapter 11: Money and Banking.

being used for transactions in the economy Based on this measurement, it adjusts policies (such as the level of interest rates) to support our economy’s growth The problem for economists revolves around the question of what account or asset/ can support a much greater expansion of the money supply measured in newly created bank deposits We must make two assumptions in a multi-bank scenario: First, each bank lends the fullest possible amount from its reserves Second, each borrower uses the total amount/

Money & Banking Dr. Katie Sauer Metropolitan State College of Denver Presented at Junior Achievement’s Elementary School Personal.

can directly control. This interest rate usually just acts as a signal from the Fed to banks about what the Fed would like banks to do. A higher discount rate: - means that it will be more costly for banks to borrow from the Fed (should they need to) - so banks take this as a signal to lend out less (be less risky) - when banks lend out less, the/

Introduction to Banking. Introduction  A bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow.

offers financial services, such as payment accounts and lending opportunities, to foreign clients (individuals and companies). Every international bank has its own policies outlining with whom they do business. Why bank with international banks?  To invest in the economies of booming countries; international banks offer better interest rates than domestic banks, providing money-making opportunities for customers.  Since international banks lend and borrow on international markets, they’re less/

Norges Bank Financial Stability November 2005. Summary.

Net capital gains Net other commission income Other Chart 3.5 Banks’ 1) deposit and lending margins, and total interest margin. 2) Per cent. Quarterly figures. 00 Q1 – 05 Q3 1) All banks in Norway 2) Moving average over the past four quarters Source: Norges Bank Total interest margin Lending margin Deposit margin Chart 3.6 Banks’ 1) interest margins in the Scandinavian countries. Per cent. Quarterly figures for/

Financial Fragility Financial Stability Property Market Bank lending * Stress testing 30% for in property prices.

whether the sector may be exposed another crisis again? - Economic cycle and the growth depends on demand Driving force - Low interest rate - Bank competition Any risk overinvestment---YES!, DEPEND ON BANK LENDING BEHAVIOR CONT’ (Section 3) The interconnection between the property secter and commercial bank  Pre versus Post financing (supply side/ demand side)  Pre financing - for property developer as source of fund.  Post financing - for/

Professor Yamin Ahmad, Money and Banking – ECON 354 ECON 354 Money and Banking Financial Crises and the subprime Meltdown. 9 Lecture 8 Financial Crises.

Note: These lecture notes are incomplete without having attended lectures Financial Crises: Mexico 1994-1995 Financial liberalization in the early 1990s: – Lending boom, coupled with weak supervision and lack of expertise. – Banks accumulated losses and their net worth declined. Rise in interest rates abroad. Uncertainty increased (political instability). Domestic currency devaluated on December 20, 1994. Rise in actual and expected inflation. 9/4/


diversify their operations more and generate more noninterest income than small banks Because larger banks generally lend to larger corporations, their interest rate spreads and net interest margins are usually narrower than those of smaller banks interest rate spread is the difference between lending and deposit rates net interest margin is interest income minus interest expense divided by earning assets Large banks tend to pay higher salaries and invest more in buildings/

Charts Financial stability 2/06. Summary Chart 1 Banks’ Tier 1 capital ratio and pre-tax profit as a percentage of average total assets. 1) 1998 – 2005.

Norway Households All sectors Enterprises Source: Norges Bank Chart 3.4 Banks’ 1) total interest rate margin divided into the deposit and lending margin 2). Percentage points. Quarterly figures. 96 Q1 – 06 Q3 1) All banks in Norway 2) Moving average over the past four quarters Total interest margin Lending margin Deposit margin Source: Norges Bank Chart 3.5 Banks’ 1) interest margin in Nordic countries. Percentage points. Quarterly figures/

Towards a New Paradigm for Monetary Economics Joseph Stiglitz Reserve Bank of Australia September 1, 2005.

Key Propositions Proposition 1. A Decrease in Bank’s Net Worth Leads to a Decrease in Bank Lending Proposition 2: An Increase in Reserve Requirements Leads to Reduced Lending Proposition 3: An Increase in the Rate of Interest on T-Bills Leads to Less Lending for Banks that Accept Deposits Proposition 4: a Mean Preserving Increase in Risk Reduces Lending Activity 33 Illustrate in Terms of First Model/

Central banks in chaotic times Marc Lavoie The subprime crisis, monetary policy implementation, and changes in monetary theory.

this text Credit easing, not quantitative easing “It is important to keep in mind that the excess reserves in our example were not created with the goal of lowering interest rates or increasing bank lending significantly relative to pre- crisis levels. Rather these reserves were created as a by- product of policies designed to mitigate the effects of a disruption in financial markets/


account regulation Deposit insurance regulation Consumer protection Withdrawal limit and reserve requirement 3 Agenda of this session (Contd.) Interest on demand deposits Lending Regulations – Consumer protection – Debt collection – Credit cards – Lending limits Central bank regulations Regulation of bank affiliates and holding companies 4 Types of Regulations Banks in one form or another have been subject to the following non exhaustive list of regulatory provisions: 1)restrictions/

Central banks in chaotic times Implications of the financial crisis for central bank procedures and our understanding of monetary theory.

2009 S = $3,000M But if things go wrong, there is no incentive to lend on the overnight market; Banks would rather deposit their excess funds at the Bank, at the same rate. The Decoupling Principle With the target interest rate set at the floor of the corridor, central banks (FED, BOC) can now set the target rate at the level of their choice and/

EVALUATING CONSUMER LOANS Chapter 11 Bank Management 5th edition. Timothy W. Koch and S. Scott MacDonald Bank Management, 5th edition. Timothy W. Koch.

serve as collateral (主要住所一般不能充当担保). Legislation arose because lenders quoted interest rates in many different ways and often included supplemental charges in a loan that substantially increased the actual cost. Truth in lending disclosure requirements … requires that lenders disclose to / loans that were repaid on time and problem loans that produced losses. Credit scoring system, university national bank, applied to credit application for purchase of a 2000 Jeep An application: The credit score A loan is/

Monetary Policy Chapter 13 2 OMO: What can go wrong? Credit easier to get Fed increases banking system reserves Fed buys bonds from the public or banks.

Demand Reserves ffr o Federal Funds Rate Reserves Decrease in GDP or Prices Demand for Reserves shifts left, ffr drops ffr 1 Reserves ioio Federal Funds Rate Banks increase lending as interest rates rise because it is more profitable Banks lend more when the fed funds rate increases Supply: banks with excess reserves A movement up ( down ) along the supply of funds resulting from higher ( lower/

CENTRAL BANKING AND MONETARY POLICY Section 4. MONETARY POLICY FRAMEWORK Intermediate Target/ Nominal Anchor Economic Indicator to Guide Expected Value.

for less When FED raises rates, they will raise i DF i DF’ Quota Uncompensated Reserves Reserves beyond the quota will not receive interest, so banks have an incentive to lend them out but impose quota on excess reserves will form the effective liquidity in interbank market S’ Equilibrium in Interbank Market where effective supply equals demand In the future, the /

Copyright © 2004 by Thomson Southwestern All rights reserved. 13-1 Asset Management for Depository Institutions: Commercial, Consumer, and Mortgage Lending.

2004 by Thomson Southwestern All rights reserved. 13-23 Establishing Loan Terms Loan amount Lending rate Maturity and timing of payments Non-interest terms and fees Collateral, guarantees, other sources of repayment Restrictive covenants Copyright © 2004 by Thomson/ named in environmental liability suits if collateral used for loans is associated with environmental hazards. To protect themselves, banks conduct environmental audits on land and buildings used for collateral. The best way to prevent lawsuits is to: /

Revise Lecture 18. Basic Lending Principles Q: What is asset management banking?

have brought the question of safety in lending to the fore; Why do banks persistently lend so imprudently and how should lending be done at minimum risk? Basic Lending Principles Safety Issues One essential problem is the human and managerial challenge of motivating employees of banks to cater to the interest of the owners (shareholders) of the bank. The history of banking is replete with episodes of employees favouring/

Revise Lecture 20. Loans and Advances Lending money is one of the two major activities of any bank. The bank acts as an intermediary between the people.

terms of percentage (of total money lent by the banks) to be lent to certain sectors which, in its perception, would not have access to organized lending market or could not afford to pay the interest at the commercial rate. Loans and Advances Classification of Loans Priority sector lending: This type of lending is called priority sector lending. Financing of small industry, small business, agricultural activities/

Copyright © 2000 by Harcourt, Inc. All rights reserved. 21-1 Chapter 21 Asset Management: Commercial, Consumer, and Mortgage Lending.

by Harcourt, Inc. All rights reserved. 21-4 As a result of declining interest rates in the 1990’s, rising household income, and bank thrift acquisitions, mortgage lending by banks has increased rapidly. Diversification into residential mortgages is one factor contributing to the / penalty for installment loans. –Lenders argue that it is justified because it helps them recover fixed lending costs. Home Equity Loans (Hels) Interest paid on Hels is tax-deductible. Can borrow 70% to 85% of the equity in a/


5.1. Loan applicants B. Control variables Moving on to control variables, relational aspects of the lending relationship seem to be important determinants of the economic terms set in the loan contracts. First, the length of the relationship with the bank is associated with significantly lower interest rates, lower probability of firms pledging collateral and exceeding the credit limit established in the contract/

1 Foreign Bank Entry and Access to Credit Evidence from case studies and cross-country analysis.

firm level and country characteristics, borrowers’ perceptions regarding interest rates and access to long-term credit are positively associated with the presence of foreign banks. 10 Case studies on foreign bank entry and SME lending in Latin America Using bank-level data for Argentina, Chile, Colombia, and Peru for the mid-1990s, we regress (1) The share of bank lending to SMEs and (2) The growth rate/

Central banks in chaotic times Marc Lavoie The subprime crisis, monetary policy implementation, and changes in monetary theory.

this text Credit easing, not quantitative easing “It is important to keep in mind that the excess reserves in our example were not created with the goal of lowering interest rates or increasing bank lending significantly relative to pre- crisis levels. Rather these reserves were created as a by- product of policies designed to mitigate the effects of a disruption in financial markets/

Bank’s balance sheet and income structure Chapter 7 An Overview of Bank Balance Sheet and measuring performance.

use more purchased funds (such as fed funds) and have fewer core deposits Large banks lend to larger corporations which means that their interest rate spread is narrower –the difference between lending and deposit rates Large banks are more diversified and generate more noninterest income Industry Performance Provision for loan losses - bank management’s recognition of expected bad loans for the period Net charge-offs - actual/

Money & Banking Video 05—Money Supply The Money Supply Process (Chapter 14) Tools of Monetary Policy (Chapter 15) Hal W. Snarr 8/20/2015.

by increasing rrr. Doing this creates a big collapse in bank lending to businesses and consumers. In addition, the Fed has to make discount loans to banks. So even though total reserves have increased via discount lending ($2 billion in the diagram above), this cash is /also raise and lower the federal funds rate by simply raising IOR and i d simultaneously. SRSR idid i or 0 Interest on Reserves  The Fed’s rescue of the financial system in 2008-2009 included purchasing enough securities to increase the /


250 300 After adjustments to asset holdings, a new equilibrium will be seen at a lower level of interest. The Money Market Copyright McGraw-Hill, Inc. 1999 The United States Financial System Copyright McGraw-Hill,/Supply Issuing Currency Setting Reserve Requirements & Holds Reserves Lending Money to Banks & Thrifts Check Collection Fiscal Agents for the Federal Government Issuing Currency Setting Reserve Requirements & Holds Reserves Lending Money to Banks & Thrifts Check Collection Fiscal Agents for the /

Money, Banking, and the Federal Reserve Bank (Monetary Policy) Chapter 6.1.

and/or define the following terms: Bank Fractional Reserve Banking Money Supply M1 and M2 Money Interest Default Required Reserve Excess Reserve Mortgage Credit & Debit Cards A Bank A Bank is defined as an institution for receiving, keeping, and lending money. Banks are for individuals and businesses. Types: Commercial Banks, Savings and Loan Associations, Mutual Savings Banks, Credit Unions, State Banks, and Federal Banks. Banking 11 Banking - History Goldsmiths were the first bankers/

International Banking Regulatory Framework Session 2.

foreign exchange receipts is perceived as a better indicator of liquidity for banks, since interest cannot be easily rescheduled. Therefore banks should look into the interest payments to foreign exchange reserves ratio before lending. International Banking Factors—Policies (9) Fiscal Policy: The international banks should assess the fiscal policy of the borrower’s country before lending. Fiscal policy refers to the government policy for dealing with the budget/

1 Venture Lending היבטים משפטיים של חברות היי- טק.

capital investment. Unlike traditional bank lending, Venture Lending is available to startups and growth companies that do not have positive cash flows or significant assets to use as collateral. 4 Benefits of Venture Lending For founders More cash, less dilution. For Venture Capital funds Leverage of equity enables financing of company with less additional investment. For Venture Lending funds High interest combined with equity kicker. 5/

1 The Repercussions on Small Banks and Small Businesses of Bank Capital and Loan Guarantees The opinions, analysis, and conclusions of this paper are solely.

on small business vary with interest rates and with economic growth SBA-guaranteed lending reduces the pro- cyclicality of small business activity 6 Some Prior Literature Peek and Rosengren (1998) Concluded bank size affected small business lending Hancock and Wilcox (1998) Capital crunch had larger effects on smaller banks lending and smaller businesses real activity Declines in capital and lending at smaller banks was associated with reduced gross/

LENDING BOOMS, FOREIGN BANK ENTRY AND COMPETITION: THE CROATIAN CASE Evan KraftLjubinko Jankov Croatian National Bank *The views presented here are the.

policy introduced in mid- 1997 Chilean-style capital controls introduced in April 1998 Not clear whether capital controls or bank failures and the Russian crisis slowed down banks foreign borrowing and lending boom Policy measures, phase 2 16% rulebanks must buy low-interest rate Croatian National Bank paper if growth of risk assets exceeds 4% in a given quarter. 35% rulebanks must hold liquid foreign/

Test Your Knowledge Fractional Reserve Banking Click on the letter choices to test your understanding ABC.

the Federal Reserve at the discount rate. C Correct! Known as the net interest spread, banks charge higher rates of interest for lending than they pay customers for interest bearing deposits. Banks earn profits through this business practice. Next Try again! Increasing bank holdings of reserves and decreasing bank lending will result in higher nominal interest rates and lower levels of borrowing by businesses and individuals. This will lead to/

Day Two Period 9:00 to 10:40 AM.

to 10:40 AM Managing Market and Credit Risk Day 2 Managing Market and Credit Risk Market Risk Credit Risk - General The Credit Risk Model in Modern Banking Lending to Small Business 2 Market Risk Market risk is the potential for loss arising from changes in interest rates, foreign exchange rates, equities, commodity prices, or credit spreads in market risk sensitive instruments. In/

Banking Systems, 2e © Cengage/South-Western Slide 1 MORTGAGES 7.1 7.1 Mortgage Lending 7.2 7.2 Mortgage Loan Processing 7.3 7.3 Mortgages and the Law 7.4.

increasing levels of wealth. Easy access to mortgage loans drove up the demand for houses. Increased housing demand caused housing prices to continue to escalate. Banking Systems, 2e © Cengage Learning/South-Western Slide 35 LOWERING LENDING CRITERIA Interest-only loans Stated Income Verified Assets loans (SIVA) Stated Income State Assets loans (SISA) No Income No Asset loans (NINA) No Income, No Asset, No/


rely on their “core deposits”, but a limit on their portfolio allocation to mortgage lending is soon reached. Various market solutions exists, as will be discussed during the conference. © Bertrand RENAUD. World Bank Seminar. 10 th February 2003 Overview of housing finance issues in emerging markets 27 3. INTEREST RATE RISK is potentially very high, and typically exceeds default risk Housing finance lenders/

Ukrainian Academy of Banking of the National Bank of Ukraine Banking Department Banking Lecture 2 Bank lending Anna Vladimirovna Buriak, Ph.D., Senior.

. Return or Profitability: Return or profitability is another important principle. The funds of the bank should be invested to earn highest return. However, a bank should not sacrifice either safety or liquidity to earn a high rate of interest. 2. Rules of Bank lending Principles of Sound Lending: 4. Diversification: ‘One should not put all his eggs in one basket’ is an/

Risk Management in Banking Unit 3

net settlement values Prepayment options embedded in loans – adds additional uncertainty and cost Unit 3 Term Structure of Interest Rates Interest rates are essential for the banking business because: Fluctuating interest rates impact the bank’s interest income Future interest rates of borrowing or lending/investing are unknown Typical commercial banks lend long-term and borrow short-term. All funding and investing decisions resulting from liquidity gaps have an impact/

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