Guy Hargreaves ACF-104 Wechat: Guyhargreaves
Transcript of Guy Hargreaves ACF-104 Wechat: Guyhargreaves
GuyHargreavesACF-104
Wechat:Guyhargreaves
Recapofyesterday! UnderstandvariouscomponentsofanAustraliancommercialbankingbusiness
! Reviewofimportantfunctionsofacommercialbankincludingliquidity,capital,margins,revenues,strategybystudyingANZ
! FormasoundunderstandingbetweenthetheoryofbankingandpracticebystudyingANZbankcase
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Goalsoftoday! Understandcommercialbankbalancesheetsandgeneralprinciplesofbankbalancesheetmanagement
! Compareoffandonbalancesheetproductsandstructures
! Understandkeyconsiderationsforthepracticeofgoodbanking
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Commercialbankmanagement
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! Strategy:global,regional,local,products,retail/wholesale,technology
! Riskmanagement:credit,market,legal/reputational,operational,country,liquidity–>diversification
! Financial:NIM,NPAT,ROE,RAROC,RoRWA,NIM! Regulatory:CET1,RoRWA,LCR,NSFR! Customers:productmix,KYC,X-sell! Operations:technology,costs,riskmanagement
Recall:commercialbankunits! BoardofDirectors! ManagementOffice! FinancialControl! RiskManagement! LegalandCompliance! Operations! HumanResources! InformationTechnology! FinancialMarkets! WholesaleBanking! RetailBanking
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Goodcommercialbanking! Goodcommercialbankingrequiressoundmanagementpractices
! Setlongtermincentives,removeshorttermincentives
! Encouragelongertermbehaviourbystaff,management! Leadstobetterdecisions=stablebank=strongsharepriceandhighliquidity/accesstocapital
! Goodbanking=healthybankingsystem=healthyfinancialsystemabletowithstandcrises/shocks
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Toavoidfinancialcrises! Therearemanytypesoffinancialcrises,including:
! Bankingcrises! Currencycrises! Speculativeassetpricebubbles! Economiccrises
! 2007-9GFCwasmostlyabankingcrisisbutitcamefromaspeculativeassetbubble
! EconomiccrisesareusuallydeeprecessionsordepressionswhereGDPfallssharply
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Inpar=cularbankingcrises! Lossofconfidenceinabankornumberofbanksleadingtobankrunwheredepositorswithdrawfundsrapidly
! Oftenassociatedwithperiodsofpoorlendingdecisionsleadingtohighloanportfoliolossprovisions
! Highleverageinthebankingsystemmeansconfidenceisfragile
! Smallloanlossescanquicklyturnintoabankingcrisis
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Balancesheetprinciples! Assets–Liabilities=Capital! Liabilities:
! Definedmaturitydate! Definedcoupon(interestrate)! Mustberepaidordefaultoccurs
! Capital:! Nomaturitydate(perpetual)! Nodefinedcoupon(dividendmayormaynotbepaid)! Norequirementforrepayment-permanent
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UScommercialbankbalancesheet
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Onoroffbalancesheet?! Iftheitemappearsinthebalancesheetfinancialstatementthenitis“onbalancesheet”
! Risksthatdonotappearinthebalancesheetfinancialstatementare“offbalancesheet”eg
! LettersofCredit(LCs)! Guarantees! Counterpartycreditriskonderivatives
! BanksneedtoholdregulatorycapitalagainstonandoffbalancesheetsexposuresunderBISIIandBISII
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