Banking

Question 1

Case study, Nike

Answer 1

Phil Knight, Shoe Dog 2016

First national bank of oregon cut off due to huge concern of liquidity and risk

Question 2

Banking differences by country

Answer 2

U.S. more likely to put into administration

Japanese hold shares, more likely to restructure debt

Question 3

The role of Banks

Answer 3

Transform time and risk -> alchemy
Match those who want capital (borrowers) with those who need return (lenders)
Intermediaries take deposits and bundle as loans

Question 4

Who are lenders

Answer 4

Individuals

Institutional

Question 5

Who are borrowers

Answer 5

Individuals, corporates, govts and public agents

Question 6

2 types of Markets

Answer 6

Primary - issuance of capital
Secondary - buying and selling negotiable
Algo trading key threat in secondary markets, erode any sort of gaming

Question 7

Banking origins

Answer 7

Central bank is the governments banker, Gordon Brown BofE independant 1997 -> monetary policy, financial stability
£435B of QE 2016

Question 8

Requirements of banking system

Answer 8

CONFIDENCE
Orders, reliable, reputation
Range of services to all systems
Stability

Question 9

Banking rules and regulation

Answer 9

Capital rates
Liquidity rules
Large exposure rule 
FX controls
Rights of inspection
BASEL III

Question 10

6 types of banking

Answer 10

1. Commercial
2. Merchant (help with funding)
3. Savings (mutually owned, bscos)
4. Co-operative
5. Credit unions
6. Islamic banks (sharing profits)

Question 11

Basel 3 - 3 items

Answer 11

Liquidity up, leverage down, level and quality of capital up
Capital conversion buffer introduced (all about loss absorption)
10.5% of risk weighted assets (7% equity, 1.5% T1, 2% T2)

Question 12

What LCRs show

Answer 12

High quality liquidt assets and outflows in 30D period - ensure operational if bank run

Question 13

Net stable funding ratio

Answer 13

Longer term risk shown // adds to medium to long term funding requirements

Means less funds to lend so price of borrowing increases

Question 14

B3 Impacts OECD

Answer 14

OECD: GDP growth will decrease
Less avaliable to lend // cost of debt increases because funding costs up
ST deposits less attractive to banks –> impacts ease of obtaining funds

Question 15

2 main accounts offered by bank

Answer 15

1) Current account - cash in and out, immediate access, overdraft
2) deposit/saving account - more long term / 90D

Question 16

Resident v nonresident

Answer 16

Changes fee structure, fund movement, approval

Question 17

Treasurer considerations x4

Answer 17

Costs
How many
Location
Who with

Question 18

What impacts bank charges x4

Answer 18

Balances
Turnover
Volume
Additional services

Question 19

4 things the treasurer must understand

Answer 19

No ‘free’ services
Identify most significant item and focus on that
Check interest rates used and calculations
Check commission charges

Question 20

International bank risks x4

Answer 20

1 - Local level funding requirements
2- local regulation
3 - central bank reporting
4 - enforcability
5 - cross border transactions

Question 21

Wholesale banking what is

Answer 21

To larger organisations (typically financials)

Lower charges, much closer to LIBOR

Question 22

What is investment banking

5 roles

Answer 22

1. Accepting bills of exchange
2. Raise new finance (new issues, rights issues and M&A)
3. Security trading
4. Derivative trading
5. FX