L7 Flashcards
3 investment intermediaries
- finance companies
- investment funds
- securities firms and investment banks
2 depository institutions
- commercial banks
- thrifts
2 contractual savings institutions
- pension funds
- insurance companies
liabilities and assets of commercial banks
L : deposits
A : loans, gvmt securities, municipal bonds
liabilities and assets of thrifts
L : deposits
A : mortgages
liabilities and assets of life insurance companies
L : premiums
A : corp bonds and mortgages
liabilities and assets of pension funds
L : employer/ ee contributions
A : corop bonds and stock
liabilities and assets of finance companies
L : commercial paper, bonds, stock
A : consumer and business loans
liabilities and assets of investment funds
L : shares
A : stocks and bonds
7 main risks faces by FIs
- credit
- liquidity
- interest rate
- market
- OBS
- forex
- insolvency
credit risk
risk that the promised cash flows from loans and
securities held by FIs may not be paid in full.
liquidity risk
risk that a sudden and unexpected increase in
liability withdrawals may require an FI to liquidate assets in a very
short period and at low prices
interest rate risk
when the
maturities of its assets and liabilities are mismatched and
interest rates are volatile
market risk
potential loss from unfavourable movements in the makret such as changes in market rate, interest rate and currency exchange rate
OBS risk
risk incurred by an
FI as the result of activities related to contingent assets
and liabilities
