Session1 - Characteristics of Institutions Flashcards
What are the characteristics of a Universal bank?
1) High leverage & low profitability.
2) ROA is low –> Do not make money in this area.
What are the characteristics of a Public bank?
1) Large amount of deposits from customers –> loans-to-customers-deposits-ratio is low.
2) Much of the Revenue goes to Non-Interest Expenses.
What are the characteristics of an Insurance Company?
1) Has a high amount of Provisions to cover for future losses.
2) Has a moderate amount of loans that are given to clients.
What are the characteristics of a Hedge Fund?
The post Equity is very large when compared to other institutions, due to making money through the share capital. Also, a large amount of their Assets consists of Loans.
What are the characteristics of a Financial subsidiary of a hypermarket chain?
1) The majority of liabilities consists of Deposits from Banks.
2) None or close to zero Fixed Assets.
3) Loans-to-customers-deposits-ratio is high.
4) negative WCR - has a lot of liquidity
What are the characteristics of a Big Microcredit Institution?
1) This type of institution has a large amount of Loans due to giving small credit loans to the poorer people in the world.
2) Also, this fund is recognized by having a large portion of its funding coming from Total Customer Deposits.
What are the characteristics of a Quoted Microcredit institution?
1) This institution has a large number of Loans but also more Equity than other microcredit institutions due to the regulations that comes from being quoted.
2) This type of institute also has a High Profit-level driven by high interest rates
3) high ROE and ROA.
What are the characteristics of a Microcredit Fund?
1) This type of institute has much of its income coming from Fees and Commissions which is what separates this bank from the others.
2) Also, this type of institute provides loans to other institutions.
What are the characteristics of a Microcredit Bank?
1) As much Loans as Assets - similarly to the other microcredit banks - financed by short-term funding and deposits.
2) This bank also has a moderate level of interest that generates income.
In general, what are the characteristics of Microcredit institutions when compared to other institutions?
1) The Asset Turnover is quite high
2) High interest with a short period of time on the loans / credits.
3) The main part of assets consists of loans.
4) They further have lower leverage than Universal banks for instance.
What are the characteristics of a Wealth Management Institution?
1) higher number of income that streams from Remaining Operating Income
2) has much assets consisting of Loans and Advances to Banks and in Non-Earning Assets.
3) Main liabilities is Other (Non-Interest bearing).
4) What else goes forth is the very high level of Non-Interest Income / Gross Revenues and a high level of ROE at 28%.
5) BUT the main key is that it doesn’t give out loans to institutions.
What is the definition of IFRS 13?
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (on December 31st in this case)
What is the definition of IFRS 9?
- Initial acquisition amount
- less principal repayment
- plus/minus amortization of discount/premium
- plus/minus foreign exchange differences
- less impairment losses
What is Solvency?
Solvency: the possession of assets in excess of liabilities (positive net worth).
Be aware: accounting value vs market value.
What is Liquidity?
Liquidity is a measure of the extent to which an organization has cash to meet immediate and short-term obligations, or assets that can be quickly converted to do this. Liquidity notion can be extended for each maturity.
