A bank needs to hold enough excess reserves that can be able to meet all depositors need. This shield the bank from additional cost in meeting the depositors need. Such additional costs include the cost of borrowing from other banks, sale of securities, calling in loans and resulting in borrowing from federal bank. Asset management; a bank need to manage its asset is effectively so as to maximize its profits. This can mainly done through, acquiring liquid assets that have acceptable low level of risk such government securities, diversifying its asset holding portfolio as risk asset management strategy, issuing loans yielding higher interest to borrowers who are deemed safe, last the bank s meet to maintain enough reserve to meet its depositors need without resulting to borrowing in order to save on cost of borrowing. Liability management with the increased innovation and changes in operation of banks operation a banks need to ensure the cost of funds is minimized. This ensures a bank will be able to meet its obligation as the fall due. Capital adequacy management-the manager must decide the amount of capital the bank should maintain and then acquire the needed capital in consideration of the regulation existing in the market. Capital is essential in bank as is prevents failures and also influence returns on common stock holders. Q . 2 Discuss the techniques of managing credit risk and interest rates risk There are various techniques used by banks to manage credit risk they include, Prescreening and loan monitoring Banks usually collects information pertaining to their prospective clients. The information collects helps to evaluate the borrowers classify the borrower either as safe borrower or risky borrower in this event the bank is able to manage the credit risk Another way is continuously monitor the borrower after the lender have issued loan, this help to solve the problem of moral hazard where the borrower under take more risky venture than the one the money was borrowed for. The second manage credit risk establishment of the long customer relationship this helps the banks to collect information about the borrower asses the overall credit worthiness of the borrower. Third the bank can manage the credit risk by placing stringent condition on the use of the borrowed funds. In this case the bank issues restrictive covenants that restrict the borrower from engaging in risky activities. Fourth a bank need to ask for collateral, in which it would recover the money in the event the borrower fail to repay the amount borrowed. Fifth another credit management tool is credit rationing. In this case the bank refuses to lend the borrower funds even if they are willing and able to pay high level of interest rates. Now let us turn our interest to measure to manage the interest rate risk, interest rates are very volatile therefore the bank needs to appropriately hedge against loss emanating from the changes interest rates. Therefore, the bank needs to undertake a gap and duration analysis, in this case sensitivity of profits to interests, where the liabilities which are sensitive to changes in the rate interest are subtracted to from assets that are responsive to changes in the rate of interest in gap analysis. Q 3. Discuss the off-balance sheet activities on banks Off- balance sheet activities are becoming increasingly popular to bank. These activities have been observed a source of higher returns to the bank. Off-balance-sheet activities
Commercial and Investment Banking Date: Q 1. GENERAL PRINCIPLES OF BANK MANAGEMENT The general principles of bank management include; Liquidity management- involves maintaining asset that can be easily converted into cash…
Moreover they are fragmented and meet only when legally required to do so. These principals of the company have created an agency in the shape of management to carry out day- to- day affairs in order to meet strategic objectives of the company. This relationship of principal and agent has its own repercussions that create agency problems.
Based on this research security assessments refer to conducting vulnerability tests and assessments tests on business or any working environment in order to keep its networks protected. A security assessment may be performed by an IT or internal security expert or through the use of hiring security firms to check for any loopholes in the current security procedures.
Morgan Stanley is a global financial services firm dedicated to three core business units: investment banking, private banking, and asset management. To trace its roots in the history, the company was originally formed by the previous J.P. Morgan & Co. and some partners from Drexel which was headquartered in Wall Street, New York City.
Sheffield One later got involved with the Heart of the City project and involved ventures like Millennium Commission to generate funds for the project. The Millennium Commission uses the money raised by the National Lottery, to invest in public projects. The Project: The Heart of the City includes a new Public Square, Peace Gardens, Millennium Galleries and Winter Gardens complex which includes galleries, exhibition space, shops, cafe and public walkways.
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It is subject to external environment that includes other banking institutions with which the banks competes for market control and efficiencies. This paper reviews characteristics of the bank’s industry, analyzes its financial position, and offers a personal opinion on the bank’s position.
The major transformation has taken place in the operating areas of the commercial banks. It is true that there have been a rising trend towards bank disintermediation in a large number of countries, but the role of banks still remains
Gathering secondary research information about Gulf Investment Bank has been difficult because there seems to be a focus on hiding bad decision-making at the firm. One research article suggested that banking leaders in Bahrain (and the surrounding Gulf region) fail to accurately report internal and external business decisions when they are shown to be bad decisions.
The writer states that banking institutions are at risk of high initial capital investment especially where a huge amount is required to act as security for the customers’ deposits in case of liquidation. He proposes to monitor the operations of all subsidiaries and comply with regulation requirement of the host country when setting up subsidiaries.
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