Question

In: Economics

Name and explain the four areas of primary concern in bank management.

Name and explain the four areas of primary concern in bank management.

Solutions

Expert Solution

Bank executive's primary concerns:
Funds are to be bought at low cost.
The bank manager engages in risk management to maximize revenues by raising funds at a low cost.
Capital must meet regulatory standards.
The bank manager engages in capital adequacy management to retain and obtain capital

To satisfy three conditions, bankers must manage their assets and liabilities:

A bank has ample reserves on hand to pay for any outflows of deposits (net reductions in deposits) but not too many to make the bank unprofitable. This tricky trade-off is called managing liquidity. Its bank is earning profits. For this to happen, the bank must have a large portfolio of remunerative assets. This is called Wealth Management. It also needs to get its funds as cheaply as possible, which is called liability management. Their bank's net worth or equity capital is adequate to hold a buffer against bankruptcy or regulatory pressure but not so much that the bank is unprofitable.

Banks are faced with two major risks in their attempt to earn income and maintain liquidity and capital: credit risk, the risk of borrowers defaulting on the loans and securities they own, and interest rate risk, the risk that interest rate increases will decrease the returns on their assets and/or raise the cost of their obligations.


Related Solutions

Name and explain the four areas of primary concern in bank management.
Name and explain the four areas of primary concern in bank management.
Of the primary areas of US concern surrounding cybersecurity, what do you think is the most...
Of the primary areas of US concern surrounding cybersecurity, what do you think is the most important issue facing policy makers?
True or False In the management of cash and marketable securities, the primary concern is profitability....
True or False In the management of cash and marketable securities, the primary concern is profitability. For most modern corporations, the more cash they have, the better off they are. Minimizing cash balances can improve overall corporate profitability. For most firms, the primary motive for holding cash is the transaction motive. Cash balances are usually determined by the amount of cash flowing through the firm on a yearly basis. A primary goal of cash management is to insure that the...
In the management of cash and marketable securities for a firm, why should the primary concern...
In the management of cash and marketable securities for a firm, why should the primary concern be for the safety and liquidity rather than maximization of profit? What about the management of other areas of the business? Discuss the balance between safety/liquidity and maximization of profit. Provide external resources to either support your thoughts above or to provide additional insight by bringing in an example from the corporate world.
Describe the goal of financial management? Identify the three main areas of concern in corporate finance?...
Describe the goal of financial management? Identify the three main areas of concern in corporate finance? Explain the advantages and disadvantages of conducting business as a corporation?
Examine and explain the key areas of concern and issues in applying IFRS 15 for the...
Examine and explain the key areas of concern and issues in applying IFRS 15 for the 2020 financial year for Genting Singapore, including the reasons why you think so. Support your arguments clearly with reference to the company’s financial reports and literature reviews of other publicly available reports / journals / documents.
1.what are the four functional areas of business management? Explain how businesses are affected by those...
1.what are the four functional areas of business management? Explain how businesses are affected by those decisions. Please explain cognitive and affective conflicts, and how are those affect teams? 2.What is SWOT? Please explain which of a company’s characteristics does a SWOT analysis compare?
Examine and explain your key areas of concern and issues in applying IFRS 15 for the...
Examine and explain your key areas of concern and issues in applying IFRS 15 for the 2020 financial year, including the reasons why you think so.
Explain the difference between macroeconomics and microeconomics. Give examples of the areas of concern for each...
Explain the difference between macroeconomics and microeconomics. Give examples of the areas of concern for each branch of economics. How are macro and microeconomics interrelated? 250 words minimum
Microeconomics and Macroeconomics. Explain the difference between microeconomics and macroeconomics. What are the areas of concern...
Microeconomics and Macroeconomics. Explain the difference between microeconomics and macroeconomics. What are the areas of concern for each of these branches of economics?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT