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A short course of lectures

Credit rationingWhat is money?Legal and documentation riskPrinciples of regulationCredit derivativesMerchant and investment banksBank liquidity and a "bank run"The banking statute: generalCollateral requirementInterest rate riskMeasures of moneyBalance sheet changes resulting from deposit withdrawals and drawdowns on loan facilitiesAsymmetric information, adverse selection and moral hazardSpecialisation in lendingPromotion of consumer protectionOff-balance sheet activities Credit riskCompensating balances and monitoring of business transactionsMoney creationPillar 1: minimum capital requirementOTC versus securities marketsThe concept of riskReserve requirementBasel accordsDevelopment banksShare capital and unimpaired reserve fundIs "money supply" a misnomer?Rationale, objectives & principles of regulation DefinitionImproved diversificationDiscount housesReturnsLarge exposuresLoansCo-operative banksGeneral principlesVolume of and the type of liquid assetsDepositsHow does a central bank maintain a bank liquidity shortage?MonitoringPillar 2: supervisory review (regulatory response to Pillar 1)Monetary policy functionMarket riskRealityThe cash reserve requirementThe central bank and the bank runRole of the central bank in money creationPrice risk lessened for the ultimate lenderUniqueness of banksLong-term relationship buildingFundamental issues in bankingBibliographyLenders and borrowersDeposit insuranceScreeningMoney and its roleManagement of interest rate riskBroad functions of banksLiquid assetsLiability and asset portfolio managementConditions for creation of liquidity Dedicated banksEssence of bankingMoney creationLiquidity riskRationale for regulationCurrency riskBasic raison d'être for banks: information costs and liquidity Principles of banking The money identity and the creation of moneyShare capital (equity)Learning outcomesThe banking statute: other requirements associated with risk managementStability-related principlesTrading banksThe financial system Loan commitmentsMoney creationEfficient allocation of fundsThe balance sheet of a bankPrice discoveryPrivate banksIslamic banksLearning outcomesDuration analysisIdeal and extreme portfoliosReputation riskOperational riskDefinitionRisk in bankingInformation technology systems riskBank modelsBibliographyMutual banks / building societiesPayments systemCompliance riskGovernment spendsMoney creation does not start with a bank receiving a depositRegulatory-structure principlesInformation costsInterest rate repricing gap analysisMoney creation is not dependent on a cash reserve requirementManagement of credit riskAllied participants on the financial systemEconomies of scalePillar 3: market discipline (promotes greater stability in the financial system)AvoidanceAssets Facilitation of flow of fundsAssistance in price discoveryDefinitionSystemic malfunctionLiabilities Market imperfectionsAsymmetry in liquidity preferenceFinancial instrumentsCommercial banksMoney creation starts with a bank loanEnhanced liquidityPrudential requirementsFinancial intermediariesSupplier demand for regulationPromotion of financial stabilityMonetary banking institutionsBanking statute returns in respect of credit riskSovereign credit riskThe banking statute: prudential requirementsNotes and coins depositedBank models & prudential requirementsCentral bank moneyMoney creationActive secondary financial marketsOff-balance-sheet activities that carry riskMicro-credit banksOff-balance-sheet activities that carry no or little riskBasel IIIBasel II DiversificationMeasures of a bank's liquidity exposureBibliographyConsumer confidence and consumer demand for regulationThe moral hazard problemExternal riskLoansObjectives of regulationCounterparty riskEconomies of scaleFinancial marketsBibliographyEfficiency-related principlesLearning objectivesHuman resources riskImpeccable recordPromotion of fair and healthy competitionConflict-conciliatory principlesLearning outcomes
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