Financial Crises and the Subprime Meltdown参考.ppt

Chapter 9 Financial Crises and the Subprime Meltdown FIGURE 1 Sequence of Events in U.S. Financial Crises FIGURE 3 Sequence of Events in Emerging Market Financial Crises FIGURE 2 Treasury Bill–to–Eurodollar Rate (TED) Spread Source: /releases/h15/data.htm Chapter 10 Banking and the Management of Financial Institutions Table 1 Balance Sheet of All Commercial Banks (items as a percentage of the total, December 2008) * * * * * * * * * * * * * * Liquidity Management: Shortfall in Reserves Reserves are a legal requirement and the shortfall must be eliminated Excess reserves are insurance against the costs associated with deposit outflows Assets Liabilities Assets Liabilities Reserves $10M Deposits $100M Reserves $0 Deposits $90M Loans $90M Bank Capital $10M Loans $90M Bank Capital $10M Securities $10M Securities $10M Liquidity Management: Borrowing Cost incurred is the interest rate paid on the borrowed funds Assets Liabilities Reserves $9M Deposits $90M Loans $90M Borrowing $9M Securities $10M Bank Capital $10M Liquidity Management: Securities Sale The cost of selling securities is the brokerage and other transaction costs Assets Liabilities Reserves $9M Deposits $90M Loans $90M Bank Capital $10M Securities $1M Liquidity Management: Federal Reserve Borrowing from the Fed also incurs interest payments based on the discount rate Assets Liabilities Reserves $9M Deposits $90M Loans $90M Borrow from Fed $9M Securities $10M Bank Capital $10M Liquidity Management: Reduce Loans Reduction of loans is the most costly way of acquiring reserves Calling in loans antagonizes customers Other banks may only agree to purchase loans at a substantial discount Assets Liabilities Reserves $9M Deposits $90M Loans $81M Bank Capital $10M Securities $10M Asset Management: Three Goals Seek the highest possible returns on loans and securities Reduce risk Have adequate liquidity Asset Management: Four Tools Find borrowers who will pay high interest rates and have low possibility of default