Wondershare EdrawMind
MindMap Gallery Commercial Bank Operation and Management
- 22
Commercial Bank Operation and Management
The mind map and course record sharing of the commercial bank operation and management course provide the best methods to everyone.
Edited at 2022-12-21 15:03:04
- bacteria
This is a mind map about bacteria, and its main contents include: overview, morphology, types, structure, reproduction, distribution, application, and expansion. The summary is comprehensive and meticulous, suitable as review materials.
- Plant asexual reproduction
This is a mind map about plant asexual reproduction, and its main contents include: concept, spore reproduction, vegetative reproduction, tissue culture, and buds. The summary is comprehensive and meticulous, suitable as review materials.
- Reproductive development of animals
This is a mind map about the reproductive development of animals, and its main contents include: insects, frogs, birds, sexual reproduction, and asexual reproduction. The summary is comprehensive and meticulous, suitable as review materials.
Commercial Bank Operation and Management
- bacteria
This is a mind map about bacteria, and its main contents include: overview, morphology, types, structure, reproduction, distribution, application, and expansion. The summary is comprehensive and meticulous, suitable as review materials.
- Plant asexual reproduction
This is a mind map about plant asexual reproduction, and its main contents include: concept, spore reproduction, vegetative reproduction, tissue culture, and buds. The summary is comprehensive and meticulous, suitable as review materials.
- Reproductive development of animals
This is a mind map about the reproductive development of animals, and its main contents include: insects, frogs, birds, sexual reproduction, and asexual reproduction. The summary is comprehensive and meticulous, suitable as review materials.
- Recommended to you
- Outline
Commercial Bank Operation and Management
Overview of banking industry
Commercial Bank Overview
Definition, Business and Function
Definition (United States)
As long as it is regulated by the Federal Deposit Insurance Corporation, it is called a bank.
business
Taking deposits
Loans
Handle liquidation
China’s commercial banking system
commercial Bank
large trading houses
joint-stock commercial bank
City commercial banks, rural commercial banks
Private Banks
foreign banks
Policy banks and other policy financial institutions
Function
Credit intermediary
payment intermediary
money creation
Other financial services functions
asset Management
letter of credit
Characteristics of the banking industry
Business Scope
geographical dimension
unitary system
branch system
business dimension
Division of business
Mixed industry
Financial holding companies and banking subsidiaries
merger wave
Scale, efficiency, concentration
Characteristics of China’s banking industry
Government-led
High market concentration
The regulatory system of U.S. commercial banks
regulatory reasons
strong externality
Supervision can promote the healthy development of the banking industry
Bank social responsibility
Tools for implementing policy
Regulatory Impact (doctrine?)
Strict monopoly mechanism will strengthen monopoly
The role of stabilizers (countercyclical)
The relationship between regulation and innovation (innovation to avoid regulation?)
Regulators
Fed
deposit reserve system
office of the comptroller of the currency
Approval and authorization to establish a new bank
deposit insurance company
Manage deposit insurance
The impact of deposit insurance on the banking industry
China’s deposit insurance system
important bill
National Currency and Banking Act
office of the comptroller of the currency
Federal Reserve Act
Fed
Banking Act 1933
Separate business system
Federal Deposit Insurance Corporation
FDIC Amendment Act
FDIC Reform Act
related to deposit insurance
The Riegel-Neal Interstate Bank and Branch Efficiency Act of 1994
Act that promotes the transition from a single unit to a branch system
Financial Services Modernization Act of 1999
A bill to promote the shift from industry division to mixed industry
Basel
Develop bank capital and risk regulatory standards
Other bills
social responsibility
Anti-terrorism and anti-money laundering
The truthfulness and accuracy of financial reports
Regulatory pros and cons
central bank
Fed
Federal Reserve Board
Federal Open Market Committee
federal reserve bank
member bank
Main tasks: Monetary policy
ultimate goal
intermediate goal
policy tools
main
other
Financial statements of commercial banks
Bank Financial Statement Overview
balance sheet
Point in time, stock, source and use of funds
income statement
Time Period Traffic Income and Expenditure
balance sheet
assets
Level 1 reserves: cash and deposits held with other banks
cash in stock
Agency deposit
Check not collected
deposit reserves
Secondary Provision: Investment Securities: Liquidity Component
Meet liquidity needs
Investment Securities: Income Component
Obtain expected rate of return or income
Trading account assets
interbank lending
loan
Classification
Loan loss reserves
Other assets
Liabilities
deposit
Non-deposit borrowings (active liabilities)
Owners' equity
Comparison of large and small rows
securities
Large banks focus on income, while small banks focus on liquidity, holding a higher ratio of investment securities and loans to assets.
Large banks have strong ability to borrow funds
Large banks rely on borrowing to meet liquidity needs, while small banks mainly rely on deposits
Large banks have strong ability to withstand risks
high risk business
(off-balance sheet items)
loan commitment
standby credit agreement
Derivative contracts
income statement
Interest business
interest income
Loan interest
interest expense
Deposit interest
net interest income
Deposit and loan interest rate spread
non-interest business
non-interest income
Trust fees (administration fees)
Guarantee fee
handling fee
Trading account income
non-interest expense
salary
Venue rental
equipment
Net non-interest income
Performance evaluation of commercial banks
bank performance evaluation
what is performance
How to evaluate
share price
Factors affecting stock price
expected dividends
risk premium
risk-free rate
Bank Profitability Assessment
Return on assets ROA
Measures asset management efficiency, i.e. the ability to convert assets into profits
Return on Equity ROE
Measuring shareholder returns
= Net profit margin * Asset profit margin * Equity multiplier
net interest margin
non-interest yield
Add up to get ROA
net operating return
income difference
Average asset return - average cost of capital
Bank risk assessment and other objectives
credit risk
molecular
non-performing assets
Loan loss reserves
Denominator
total loan
total capital
Liquidity risk
market risk
price risk
Interest Rate Risk
capital risk
other
Foreign exchange risk and political risk
Off-balance sheet risk
operational risk
Legal and compliance risks
Reputation risk
strategic risk
Impact of scale on profitability and risk
Advantages of major banks
Strong borrowing capacity and low cost
Large banks have strong ability to resist and manage risks
Branches spread risks
Good risk management and control skills
Large scale
the difference
ROA and ROE of major banks are larger
Large banks have higher net non-interest margins, while small banks have higher net interest margins.
Equity capital/total assets are larger for smaller banks
Loans and deposits are higher than those of major banks
Net bad debt write-offs/total loans are higher for major banks
Allowances for loan losses/total loans are larger for smaller banks
Three major risks in business
Interest Rate Risk
Interest Rate Risk
Asset-Liability Management Strategy
asset Management
Liability Management
Asset-liability management (money management)
interest rate
determining factors
long
market
short term
Monetary Policy
measure/measure
Deposit and loan interest rates
bond interest rate
discount rate
structure
risk premium
Risky vs riskless spreads
term premium
Long term vs short term spread
Interest rate = risk-free short-term interest rate term premium risk premium
Expiration gap
Average maturity of assets - Average maturity of liabilities
Financial institutions generally have a positive maturity gap
Impact of interest rate changes
Changes in net interest income NII
interest rate gap model
interest rate sensitivity gap
net interest spread
Refinancing risk and reinvestment risk
Synchronize pricing time
Analyze interest rate sensitivity
Term classification
Gaps at each level
Total assets - total liabilities
Analyze the impact of interest rate changes on the net interest spread of each grade
interest rate sensitivity gap
Bank gaps are mostly negative and liability-sensitive
Interest rate sensitivity gap management
positive
precautionary
Eliminate gaps
Hedging
Problems and Prevention
weighted interest rate sensitive gap
Duration gap management
bond price changes
duration model
duration model
Duration
Measuring maturity using value weighted by time
step
annual cash flow
The present value of cash flows in each period and its sum
Time*Cash flow present value and its sum
Duration
Influencing factors
the term
Proportional
coupon rate
Inversely proportional
Yield to maturity YTM
Inversely proportional
extreme case
zero coupon bond
Duration equals maturity
non-repayment bond
Duration=1 1/R
bond pricing formula
formula
The sensitivity of bond prices to interest rates
portfolio duration
Use duration models to avoid interest rate risks
hypothesis
market price method
The duration gap is
Often positive
Asset size
The size of the interest rate shock
measure
Passive response measures
When the direction of interest rate changes cannot be predicted
Portfolio Preservation
Active response measures
When the direction of interest rate changes can be predicted
Adjust the gap
method
shortcoming
lower rate of return
Increase in cost rate
Increased risk of bank failure
Over time, the gap value will change
Large interest rate fluctuations cannot be accurately estimated
Interest rate risk hedging tools
Financial futures contracts and interest rate options
financial futures contract
Delivery at an agreed price at a certain time in the future
participant
ultimate buyer
investor
Hedging risk
type
Short Hedging
Long hedging
Steps to Hedging Interest Rate Risk
Determine who to hedge risk
Choose a hedging tool
Make the above add up to zero by trading
One question: basis
interest rate options
Classification
call option
put option
choose
exercise option
selling options
Do not exercise and let the option expire
Financial institutions are often the buyer rather than the seller
interest rate swap
Interest rate ceiling, interest rate floor and interest rate upper and lower limits
risk measurement model
Value at risk VaR
Measure potential losses in extreme situations
Confidence
The length of time
Probability distribution of returns
Daily risk return DEAR (daily value at risk)
If it follows a normal distribution
Insured income for N days
Portfolio Value at Risk
ρ
Lack of description of tail risks
Historical/backward simulation
How will asset values change if history repeats itself?
Advantages and Disadvantages
Monte Carlo simulation
Synthesize additional samples to overcome the problem of limited number of historical observation samples
Implemented through the same variance-covariance method
Expected loss ES (conditional VaR)
What is the expected loss on the tail?
credit risk
Quantitative method
What to measure
inside information
public information
How to measure
qualitative model
Variables related to borrowing companies
Reputation, leverage ratio, stability of income, mortgage guarantee
market related variables
Economic cycle, interest rate level
Quantitative model
credit scoring model
linear model
default rate
step
Select variables
variables related to the enterprise
Industry related variables
Macroeconomic related variables
Estimate parameter value β
regression, valuation
Improve
logit model
More accurate
Z-score model
(Variables are already given)
>2.99 has a low default rate, <1.81 has a high default rate, and it is impossible to judge whether it is in the middle.
More convenient to use
term structure model
Use public market information to determine a company's default risk
repayment rate
(i: Treasury bond interest rate, k: Corporate bond interest rate)
Got collateral?
(γ: recovery rate)
What about two phases?
First year repayment rate
Second year repayment rate
Two-year cumulative default rate (questionable)
Credit risk avoidance tools
Loan securitization and loan sales
loan securitization
step
Asset conversion: loan pool → asset-backed securities
Securities rating, credit support (guarantee), liquidity support
Securities Sales (Underwriters)
Review and Assurance
effect
advantage
Helps lenders transfer and spread credit risks
Improving liquidity for assets that are illiquid and expensive to sell
But securitization cannot be used as a tool to manage liquidity risk
Interest rate risk management tools
The interest rate sensitivity gap and duration gap become smaller
Possibility of additional income
Create profit opportunities
Disadvantages
Securitization costs are too high
Time consuming
Many participants and strong externalities
origin
residential mortgage market
Residential Equity Loan
Bonds issued on a loan basis
The loan remains on the balance sheet
Credit risk is not transferred
Reduce interest rate risk
loan for sale
participant
seller
Purchaser
seller
form
Participate in Loans
transfer
loan stripping
reason
risk
standby letter of credit
credit derivatives
Liquidity risk
introduction
Objects involved
central bank liquidity
market liquidity
Financing Liquidity
financial institution liquidity
Liquidity and Liquidity Risk
fluidity
Liquidity demand and supply
Liquidity risk
→The importance of liquidity management to financial institutions
Causes of Liquidity Risk
debtor
Asset side
Other causes
Liquidity management
Features
temporality
customer's demand
Interest rate risk and availability risk
bring costs
Nature
Cash flow out of sync
Alternative trade-offs between liquidity and profitability
liquidity issues
Asset and liability maturities do not match
Seasonal
Interest rate issue (doubtful)
Liquidity Management Strategy
Asset side
Hold liquid assets
Cash, negotiable securities, etc.
shortcoming
Mostly used by small banks
debtor
Buy liquidity
borrow
Mostly used by big banks
advantage
shortcoming
Balanced liquidity management strategy
Forecast liquidity needs (estimate changes in deposits and loans)
method
Sources and use of funds
source of liquidity
Increase in deposits or decrease in loans
Liquidity usage
Decrease in deposits or increase in loans
Predict changes in deposits and loans?
Predictive model
return
Segment Forecast
Trend, seasonality, cyclicality
(Employed by a management machine...?)
capital structure method
Sources of funds are classified according to the likelihood of being withdrawn
hot money liabilities
volatile funds
stable funding
Reserve liquidity funds
outflow rate
live
loan liquidity needs
Forecasting outstanding loans
actual outstanding loans
loan
Total liquidity demand = Liability liquidity demand (deposits) Loan liquidity demand (loans)
Liquidity needs under different possibilities
liquidity indicator method
liquidity index
Fire sale price
Market Signals (Market Discipline) Act
Public confidence, stock prices, risk premiums, etc.
Liquidity preparation
planning part
protective part
Basel Committee’s Mobility Framework
liquidity coverage ratio
asset perspective
net stable financing ratio
Liability angle
bank business
deposit
loan
Capital management