What do you mean by Loan Securitization ? Explain its impact on banks Securitizationis the practice of creating and selling interests in the returns from a large pool of liquid assets (assets that cannot easily be transferred).
Securitizing assets with low liquidity, such as loans, allows the owner to sell the assets more easily.
The impacts of securitization are as follows:
1. Creates of markets in financial claims by creating tradable securities.
2.
Spread of holding of financial assets as the security is
designed in minimum size marketable lots as necessary.
3. Promotion of savings-
securitization
makes it possible for the simple investors to invest in
direct financial claims at attractive rates
4. Reduces costs-
The intermediation costs, since the specialized-intermediary costs are service-related, and comparatively lower.
5. Risk diversification-
Securitization
spreads diversified risk to a wide base of investors, with
the result that the risk inherent in financial transactions is
diffused.
6.
Focuses on use of resources, and not their ownership as a
custodian for the several investors who thereafter acquire such
claim.
Importance of Loan Securitization.
The
issuers use securitization to fund their business exercises. The
money related resources that bolster installments on resource upheld
securities incorporate private and business home loan advances, and in
addition a wide assortment of non home loan resources. Securitized
resources may be connected to any benefit that has a sensibly
ascertainable quality, or that creates a sensibly unsurprising future
stream of income. Securitization prompts organized account, as the
subsequent security is not a non specific danger in substance that
securitizes its advantages, yet in particular resources or money streams
of such element.
The thought of securitization is to make a capital business sector item that is, it comes about into making of a security which is an attractive item. Thusly, there is expansive extension for advancement here. Capital markets are today a spot where we can exchange, claims over elements, claims over resources, dangers, and prizes. Give us a chance to consider certain sorts of securitization.
The thought of securitization is to make a capital business sector item that is, it comes about into making of a security which is an attractive item. Thusly, there is expansive extension for advancement here. Capital markets are today a spot where we can exchange, claims over elements, claims over resources, dangers, and prizes. Give us a chance to consider certain sorts of securitization.
What is minimum capital and liquidity requirement for a non-bank financial institution?
Minimum capital requirement for NBFIs:
As per department of financial institutions and markets of Bangladesh bank circulate that the NBFIs to raise the paid-up capital by June 30, 2012 from the amount 50 crore to the amount 100 crore and they would not be allowed to offer cash dividends until they fulfilled the newly-set paid-up capital requirement as a part of implementation of BASEL II. The foreign financial institutions operating in Bangladesh will also have to fulfill the same paid-up capital requirement. [For Banks, as a part of implementation of Basel-II accord, banks are required to maintain minimum capital to risk-weighted assets ratio at 10% of which core capital will not be less than 5% effective from December 31, 2007. However, minimum capital requirements as required under Article 13 of Banking Companies Act, 1991 for all banks has been raised to Tk.400 crore of which the paid up capital shall be minimum Tk.200 crore. Banks having capital shortfall will have to meet the shortfall by august 11, 2011.]
Minimum liquidity requirement for NBFIs:
Required reserved 6%, raised from 5.50. Effective from 15 December 2010.
As per department of financial institutions and markets of Bangladesh bank circulate that the NBFIs to raise the paid-up capital by June 30, 2012 from the amount 50 crore to the amount 100 crore and they would not be allowed to offer cash dividends until they fulfilled the newly-set paid-up capital requirement as a part of implementation of BASEL II. The foreign financial institutions operating in Bangladesh will also have to fulfill the same paid-up capital requirement. [For Banks, as a part of implementation of Basel-II accord, banks are required to maintain minimum capital to risk-weighted assets ratio at 10% of which core capital will not be less than 5% effective from December 31, 2007. However, minimum capital requirements as required under Article 13 of Banking Companies Act, 1991 for all banks has been raised to Tk.400 crore of which the paid up capital shall be minimum Tk.200 crore. Banks having capital shortfall will have to meet the shortfall by august 11, 2011.]
Minimum liquidity requirement for NBFIs:
Required reserved 6%, raised from 5.50. Effective from 15 December 2010.
a) Securities
b) Equity instrument
b) Equity instrument
c) All other preference shares
d) Subordinated debt.
3. Tier-3 Additional Supplementary Capital:
Short-term subordinated debt that original maturity 2 to 5 years.
Short-term subordinated debt that original maturity 2 to 5 years.
4. Foreign banks operating:
a) Tier-1 consists
- Funds from head office
- Remitable profit retained
- Other items approved by central bank.
- Funds from head office
- Remitable profit retained
- Other items approved by central bank.
b) Tier-2 consists
- General provision Borrowing from head office in foreign currency
- Revaluation of securities
- Other items approved by central bank.
5.Conditions pf maintaining capital:
- General provision Borrowing from head office in foreign currency
- Revaluation of securities
- Other items approved by central bank.
5.Conditions pf maintaining capital:
a) Tier-2 will be limited to 100% of amount of Tier-1
b) 50% of revaluation reserves for fixed assets & securities eligible for Tier-2
c) 10% of revaluation reserves for equity instruments eligible for Tier-2
d) Subordinated debt should limited up to 30% of the amount of Tier-1
e) Limitation of Tier 3: 28.5% market risk needs to support by Tier-1.
Market Risk support from Tier-3 should up to 250% of Tier-1
Market Risk support from Tier-3 should up to 250% of Tier-1
Financial
institute is required to maintain a Cash Reserve Ratio (CRR)
of 2.50% on its customer deposits. The CRR is maintained with
the non-interest bearing current account with the Bangladesh
Bank. In addition, every financial institute is required to
maintain a Statutory Liquidity reserve (SLR) of 5% (including
CRR) on all its liabilities [For Banks, the present statutory
liquidity reserve (SLR) requirement is 20% of total demand and
time liabilities, 4% of which is to be maintained as cash
reserve ratio (CRR), and the rest 16% as approved securities.
The SLR requirement for Islamic banks is 10% and they are to
keep 4% of this reserve as CRR and the rest 6% in approved
securities.]
What are the differences between market value and book value of capital Sl (sell loan).
Book Value vs Market Value
1.
Book value is the price paid for a particular asset.
Book value is the price paid for a particular asset.
&
Market value is the current price at which you can sell an asset.
2.
This price never changes.
This price never changes.
&
The price may be changed.
3.
Useful to help track profits and losses.
Useful to help track profits and losses.
&
It indicates the profit or loss incurred.
4.
The need for book value also arises when it comes to generally accepted accounting principles.
The need for book value also arises when it comes to generally accepted accounting principles.
&
It is not raises from generally accepted accounting principles.
5.
Sometimes creates problems for assets price being fixed.
Sometimes creates problems for assets price being fixed.
&
It generates the appropriate price.
Why banks and other financial institutions sell loan?
The banks and FIs sell loan due to profits and reduce the some capital expenditures are mentioned below:
1. Reserve Requirement:
Regulatory
authority forces non-enthusiasm bearing necessities, are a type of
expense that adds to the expense of financing the credit portfolio.
Administrative assessments, for example, save necessities make a
motivator for banks to expel credits from the asset report by advance
offering.
2. Fee Income:
Banks
and financial institutions often report any income earned from
selling loans. Therefore, beginning and rapidly offering credits can
help banks and money related establishments reported wage under current
bookkeeping guidelines.
3. Capital Costs:
The
reserve requirements imposed as a weight the length of obliged
capital surpasses the sum that they battle to meet sufficient capital
necessities holding more obligation capital as opposed to value
capital.
4. Liquidity Risk:
The
liquidity is a major problem because of liabilities has a
tendency to be exceedingly fluid. To determine it, some of its credits
deals to outside financial specialists and essentially decreased the
liquidity as resources on the accounting report.
What are the sources of revenue and areas of expenses for a bank & insurance company?
Sources of revenue of a Bank:
1. Interest Earned:
- Discount bills.
- Income on investments.
- Balances with other banks & FIs.
2. Other Income :
- Commission, exchange, brokerage.
- Sale of investments.
- Revaluation of investments.
-Sale of land building & other assets. - Exchange transactions.
Areas of expenses of a bank:
1. Interest Expense :
- Interest on deposits.
- Interest on borrowings to other banks & FIs - Others.
2. Operating Expenses:
- Provisions .
- Rent, taxes.
- Printing, stationery, advertising, publicity.
- Depreciation.
- Fees of auditors & advocacy.
- Utility bill.
- Repairs and maintenance.
- Insurance.
Sources of revenue of a Insurance Company:
- Premiums paid by Policy owners.
- Income from investments .
Areas of expenses of a Insurance Company:
- Commissions paid to agents.
- Expenses to investigate, litigate, settle claims.
- Advertising.
- Computerized racing and policy issuance systems.
- Postage and telephone charges.
- Travel expenses.
- Salaries.
Define different capital requirement.
Capital requirement is categorized in three tiers:
1. Tier-1
capital called ‘Core Capital’ comprises of highest quality of capital elements:
a) Paid up capital
b) Non-repayable share premium account
c) Statutory reserve
d) General reserve
e) Retained earnings
f) Minority interest in subsidiaries g) Non-cumulative irredeemable preference shares.
h) Dividend equalization account
2. Tier-2
capital
called ‘Supplementary Capital’ represents other elements, which
fall short of some of the characteristics of the core capital
but contribute to the overall strength of a bank:
a) General provision
b) Revaluation reserves - - Fixed assets Securities Equity instrument
c) All other preference shares
d) Subordinated debt.
3. Tier-3
capital
called ‘Additional Supplementary Capital’, consists of short-term
subordinated debt (original maturity 2 to 5 years) would be
solely for the purpose of meeting a proportion of the capital
requirements for market risk.
Point out the major guidelines regarding management of capital according to Basel-II.
The major guidelines regarding capital management are as pointed below:
1. Tier-1
Core Capital:
a) Paid up capital
b) Non-repayable share premium account
c) Statutory reserve
d) General reserve
e) Retained earnings
f) Minority interest in subsidiaries g) Non-cumulative irredeemable preference shares
h) Dividend equalization account
2. Tier-2
Supplementary Capital:
a) General provision
b) Revaluation reserves
- Fixed assets
- Securities
- Equity instrument.
c) All other preference shares
d) Subordinated debt.
3. Tier-3
Additional Supplementary Capital: Short-term subordinated debt that original maturity 2 to 5 years.
4. Foreign banks operating:
a) Tier-1 consists
- Funds from head office .
- Remittable profit retained Other items approved by BB
b) Tier-2 consists
-
General provision Borrowing from head office in foreign
currency Revaluation of securities Other items approved by BB.
5. Conditions pf maintaining capital:
a) Tier-2 will be limited to 100% of amount of Tier-1
b) 50% of revaluation reserves for fixed assets & securities eligible for Tier-2
c) 10% of revaluation reserves for equity instruments eligible for Tier-2
d) Subordinated debt should limited up to 30% of the amount of Tier-1
e) Limitation of Tier 3:
28.5% market risk needs to support by Tier-1. Market Risk support from Tier-3 should up to 250% of Tier-1 .
Opening bank account, checking accounts, student bank account
ReplyDeleteRisks facing by the financial institutions another part-3 is release. What you tell for such pages because all for the institute is here where you must get all https://bestwritingsclues.com/reviews/myperfectwords-review/ risk. When you whole team is trying to change your risk facing ideas.
ReplyDelete
ReplyDeleteHello everyone..Welcome to my free masterclass strategy where i teach experience and inexperience traders the secret behind a successful trade.And how to be profitable in trading I will also teach you how to make a profit of $7,000 USD weekly and how to get back all your lost funds feel free to Email: tdameritrade077@gmail.com
This is excellent information which is shared by you. This information is meaningful and magnificent for us to increase our knowledge about it. Keep sharing this kind of information. Thank you. compliance risk assessment
ReplyDeleteAll around the world, there is a growing problem with illegal sports-betting. In countries across Europe and Asia as well as North America, bookmakers have been using advanced technology to take advantage of loopholes in the law that surround gambling. By going https://www.aviationanalysis.net/is-it-real-to-win-money-at-online-casinos/ into billiard bookmaker and cafés across the world, these illegal bookmakers can make large amounts of money.
ReplyDeleteOur Play Rewards app offers a rewarding way for you to play casino without deposit, collect points and redeem them for great prizes. It's easy to use and available on https://exycasinos.ca/casino-bonus/no-deposit/ your desktop and mobile so you can pick up where you left off no matter where the road takes you.
ReplyDelete