Risks facing by the Financial Institutions . Part-4

Explain  spread  &  burden  with  example.

Spread:

An interest rate spread is loaning rate short store rate, %. Premium rate spread is the premium rate charged by banks on advances to private division clients short the premium rate paid by business or comparative banks for interest, time, or investment funds stores. The terms and conditions connected to these rates contrast by nation, then again, constraining their equivalence.

Burden:

Burden  Rate  is  is circuitous expenses connected with workers, well beyond net remuneration or finance costs. Common expenses connected with the weight rate incorporate finance assessments, specialist's pay and well being protection, paid time off, preparing and travel costs, excursion and wiped out leave, annuity commitments and different advantages.

Burden=(Non-interest  operating  Expenditure  -  Non-interest  operating  income)  / Average  Total  Assets.

A  bank  with  a  low  burden  ratio  is  more  better  off.  An  increasing  trend  would show lack of burden bearing capacity.

Explain  liability  structure  financial  institutions.

Liability  Structure  refers  to  deposit  sources  of  funds  that  comprise  to-

* Core  deposits  of  regular  bank  customers

* Purchased  deposits  are  acquired  on  a  non-personal  basis
   

* Demand  deposits,  small  time  and  savings  deposits,  large  time  deposits

* Liability  management  is  based  on  purchased  funds.

* Brokered  deposits.

The components  of  liability  structure  are-  

1.  Amounts  owed  to  central  banks

2.  Amounts  owed  to  credit  institutions

3.  Amounts  owed  to  customers

4.  Debts  evidenced  by  certificates

5.  Liabilities  (other  than  deposits)  held  for  trading

6.  Provisions

7.  Subordinated  liabilities

8.  Other  liabilities

9. Capital and reserves.

Explain  re-pricing  model  with  example.

The  Re-pricing  Model  called  re-pricing  GAP  model-   

1.  Income  oriented  model: 

Target  variable  =  Net  Interest  Income  =  Interest  Revenues  –  Interest Expenses   

2.  Interest  Rate  Gap  difference  between  assets  and  liabilities  sensitive  to interest  rates  changes  in  a  predefined  time  period  

3.  An  asset  or  a  liability  is  “sensitive”  if,  in  the  relevant  time  period  (“gapping period”),  it  reaches  its  maturity  or  there  is  a  renegotiation  of  the  interest rate G=SA-SL.

Discuss  the  important  aspects  that  should  be considered  by  a banker  while  financing  an  industrial  project.

Each  project  should  define:

1.  Stakeholders

2.  Project  goals

3.  Resources  (people,  budget  etc).

4.  Deadline  (schedule)

5.  Milestones

6.  Project  scope

7.  Known  constraints

8. Risk management.

What  are  the  processes  for  measuring  and  evaluating  the performance  of  a  financial  institution?

Evaluating  a  Bank's  Performance

A. Determining  Long-Range  Objectives

B. Maximizing  The  Value  of  the  Firm:  A  Key  Objective  for  Nearly  All Financial-Services  Institutions

C. Profitability  Ratios: 

A  Surrogate  for  Stock  Values  (Many  small  banks do  not  have   an  active  stock  market  and  product  or  geographic subsets  of  a  bank  do  not  have  stock  prices.) 

1. Key  Profitability  Ratios (ROE,  ROA,  NIM,  NIMPLL,  EPS, Efficiency  Ratio,  Fee  Income  Ratio)

2. Interpreting Profitability Ratios 

Measuring  Risk  in  Banaking  and  Financial  Services  (pp.  181-188).  We will  not  cover  these  now  but  will  cover  them  in  detail  in  the  appropriate places  during  the  semester.  (Credit  Risk,  Liquidity  Risk,  Market  Risk, Interest-Rate  Risk,  Foreign  Exchange  &  Sovereign  Risk, Off-Balance  Sheet Risk, Operational  (Transactional)  Risk, Legal & Compliance Risk, Reputation Risk, Strategic Risk, and Capital Risk) Key  Performance  Indicators  among  Banking’s  Key  Competitors  (NOTE:  when  an  income  statement  item  for  a  period  is  combined  with  a  balance sheet  item  for  a  specific  time  the  average  of  the  balance  sheet  item  for the income statement period should be used.)

Inter Branch Reconciliation

Inter Branch Reconciliation is a noteworthy action for Banks and financial organizations hoping to make an adjusted company appointment between their different branches and their activities. TechMech offers entomb branch compromise administrations whereby our prepared experts cover each exchange, trade of services and other collaborations between diverse branches of a bank or backups of an organization. Our specialists guarantee a sharp tender loving care, covering each connection inside and out, so as not to pass up a great opportunity for any innate blemishes or inconsistency. Bury branch reconciliation can help the association find any lapses or carelessness in exchanges and roll out due improvements. Our specialists, with their point by point budgetary information, can help to discover lapses as well as likewise encourage in evacuating or minimizing them. We are trained to handle expansive volumes of budgetary information and have worked with organizations of all scales.



Risks facing by the Financial Institutions . Part-1

Risks facing by the Financial Institutions . Part-2

Risks facing by the Financial Institutions . Part-3

Risks facing by the Financial Institutions . Part-4