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Chapter 10
Banking and
the Management
of Financial
Institutions
Copyright © 2010 Pearson Education. All rights reserved.
The Bank Balance Sheet
• Liabilities
–
–
–
–
Checkable deposits （支票存款）
Nontransaction deposits (非交易存款)
Borrowings (借入款)
Bank capital (銀行資本)
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10-2
The Bank Balance Sheet
• Assets
–
–
–
–
–
–
Reserves (準備金)
Cash items in process of collection (託收中現金 )
Deposits at other banks(在他行存款)
Securities (證券投資)
Loans (放款)
Other assets
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10-3
Table 1 Balance Sheet(資產負債表) of All
Commercial Banks (items as a percentage of
the total, December 2008)
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10-4
Table 1 Balance Sheet of All
Commercial Banks (items as a
percentage of the total, June 2011
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10-5
Basic Banking: Cash Deposit
First National Bank
Assets
Vault
Cash
+$100
First National Bank
Liabilities
Checkable
deposits
+$100
Assets
Reserves
+$100
Liabilities
Checkable
deposits
+$100
• Opening of a checking account leads to an increase
in the bank’s reserves equal to the increase in
checkable deposits
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10-6
Basic Banking: Check Deposit
When a bank receives
First National Bank
Assets
Liabilities
Cash items in +$100
process of
collection
Checkable
deposits
+$100
additional deposits, it
gains an equal amount of reserves;
when it loses deposits,
it loses an equal amount of reserves
First National Bank
Assets
Reserves
+$100
Second National Bank
Liabilities
Checkable
deposits
Copyright © 2010 Pearson Education. All rights reserved.
+$100
Assets
Reserves
Liabilities
-$100
Checkable
deposits
-$100
10-7
Basic Banking: Making a
Profit
First National Bank
Assets
Required
reserves
Excess
reserves
First National Bank
Liabilities
+$100 Checkable
deposits
+$90
+$100
Assets
Required
reserves
Loans
Liabilities
+$100 Checkable
deposits
+$100
+$90
• Asset transformation(資產轉換): selling liabilities with one set
of characteristics and using the proceeds to buy assets with a
different set of characteristics(賣出各種性質的負債(存款）再將本
金買進不同性質的資產(放款))
• The bank borrows short and lends long （借短貸長）
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10-8
Bank Management
•
•
•
•
Liquidity Management（流動性管理）
Asset Management（資產管理）
Liability Management（負債管理）
Capital Adequacy Management（資本適足管
理）
• Credit Risk（信用風險）
• Interest-rate Risk（利率風險）
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10-9
Liquidity Management: Ample
Excess Reserves （足夠的超額準備）
Assets
Liabilities
Reserves
$20M Deposits
Loans
$80M Bank
Capital
$10M
Securities
$100M
$10M
Assets
Liabilities
Reserves
$10M Deposits
$90M
Loans
$80M Bank
Capital
$10M
$10M
Securities
• Suppose bank’s required reserves are 10%
• If a bank has ample excess reserves, a deposit
outflow does not necessitate changes in other parts
of its balance sheet （存款流失不需要改變資產負債表其
他部分）
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10-10
Liquidity Management:
Shortfall in Reserves （準備不足）
Assets
Liabilities
Reserves
$10M Deposits
Loans
$90M Bank
Capital
$10M
Securities
$100M
$10M
Assets
Reserves
Loans
Securities
Liabilities
$0 Deposits
$90M Bank
Capital
$10M
$90M
$10M
• Reserves are a legal requirement and the shortfall
must be eliminated （準備金(的作用)是法定準備與(使
用超額準備)排除資金不足）
• Excess reserves are insurance against the costs
associated with deposit outflows(超額準備的作用是為
保障(免於)因存款流失所導致的成本)
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10-11
Liquidity Management:
Borrowing
Assets
Reserves
Liabilities
$9M Deposits
$90M
Loans
$90M Borrowing
$9M
Securities
$10M Bank Capital
$10M
• Cost incurred is the interest rate paid on the
borrowed funds ((借入款)成本來自於借入資金的利息支
付)
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10-12
Liquidity Management:
Securities Sale
Assets
Reserves
Loans
Securities
Liabilities
$9M Deposits
$90M Bank Capital
$90M
$10M
$1M
• The cost of selling securities is the brokerage and
other transaction costs(銷售證券的成本是經紀商手續費
與其他交易成本
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10-13
Liquidity Management:
Federal Reserve
Assets
Reserves
Liabilities
$9M Deposits
Loans
$90M Borrow from Fed
Securities
$10M Bank Capital
$90M
$9M
$10M
• Borrowing from the Fed also incurs interest
payments based on the discount rate(向聯邦準備銀行
(央行）借入資金也會引發來自於貼現窗口利率之利息支付)
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10-14
Liquidity Management:
Reduce Loans
Assets
Reserves
Liabilities
$9M Deposits
Loans
$81M Bank Capital
Securities
$10M
$90M
$10M
• Reduction of loans is the most costly way of
acquiring reserves（以放款減少來籌措準備金所耗費的成本最高）
• Calling in loans antagonizes customers(收回放款會得罪客戶）
• Other banks may only agree to purchase loans at a
substantial discount（其他銀行可能會同意在實質折扣下購買放款）
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10-15
Asset Management: Three
Goals
• Seek the highest possible returns on loans
and securities（尋找放款與證券之最高可能報酬）
• Reduce risk （降低風險）
• Have adequate liquidity（要有適度的流動性）
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10-16
Asset Management: Four
Tools
• Find borrowers who will pay high
interest rates and have low possibility
of defaulting（最高利率與最低違約可能）
• Purchase securities with high returns and
low risk （最高報酬與最低風險）
• Lower risk by diversifying（越分散風險越低）
• Balance need for liquidity against increased
returns from less liquid assets （越高報酬越
低流動性的資產越需要流動性以平衡之）
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10-17
Liability Management(負債管理)
• Recent phenomenon due to rise of money
center banks（貨幣中心(大型)銀行）
• Expansion of overnight loan markets(隔夜拆
款市場) and new financial instruments （新金
融工具） (such as negotiable CDs（可轉讓定期
存單）)
• Checkable deposits have decreased in
importance as source of bank funds
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10-18
Capital Adequacy
Management
• Bank capital helps prevent bank failure（銀
行資本有助於防止銀行失敗）
• The amount of capital affects return for the
owners (equity holders) of the bank(銀行業
主之報酬)
• Regulatory requirement (法定要求)
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10-19
Capital Adequacy Management:
Preventing Bank Failure
High Bank Capital
Assets
Low Bank Capital
Liabilities
Assets
Liabilities
Reserves
$10M Deposits
$90M Reserves
$10M Deposits
Loans
$90M Bank Capital
$10M Loans
$90M Bank Capital
High Bank Capital
Assets
$10M Deposits
Loans
$85M Bank Capital
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$4M
Low Bank Capital
Liabilities
Reserves
$96M
Assets
$90M Reserves
$5M Loans
Liabilities
$10M Deposits
$96M
$85M Bank Capital
-$1M
10-20
Capital Adequacy Management:
Returns to Equity Holders
Return on Assets: net profit after taxes per dollar of assets
net profit after taxes
assets
Return on Equity: net profit after taxes per dollar of equity capital
ROA =
ROE =
net profit after taxes
equity capital
Relationship between ROA and ROE is expressed by the
Equity Multiplier: the amount of assets per dollar of equity capital
Assets
EM =
Equity Capital
net profit after taxes net profit after taxes
assets


equity capital
assets
equity capital
ROE = ROA  EM
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10-21
Capital Adequacy
Management: Safety
• Benefits the owners of a bank by making
their investment safe(維護投資的安全是銀行股
東權益）
• Costly to owners of a bank because the
higher the bank capital, the lower the return
on equity（越多的資本導致股東的成本是越低的
資本報酬）
• Choice depends on the state of the economy
and levels of confidence （根據經濟現況與信心
水準做出(最適資本)選擇）
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10-22
Application: How a Capital Crunch
Caused a Credit Crunch in 2008
• Shortfalls of bank capital led to slower credit
growth(銀行資本不足會導致信用成長遲緩)
– Huge losses for banks from their holdings of
securities backed by residential mortgages(不動
產抵押貸款所擔保發行的證券).
– Losses reduced bank capital
• Banks could not raise much capital on a
weak economy(在經濟低迷時銀行很難籌措資本),
and had to tighten their lending standards
and reduce lending.
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10-23
Credit Risk: Overcoming Adverse
Selection and Moral Hazard
• Screening（篩選） and Monitoring(監督)
– Screening
– Specialization in lending（貸款專門化）
– Monitoring and enforcement of
restrictive covenants(強制性限制條款)
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10-24
Credit Risk: Overcoming Adverse
Selection and Moral Hazard
• Long-term customer relationships（長
期的顧客關係）
• Loan commitments（放款承諾）
• Collateral and compensating balances
（擔保品與補償存款 ）
• Credit rationing（信用分配）
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10-25
Interest-Rate Risk
First National Bank
Assets
Rate-sensitive assets
Liabilities
$20M Rate-sensitive liabilities
Variable-rate and short-term loans
Variable-rate CDs
Short-term securities
Money market deposit accounts
Fixed-rate assets
$80M Fixed-rate liabilities
Reserves
Checkable deposits
Long-term loans
Savings deposits
Long-term securities
Long-term CDs
$50M
$50M
Equity capital
• If a bank has more rate-sensitive liabilities than assets（利率敏
感負債超過利率敏感資產）, a rise in interest rates will reduce
bank profits and a decline in interest rates will raise bank
profits
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10-26
Interest Rate Risk: Gap
Analysis(缺口分析)
• Basic gap analysis:
(rate sensitive assets - rate sensitive liabilities) x  interest rates =
profit
 in bank
• Maturity bucked approach
– Measures the gap for several maturity
subintervals.
• Standardized gap analysis
– Accounts for different degrees of rate sensitivity.
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10-27
Interest Rate Risk: Duration
Analysis(存續期間分析)
% in market value of security  - percentage point in interest rate
x duration in years.
• Uses the weighted average duration of a financial
institution’s assets and of its liabilities to see how
net worth responds to a change in interest rates.
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10-28
Off-Balance-Sheet Activities
• Loan sales (secondary loan participation)(聯
貸)
• Generation of fee income(手續費收入時代).
Examples:
– Servicing mortgage-backed securities.
– Creating SIVs (structured investment vehicles(結
構型投資工具)) which can potentially expose
banks to risk, as it happened in the subprime
financial crisis of 2007-2008.
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10-29
Off-Balance-Sheet Activities
• Trading activities and risk management
techniques
– Financial futures (金融期貨), options for debt
instruments (債務工具選擇權), interest rate swaps
(利率交換), transactions in the foreign exchange
(外匯買賣) market and speculation.
– Speculation(投機)
– Principal-agent problem arises (主人-代理人問題)
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10-30
Off-Balance-Sheet Activities
• Internal controls to reduce the principalagent problem
– Separation of trading activities and bookkeeping
– Limits on exposure（限制曝險額）
– Value-at-risk(風險值)
– Stress testing(壓力測試)
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10-31