Indicate how a bank’s core deposits differ from its wholesale liabilities in terms of interest elasticity. What factors are relatively more important for attracting and retaining core deposits as compared with purchased funds?
Answer to relevant QuestionsWhat can a bank do to increase its core deposits? What are the costs and benefits of such efforts? Generally, how might management estimate the relative interest elasticity of various deposit liabilities of a bank? As a potential jumbo CD depositor, under what circumstances would you prefer a variable rate CD over a fixed rate CD? Under what circumstances would you prefer a zero coupon CD over a variable rate CD? Explain the role that the Federal Reserve played in providing loans to financial institutions during the financial crisis of 2007– 2010. What are the advantages and disadvantages of using financial leverage? Answer from the banker’s point of view and then from the bank regulator’s point of view. Many analysts argue that RBC requirements should force banks to raise loan rates. Explain this by assuming that a bank’s management sets loan rates to earn a 16 percent ROE. How does the allocation of equity to a loan ...
Post your question