The Economics Of Banking 1st Edition Kent Matthews, John Thompson - Solutions

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Critically evaluate the argument that an independent central bank should be‘conservative’ but not ‘too conservative’.
What is the credit channel?
Review the mechanisms by which monetary policy a¡ects the economy.
How does ¢nancial innovation reduce the e¡ectiveness of domestic monetary policy?
What are the macroeconomic objectives of a central bank? How do they di¡er from the macroeconomic objectives of the government?
In the context of central banking, explain the di¡erence between the terms ‘operational independence’ and ‘goal independence’.
How does the Bank of England in£uence the level of interest rates in the market?
What is your dollar VaR when holding a UK portfolio of »100m if the current exchange rate is $1.5 per », the correlation between the return on the UK portfolio and the exchange rate is ¼ 0:5, the standard deviation of the UK portfolio is 1 ¼ 1:896% and the standard deviation of the exchange
A bank is trading on its own account $10m of corporate bonds and $5m of Treasuries. The daily volatility of corporate bonds is 1 ¼ 0:9%, and the daily volatility of Treasuries is 2 ¼ :6%. Calculate the variance of the portfolio and the Basel-recommended VaR if the correlation between the
How is VaR used to evaluate Capital-at-Risk?
What is the advantage to the investor from diversi¢cation?
What is Value-at-Risk and how is it used to manage market risk?
What is interest rate risk? How do banks manage interest rate risk?
What are the main risks that banks manage?
Why do banks need to manage risk?
‘Banks cannot be trusted to regulate themselves and, therefore, prudential regulations are a necessary evil.’ Discuss.
‘Deposit insurance weakens the incentive to maintain capital adequacy’(K. Dowd). Comment.
What measures have been suggested to increase the degree of market discipline on bank’s risk-taking and capital adequacy?
di¡er from Basel 1?
How does Basel
What is the main regulatory condition of Basel 1? What are the standard criticisms of Basel 1?
What are the arguments in favour of a government-backed deposit insurance scheme?
What are the main reasons for bank regulation?
What are the real resource costs of regulation?
What are the problems in measuring the e⁄ciency of a bank’s operation?
Critically comment on the various methods for the evaluation of bank performance.
How may event studies be used to assess whether mergers have been advantageous?
What is Data Envelopment Analysis and how may it be used in judging whether mergers have increased e⁄ciency?
What accounting ratios may be used to measure changes in e⁄ciency following a merger?
How may the estimation of cost and production functions assist in measuring the e⁄cacy of bank mergers?
In recent years, there has been a growth of and acquisitions in the banking industry. Why may this have occurred?
How may bank output be measured?
What is securitization? Comment on its signi¢cance for international banking.
Discuss the implications of securitization for the long-term future of banking.
How do banks gain from asset-backed securitization?
What is asset-backed securitization? How are the securities issued?
What are the three categories of securitization arranged through ¢nancial markets?
What are (a) NIFs, (b) FRNs and (c) commercial paper? Does the growth of these harm banks?
What factors explain the growth of securitization?
Financial intermediation can be considered as a bundle of separate services.What are these separate components?
‘Credit rationing is not really the result of market failure but a failure on the part of the borrower to appreciate the true price of credit.’ Discuss.
Critically comment on the argument that pro¢t-maximizing banks would not ration credit because of the many alternative sources of funding available to the borrower.
Review the implications of adverse incentives for the explanation of credit rationing.
Explain what you understand by the following terms: (a) asymmetric information, (b) moral hazard, (c) adverse selection.
What do you understand by type 1. and type 2. rationing?
Explain the di¡erence between exogenous and endogenous credit rationing>
What is the availability doctrine?
How does a bank react to an increase in the demand for loans under conditions of liability management? What are the implications for the banking system as a whole of an increase in the demand for loans?
Discuss the contributions of the theories of the banking ¢rm to our understanding of bank behaviour.
What does the portfolio balance model of banking predict on a bank’s balance sheet if there was an increase in (a) the yield on loans, (b) an increase in the riskiness of loans?
What are the conditions for bank intermediation to take place in the portfolio balance model of banking?
What is the evidence that a bank behaves like a risk averter?
What factors in£uence a bank’s holding of reserves?
What is liability management? What is asset management?
Let the balance sheet of the bank be described by L þ R þ T ¼ D þ E, where L is the stock of loans, R is reserves, T is the stock of liquid assets, D is deposits and E is equity capital. Let the required return on bank capital be given by .Let the reserve^deposit ratio be given by k and the
We do we not have theories of the steel-producing ¢rm, or the automobile¢rm. Why do you think we need a theory of the banking ¢rm?
What is the implication of an increase in the bill rate of interest on the loan rate and deposit rate in the Monti^Klein model of banking?
What are the potential e¡ects on UK banks if (or when?) the UK joins the European Monetary Union?
Explain the e¡ects of an increase in the interest elasticity of loans and deposits on the interest rate spread between loans and deposits.
What are the implications of an increase in the reserve^deposit ratio on the interest rate spread between loans and deposits?
Outline the e¡ects of a decrease in the desired ratio of currency to deposits on bank lending and deposit creation.
What is the role of Eurocurrency banking? Discuss the implications for the supply of eurodollars of a portfolio switch from domestic dollar deposits to eurodollar deposits.
Explain the growth of international banking during the second half of the 20th century. Regulatory avoidance has been claimed to be one of the reasons for this growth. Why has the growth in international banking continued despite a reduction in regulatory constraints?
Why would the following relationship be expected to hold in the Eurocurrency markets:R ¼ R$ þ EðDERÞwhere R is the nominal sterling rate of interest, R$ is the nominal eurodollar rate of interest on the corresponding eurodollar security and EðDERÞ is the expected appreciation/depreciation of
What are the consequences of the growth of the Eurocurrency markets for the international ¢nancial system?
What are the main assets and liabilities of a bank operating in the Eurocurrency markets? To what extent is syndicated lending important?
What are the Eurocurrency markets? Why have they grown in recent years?
What are the reasons for the growth in international banking?
What are the types of international banking identi¢ed by the Bank for International Settlements and McCauley?
It is argued that the trend to universal banking will leave no room for bank specialization. Critically evaluate this argument and comment on the risks associated with the increased tendency to universal banking
What are the main features of the di¡erent types of banks that operate in the developed economies?
How far are the di¡erences between the various types of banks diminishing over time?
What advantage does a system of universal banks have relative to other types of banking?
What are the four di¡erent types of universal bank organizations identi¢ed by Saunders and Walters?
What are wholesale banks? How do they di¡er from retail banks in their operating methods?
What are retail banks? What are the main features of their balance sheets?
What risks do all banks face in their operations?
What is ‘special’ about a bank?
Why do banks exist?
Can rating agencies overcome the problem of asymmetry of information?
What problems does ‘asymmetry of information’ create in the loan market?Can banks help to reduce the impact of this problem?
What are the sources of transaction costs in the transfer of funds from surplus to de¢cit units?
What are the sources of economies of scale and scope in banking?
What are the distinguishing features of ¢nancial intermediaries?
How do borrowers and lenders di¡er in their requirements? Can banks reconcile these di¡erences?
Outline the e¡ects on the market rate of interest, and the welfare implications for borrowers and savers of (a) an increase in desired savings, (b) an increase in desired investment.
What is ‘¢nancial intermediation’? Demonstrate the welfare superiority of the introduction of ¢nancial intermediation.
Trace out the way in which a reduction in the desire to invest will lead to a reduction in interest rate
How far does the view that the existence of ¢nancial intermediation bene¢ts an economy depend on the assumptions underlying the Hirschleifer model?
Show how the Loanable Funds Theory of interest rates depends on the behaviour of savers and investors.
Using the Hirschleifer (1958) model, show how ¢nancial intermediation improves the performance of an economy compared with ¢nancial autarky.
What is the role of the capital market in a modern economy?
Are banks dead or are the reports grossly exaggerated?
Examine the international trends in commercial banking in the past two decades. Analytically account for the trends and, on the basis of your account, comment and make a projection on the future of banking in the next decade.
What has been the long-term trend in net interest margin and bank pro¢tability? Why has this occurred?
What are the three strands in the globalization of banking identi¢ed by Canals(2002).
What are the three principal forms of structural change in banking due to¢nancial innovation, as identi¢ed by Goodhart (1984)?
It has been suggested that ¢nancial innovation has been the result of three interacting forces: What are these?
What have been the three phases of bank deregulation during the 1980s and 1990s?
What have been the principal trends in international banking during the last two decades of the 20th century?

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The Economics Of Banking 1st Edition Kent Matthews, John Thompson - Solutions

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