商业银行管理全套配套课件英文PPT教师手册习题习题答案 Chap011.ppt 33页

ChapterElevenLiquidityandReservesManagement:StrategiesandPolicies KeyTopicsSourcesofDemandforandSupplyofLiquidityWhyFinancialFirmsHaveLiquidityProblemsLiquidityManagementStrategiesEstimatingLiquidityNeedsTheImpactofMarketDisciplineLegalReservesandMoneyManagement IntroductionOneofthemostimportanttasksthemanagementofanyfinancialinstitutionfacesisensuringadequateliquidityatalltimesAfinancialfirmisconsideredtobe“liquid”ifithasreadyaccesstoimmediatelyspendablefundsatreasonablecostatpreciselythetimethosefundsareneededThissuggeststhataliquidfinancialfirmeitherhasTherightamountofimmediatelyspendablefundsonhandwhentheyarerequiredTheycanraiseliquidfundsintimelyfashionbyborrowingorsellingassetsLackofadequateliquiditycanbeoneofthefirstsignsthatafinancialinstitutionisintroubleAfinancialfirmcanbeclosedifitcannotraisesufficientliquidityeventhough,technically,itmaystillbesolvent TheDemandforandSupplyofLiquidityDemandsforLiquidityCustomerdepositwithdrawalsCreditrequestsfromqualityloancustomersRepaymentofnondepositborrowingsOperatingexpensesandtaxesPaymentofstockholderdividendsSuppliesofLiquidFundsIncomingcustomerdepositsRevenuesfromthesaleofnondepositservicesCustomerloanrepaymentsSalesofbankassetsBorrowingsfromthemoneymarket TheDemandforandSupplyofLiquidity(continued)Thesevarioussourcesofliquiditydemandandsupplycometogethertodetermineeachfinancialfirm’snetliquiditypositionatanymomentintimeThatnetliquidityposition(L)attimetisLiquidityDeficitisLt<0andLiquiditySurplusisLt>0 TheDemandforandSupplyofLiquidity(continued)TheessenceofliquiditymanagementproblemsforfinancialinstitutionsRarelyaredemandsforliquidityequaltothesupplyofliquidityatanyparticularmomentintimeThefinancialfirmmustcontinuallydealwitheitheraliquiditydeficitoraliquiditysurplus.Thereisatrade-offbetweenliquidityandprofitabilityThemoreresourcesaretiedupinreadinesstomeetdemandsforliquidity,theloweristhatfinancialfirm’sexpectedprofitability(otherfactorsheldconstant) WhyFinancialFirmsOftenFaceSignificantLiquidityProblemsImbalancesbetweenmaturitydatesoftheirassetsandliabilitiesHighproportionofliabilities(especiallydemanddepositsandmoneymarketborrowings)aresubjecttoimmediaterepaymentSensitivitytochangesininterestratesMayaffectcustomerdemandfordepositsMayaffectcustomerdemandforloansCentralroleinthepaymentprocess,reputationandpublicconfidenceinthesystem StrategiesforLiquidityManagersThinkaboutwhatisaliquidasset?Liquidassetshaveareadymarket,stablepriceandarereversibleIdentifystrategiesforliquiditymanagementAssetLiquidityManagementorAssetConversionStrategyThisstrategycallsforstoringliquidityintheformofliquidassets(T-bills,fedfundsloans,CDs,etc.)andsellingthemwhenliquidityisneededBorrowedLiquidityorLiabilityManagementStrategyThisstrategycallsforthebanktopurchaseorborrowfromthemoneymarkettocoverallofitsliquidityneedsBalancedLiquidityStrategyThecombineduseofliquidassetholdings(AssetManagement)andborrowedliquidity(LiabilityManagement)tomeetliquidityneeds StrategiesforLiquidityManagers(continued)GuidelinesforLiquidityManagersKeeptrackofallfund-usingandfund-raisingdepartmentsKnowinadvancewithdrawalsbythebiggestcreditordepositcustomersPrioritiesandobjectivesforliquiditymanagementshouldbeclearLiquidityneedsmustbeevaluatedonacontinuingbasis EstimatingLiquidityNeedsSourcesandUsesofFundsApproachStructureofFundsApproachLiquidityIndicatorApproachTheUltimateStandardforAssessingLiquidityNeeds:SignalsfromtheMarketplace EstimatingLiquidityNeeds(continued)SourcesandUsesofFundsApproachLoansanddepositsmustbeforecastforagivenliquidityplanningperiodTheestimatedchangeinloansanddepositsmustbecalculatedforthesameplanningperiodTheliquiditymanagermustestimatethebank’snetliquidfundsbycomparingtheestimatedchangeinloanstotheestimatedchangeindeposits EstimatingLiquidityNeeds(continued)SourcesandUsesofFundsApproach EstimatingLiquidityNeeds(continued)SourcesandUsesofFundsApproach EstimatingLiquidityNeeds(continued)SourcesandUsesofFundsApproach EstimatingLiquidityNeeds(continued)StructureofFundsApproachABank’sDepositsandOtherSourcesofFundsDividedIntoCategories.ForExample:‘HotMoney’Liabilities(volatileliabilities)VulnerableFundsStableFunds(coredepositsorcoreliabilities)LiquidityManagerSetAsideLiquidFundsAccordingtoSomeOperatingRule EstimatingLiquidityNeeds(continued)StructureofFundsApproachForexample,themanagermaydecidetosetupA95percentliquidreservebehindallhotmoneyfunds(lessanyrequiredlegalreservesheldbehindhotmoneydeposits)30percentinliquidreservesforvulnerabledepositandnondepositliabilities15percentorlessinliquidreservesforstable(core)fundssources EstimatingLiquidityNeeds(continued)StructureofFundsApproachCombiningbothloananddepositliquidityrequirements,thisinstitution’stotalliquidityrequirementwouldbe EstimatingLiquidityNeeds(continued)StructureofFundsApproachManyfinancialfirmsliketocalculatetheirexpectedliquidityrequirement,basedontheprobabilitiestheyassigntodifferentpossibleoutcomes EstimatingLiquidityNeeds(continued)LiquidityIndicatorApproachCashpositionindicatorLiquidsecuritiesindicatorNetfederalfundsandrepurchaseagreementspositionCapacityratioPledgedsecuritiesratioHotmoneyratioDepositbrokerageindexCoredepositratioDepositcompositionratioLoancommitmentsratio EstimatingLiquidityNeeds(continued)TheUltimateStandardforAssessingLiquidityNeeds:SignalsfromtheMarketplaceLiquiditymanagersshouldcloselymonitorthefollowingmarketsignals:PublicconfidenceStockpricebehaviorRiskpremiumsonCDsandotherborrowingsLosssalesofassetsMeetingcommitmentstocreditcustomersBorrowingsfromthecentralbank LegalReservesandMoneyPositionManagementLegalReservesThoseassetsthatlawandcentralbankregulationsaymustbeheldduringaparticulartimeperiodThecurrentsystemofaccountingforlegalreservesiscalledlaggedreserveaccounting(LRA)Thedailyaverageamountofdepositsandotherreservableliabilitiesarecomputedusinginformationgatheredoveratwo-weekperiodstretchingfromaTuesdaythroughaMondaytwoweekslaterThisintervaloftimeisknownasthereservecomputationperiodThedailyaverageamountofvaultcasheachdepositoryinstitutionholdsisalsofiguredoverthesametwo-weekcomputationperiod EXHIBIT11–1FederalReserveRulesforCalculatingaWeeklyReportingDepositoryInstitution’sRequiredLegalReserves LegalReservesandMoneyPositionManagement(continued)LegalReservesOnlytwokindsofassetscanbeusedforthispurposeCashinthevaultDepositsheldinareserveaccountwiththeregionalFedThereserverequirementin2010was3percentoftheend-of-the-daydailyaverageamountheldoveratwo-weekperiod,from$10.7millionupto$58.8millionThefirst$10.7millionhavezerolegalreservesThe$58.8millionfigureisknownasthereservetrancheandchangeseveryyearbasedondepositgrowthTransactiondepositsover$58.8millionheldbythesamedepositoryinstitutioncarrieda10percentlegalreserverequirementThisannuallegalreserveadjustmentisdesignedtooffsetinflation LegalReservesandMoneyPositionManagement(continued)CalculatingRequiredReservesThelargestdepositoryinstitutionsmustholdthelargestpercentageoflegalreservesEachreservableliabilityitemismultipliedbythestipulatedreserverequirementpercentagetoderiveeachdepository’stotallegalreserverequirement LegalReservesandMoneyPositionManagement(continued)CalculatingRequiredReservesThelargestdepositoryinstitutionsmustholdthelargestpercentageoflegalreservesEachreservableliabilityitemismultipliedbythestipulatedreserverequirementpercentagetoderiveeachdepository’stotallegalreserverequirement LegalReservesandMoneyPositionManagement(continued)ClearingBalancesInadditiontoholdingalegalreserveaccountatthecentralbank,manydepositoryinstitutionsalsoholdaclearingbalancewiththeFedtocoveranychecksorotherdebititemsdrawnagainstthemForexample,supposeabankhadaclearingbalanceaveraging$1millionduringaparticulartwo-weekmaintenanceperiodandtheFederalfundsinterestrateoverthissameperiodaveraged5.50percentThenitwouldearnaFederalReservecreditofAssuminga360-dayyearforeaseofcomputation,thisbankcouldapplyupto$2,138.89tooffsetanyfeeschargedtothebankforitsuseofFederalReserveservices LegalReservesandMoneyPositionManagement(continued)FactorsInfluencingtheMoneyPosition LegalReservesandMoneyPositionManagement(continued)SweepAccountsVolumeoflegalreservesheldattheFedhasdeclinedinrecentyearslargelyduetosweepaccountsAcontractualaccountbetweenabankandacustomerthatpermitsthebanktomovefundsoutofacustomer’scheckingaccountovernightinordertogeneratehigherreturnsforthecustomerandlowerreserverequirementsforthebankRetailSweepBusinessSweepThesweepsmarketislikelytochangeinformandimportanceduetotherecentpassageoftheDodd-FrankWallStreetReformandConsumerProtectionActof2009 LegalReservesandMoneyPositionManagement(continued)OtherFactorstoInfluenceLegalReservesUseofFedFundsMarketThecheapestsourceButveryvolatileManagersrelyontheFedfundstargetrate(themostvolatileonthesettlementdate)OtherOptionsSellliquidsecuritiesDrawuponexcesscorrespondentbalancesEnterintorepurchaseagreementsfortemporaryborrowingsSellnewtimedepositsBorrowintheEurocurrencymarket EXHIBIT11–2MovementsintheEffectiveFederalFundsRate,ItsTarget(theIntendedFederalFunds)Rate,andtheDiscount(PrimaryCredit)RateforDepositoryInstitutionsSeekingCreditfromtheFederalReserveBanks FactorsinChoosingamongtheDifferentSourcesofReservesInchoosingwhichsourceofreservestodrawupontocoveralegalreservedeficit,managersmustcarefullyconsiderseveralaspectsoftheirinstitution’sneedforliquidfunds:ImmediacyofneedDurationofneedAccesstothemarketforliquidfundsRelativecostsandrisksofalternativesourcesoffundsTheinterestrateoutlookOutlookforcentralbankmonetarypolicyRulesandregulationsapplicabletoaliquiditysource CentralBankReserveRequirementsaroundtheGlobeNotallcentralbanksimposelegalreserverequirementsonthedepositoryinstitutionstheyregulateForexample,theBankofEnglandhasnotestablishedofficialreserverequirementsforitsbanksThereisatrendamongcentralbanksaroundtheglobetoeliminate,suspend,oratleastmakelessuseofthereserverequirementtool,inpartbecauseitissodifficulttocontrolAnotableexceptionistheEuropeanCentralBank(ECB)Evenifcentralbanksimposednoreserverequirements,managersofdepositoryinstitutionswouldstillhaveademandforcashreservesAlldepositoryinstitutionsatonetimeoranotherneedimmediatelyavailablefundstohandlecustomerwithdrawals,meetnewloandemand,andsatisfyotheremergencycashneeds QuickQuizWhataretheprincipalsourcesofliquiditydemandforafinancialfirm?Whataretheprincipalsourcesfromwhichthesupplyofliquiditycomes?Whydofinancialfirmsfacesignificantliquiditymanagementproblems?Whataretheprincipaldifferencesamongassetliquiditymanagement,liabilitymanagement,andbalancedliquiditymanagement?Howdoesthesourcesandusesoffundsapproachhelpamanagerestimateafinancialinstitution’sneedforliquidity?Howcanthedisciplineofthemarketplacebeusedasaguideformakingliquiditymanagementdecisions?Whataresweepaccounts?WhyhavetheyledtoasignificantdeclineinthetotallegalreservesheldattheFederalReservebanksbydepositoryinstitutionsoperatingintheUnitedStates?Whatimpacthasrecentfinancialreformlegislationhadonraisingshort-termcash?