We model the impact of bank mergers on loan competition, reserve holdings,
and aggregate liquidity. A merger changes the distribution of liquidity
shocks and creates an internal money market, leading to financial cost efficiencies
and more precise estimates of liquidity needs. The merged banks
may increase their reserve holdings through an internalization effect or decrease
them because of a diversification effect. The merger also affects loan
market competition, which in turn modifies the distribution of bank sizes
and aggregate liquidity needs.
Lecture Money and banking - Lecture 21: Role of financial intermediaries presents the following content: Pool savings; safekeeping, accounting services and access to the payments system; liquidity, risk diversification, information services.
The main contents of this chapter include all of the following: Balance sheet of commercial banks, assets: uses of funds, bank capital and profitability, off-balance-sheet activities, bank risk, liquidity risk, credit risk, interest rate risk, trading risk, other risks.
The Mzansi Account is the result of a banking industry initiative to provide a standard bank account,
which is affordable, readily available and suits the specific needs of the previously unbanked com-
munities. This initiative is a requirement of the Financial Sector Charter, which requires banks to
make banking more accessible to the nation and, specifically, to increase banking reach to all com-
Growing linkages between MFIs and the banking system in Africa appear to be mutually beneficial.
MFIs rely on banks for a variety of services, including deposit facilities, liquidity management services,
and in some cases, emergency credit lines to cover cash shortfalls. For banks, the benefits are the
opportunity to expand their client base through MFIs, and to expand their operations through the
network of MFIs (including in the rural sector).
The sample of banks includes FDIC-insured commercial banks with total assets
greater than $300 million as of March 1996. Of these institutions, banks that have no
commercial and industrial loans are excluded. The sample ranges from 942 banks in March
of 1996 to 467 banks in December of 2004. Institutions that are liquidated during the sample
period are included in the sample before liquidation and excluded from the sample for the
periods after liquidation. Banks that merge during the sample period are included in the
Liquidity management: A more centralized (branch) model would allow global banks
with wholesale operations to manage liquidity more efficiently at the group level,
allowing them to transfer liquidity where it is most needed (in normal times, as well as
at times of stress, absent barriers placed on transferring funds across jurisdictions in
excess of the regulatory requirements).
Lecture Money and banking - Lecture 17: Tax effect and term structure of interest rate presents the following content: Tax effect, term structure of interest rate, expectations hypothesis, liquidity premium.
Suggests that since investors are risk averse, they will demand a greater premium for securities with longer maturity periods as these are not easily convertible to cash on short notice. A liquidity premium is usually added to the equilibrium interest rate to determine the market rate of securities.
An explicit system of Deposit Insurance may be defined as the instrument through which the
banking system guarantees that funds deposited by the public in a bank are independent of solvency
and liquidity conditions of the bank itself, so that depositors may be sure of being reimbursed at any
time. Recently, much attention has been given in the economic literature to the role of legal,
political and regulatory institutions as important determinants of the evolution in both the financial
structure and efficiency as well as the macroeconomic performances of one country.
Despite all the skepticism, the ‘old savings’ bonds turned out to be the perfect
opportunity for the development of financial market in Serbia. This was a new and
liquid security that carried virtually no risk for its holders.
However, for a number of reasons, the bond market became distorted, dividing
into primary and secondary markets, with the secondary market further segmented
into over-the-counter and stock exchange markets.
The Liikanen Report has opted for not providing any definition of proprietary trading or market
making activities, which is the most sensitive issue when prescribing a mandatory separation. The
ESBG is of the opinion that ring-fencing market making activities will substantially harm the
liquidity of markets since banks will get incentives for winding down these activities.
Against the backdrop of the close connection between the implementation of monetary policy and the
processing of payments through the central bank, the Bundesbank pays particular attention to the
encouragement of large-value payments. These payments are processed through RTGSplus
, which at
the same time provides a connection to the TARGET system.
In exercising the oversight function, close cooperation between the bodies overseeing payments and
the BaFin is of fundamental importance. In the field of electronic money the Deutsche Bundesbank
also cooperates with the Federal Agency for Security in Information Technology (BSI) and takes
advice from this body, as systems with electronically stored units of value are subject to a special
The legal foundation for banking supervision is the KWG.
The 2007–08 boom in food prices and the subsequent period of relatively high
and volatile prices reminded many import-dependent countries of their vul-
nerability to food insecurity and prompted them to seek opportunities to
secure food supplies overseas. Together with the reduced attractiveness of
other assets due to the financial crisis, the boom led to a “rediscovery” of the
agricultural sector by different types of investors and a wave of interest in land
acquisitions in developing countries.
The crisis has shown that securitization is heavily dependent on markets’ perceptions and could
be subject to sudden bouts of illiquidity generated from investors’ concerns. Namely the
consequences of the increased participation in bank funding by financial markets’ investors and
the large increases in securitized assets, can led to acute liquidity crises.
The funds in these portfolios must either be invested in high quality liquid securities (reported as
held for trading or available for sale) or placed as deposits in central banks.If the Basel III proposal
regarding the Net Stable Funding Ratio (NSFR) requirement is implemented, the liquidity portfolio
required will increase even further.
But an RTGS structure may incentivise free-riding. A bank may find it convenient to delay its
outgoing payments (placing it in an internal queue) and wait for incoming funds, in order to avoid
the burden of acquiring expensive liquidity in the first place. As banks fail to ‘internalise’ the
systemic benefits of acquiring liquidity, RTGS systems may suffer from inefficient liquidity
Inefficiencies may also emerge for a second reason.