tailieunhanh - Lecture International finance: An analytical approach (3/e): Chapter 7 - Imad A. Moosa

Chapter 7 - International banking and the basel accords. The objectives of this chapter are: To find out why banks are assigned special importance and why banking is more regulated than other business, to consider the types of risk a bank is exposed to, to consider the pros and cons of banking regulation | Lecture International finance An analytical approach 3 e Chapter 7 - Imad A. Moosa Chapter 7 International Banking and the Basel Accords Objectives To find out why banks are assigned special importance and why banking is more regulated than other business To consider the types of risk a bank is exposed to To consider the pros and cons of banking regulation cont. Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t a International Finance An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 7-2 Objectives cont. To outline the regulatory functions and the forms of banking regulation To evaluate the Basel I and Basel II accords Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t a International Finance An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 7-3 Why banks are important Banking regulation centres on the objective of minimising the possibility of bank failure because banks command more importance than other financial and non-financial firms The failure of banks creates more turmoil in the economy than perhaps any other kind of firm Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t a International Finance An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 7-4 Reasons for the special importance of banks The difference between the degrees of liquidity of their assets and liabilities which makes them highly vulnerable to depositor withdrawal and bank runs in extreme cases Banks are at the centre of the payment system they are the creators of money the medium of exchange cont. Copyright 2010 McGraw-Hill Australia Pty Ltd PPTs t a International Finance An Analytical Approach 3e by Imad A. Moosa Slides prepared by Afaf Moosa 7-5 Reasons for the special importance of banks cont. They face an asymmetric loss function which is a consequence of handling other people s money The sheer size of the interbank market resulting from the fact that banks deal with each other on a massive scale cont. Copyright .