Questions tagged [banking]

Use for questions about banks, their operations, and their role in the broader economic and financial system.

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1answer
133 views

How does a bank convert one currency to another?

Say for example I sell ZAR and buy USD. What happens behind the scenes so that the local ZAR bank is able to deposit USD into my account? Does the bank require some sort of USD cash reserve? How do ...
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47 views

Why was the Bank of England nationalized after World War 2?

After the Second World War the new Labour government nationalised the Bank of England. Did this give the British Government any new capabilities? For example, could the Government print money before ...
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Lifeboat vs bailout

I have encountered the term lifeboat in these two contexts: Floating a “lifeboat”: The Banque de France and the crisis of 1889 The 1974 rescue in the UK's secondary-banking crisis. Is the term ...
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0answers
20 views

Since the financial crisis, what measures have been taken to solve the too-big-to-fail problem?

Ben Bernanke (2010): If the crisis has a single lesson, it is that the too-big-to-fail problem must be solved. So, what measures have been taken to solve the too-big-to-fail problem? To what ...
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0answers
20 views

Where does the value of implicit government banking guarantees end up?

Post-Lehman a widespread political agenda has established to minimize implicit government guarantees to banks. However, in the buid-up of new banking regulations, lending to small and mid-sized ...
2
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0answers
139 views

Bail-in and equity absorbing losses

Below we have a diagram for a bail-in. According to it, as the big company/bank takes a loss in the asset side, the first to absorb those losses, in the liabilities side, is equity. How is this ...
2
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1answer
115 views

Measuring demand for banking services - (Maximum) Market Size

I am in need of a variable measuring "demand for banking services" in general, on a country level. Specifically the (maximum) size of the market for banking services for a given country. This will be ...
2
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1answer
58 views

What will happen to the reserves at the Fed?

Banks currently have 2.7 trillion Federal Reserves that they hold at their Federal Reserve account. It's part of the monetary base and these reserves were created when the Fed purchased bonds in their ...
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17 views

Investments during recession

During Recession, banks loans decrease which leads to financial constraints and ultimately Investment suffers and declines. my question is - "Are loans lower because of demand or supply?" My ...
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0answers
19 views

One Week U.S. GC REPO Bid Rate Exceeds Ask Rate

I have recently downloaded a time-series of one-week U.S. Generalized Collateral Repurchase Agreement Rates from Bloomberg (Ticker: USRGCY1Z CURNCY). While looking through the data, I noticed that the ...
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0answers
17 views

Can a bank have deposits at another bank?

Can a bank create an account at another bank and get a loan in the form of deposits at that bank? If so, could these deposits at the other bank be used to satisfy the first bank's reserve/liquidity ...
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0answers
38 views

“The odds of a bailout in the next century are still nearly 70%.”

In a 2017 Wall Street Journal op-ed, President of the Minneapolis Fed, Neel Kashkari, wrote: The odds of a bailout in the next century are still nearly 70%. I found it surprising that anyone could ...
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1answer
72 views

In the context of banking, how (if at all) do the terms 'capital', 'net worth', and 'equity' differ?

In banking, are the three terms capital, net worth, and equity simply identical and exact synonyms? If not, how do they differ? (Aside: And what about in other contexts? For example, does the same ...
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28 views

How does the central bank fund open market operations?

This may seem like an extremely simple question, but I have been unable to find any satisfactory information on this. How, practically, does the central bank generate the funds to purchases ...
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3answers
118 views

Bank Runs During the 1930s

Why were there numerous banks run right after the stock market crash of 1929? Why would a bank fail because the stock market crashes?
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24 views

financial crisis '08: what is it meant by the banks were saved by the states?

Were banks literally saved with tax payers' money? Or is it that states borrowed the banks, consequently, the banks must return this money back at some point? Can someone please give me some ...
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0answers
25 views

What qualifications does a bank need to create USD funds?

It is my understanding that, while any entity can create dollar-denominated assets (stocks and bonds) and sell them on the open market, only banking institutions in the United States can engage in ...
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0answers
13 views

What were the liquidity requirements prior to Basel III?

I am investigating the impact of enforcing the Basel III liquidity requirements with a focus on the LCR. I have found some information about regulations in fore prior to Basel III in Sweden and ...
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0answers
31 views

Explaining the size of the canadian banking sector

Canadian banks are among the largest in the world and I think that only the UK compares in terms of having your economy dominated by banking. Of course some of the US banks are much larger but so is ...
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0answers
30 views

How does the private bank reserve increase when money is being withdrew?

The federal government raises 400 million by selling bonds to the general public in order to pay for a construction program. The program cost 440 million so the government withdraws 25 million from ...
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0answers
46 views

Do you have a list of books about the evolution of the banking sector?

I'm looking for interesting books to read about the banking sector. Topics: Changes in the banking sector, Adaptation of financial services in the digital age, European and US banking regulations ...
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0answers
22 views

Why is Double-entry Bookkeeping always equal? (Part 2)

In this question, with answer here Destroying the Dollarhypothetically a hack is used to trick whatever programme is used to make sure accounts balance, so say a transfer is made from Bank manager A ...
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0answers
53 views

A country with dual payment system

Is there any country with dual domestic payment system? For instance, in the USA there are CHIPS or Fedwire both help wire transfer of USD within the USA. They give services to international ...
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0answers
39 views

Is Eurodollar borrowing close substitute for Fed funds borrowing?

It is often stated that eurodollar borrowing is clost substitute for Fed funds borrowing. In other words, when US banks cannot fund themselves domestically, they might go to the eurodollar market and ...
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0answers
57 views

Is the ECB a lender of last resort for european governments?

One of the usual functions of a Central Bank is to be the last resort of commercial banks, and governments. Does the ECB behave in this usual way toward European Governments? What about toward banks?...
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1answer
54 views

What are the costs of requiring banks to have more equity?

In The Bankers' New Clothes: What's Wrong with Banking and What to Do about It (2013), Admati & Hellwig recommend much higher equity requirements: Requiring that banks’ equity be at least on ...
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10 views

Loanable funds theory and the “Birth” of a risk premium

Im taking about the loanable funds theory and I am having trouble with this question: Give two examples of the loanable funds theory to explain the “birth ” of a risk premium for bonds of the same ...
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16 views

What happens to net assets in case of increasing NPAs(Non-Performing assets)?

The bank's profit is measured as Return on Assets which is the ratio of Bank’s net profits and Net assets. In case of increasing NPAs, the bank's net profits will decrease, but what will happen to ...
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15 views

Can the New Development Bank by BRICS countries compete with World Bank or IMF?

The BRICS countries have created the New Development Bank with an initial pool of $100 billion. What factors will determine if the NDB can ever compete with World Bank, ADB or the IMF?
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42 views

Why was the Glass-Steagall Legislation enacted?

I realize that the part of the reason the Glass-Steagall act was enacted was to ensure that banks do not invest customer's deposits into risky securities, but what was the rationale for separating ...
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12 views

Accounting of common stock and capital surplus for banks

I am trying to understand the accounting involved with bank capital and am a bit confused about the common stock and capital surplus lines on balances sheets. I would like to know if the following ...
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12 views

What is the effect on money multiplier of the following three cases?

Assuming ceterus paribas in each case: (i)The bank expands its operations in the field of financial derivatives. (ii) Increasing competition leads to a fall in the transaction costs incurred by ...
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10 views

Why does a leaseback remove the need to value the poisonous assets?

Robert Peston | 10:40 UK time, Friday, 16 January 2009 Burt is proposing a sale-and-leaseback of toxic assets. Which probably sounds like gobbledegook to you. [1.] So I'll address it in more detail ...
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17 views

How to interpret RTS in Stata?

I want to study the efficiency of banks using Data Envelopment Analysis (DEA). When I run an output-oriented DEA based on the variable return to scale I get CRS, VRS, NIRS and SCALE efficiency with ...
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15 views

In an unsterilized purchase of dollars and sale of foreign assets, why doesn't the supply of dollar assets fall?

From Mishkin (2016, p. 500): Explanation of what the supply curve here is, from p. 478: The quantity of dollar assets supplied is primarily the quantity of bank deposits, bonds, and equities in ...
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1answer
28 views

Real Income and a Fixed Money Supply

What would happen to nominal income and wages if the money supply were fixed (100% reserve banking). Would real wages increase, even though nominal wages would stay the same or even decrease?
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16 views

How to do elasticity modeling for products where there is slab pricing like electricity?

I have few product categories eg prod1 prod2. Each category have similar products. So prod1 has 3 similar products with slight difference in features and prod2 has 5 products with slight differences. ...
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22 views

What would be the possible effect on a country's economy if private banks are declared as non-profit?

Suppose, there are 100 banks in a country. 50 of them are government owned. What would be the possible effect on a country's economy if private banks are declared as non-profit? I.e. they can not ...
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49 views

Does only enough money exist to pay the principal on all debts, and none for the interest or for anything else?

This is reported to be the testimony of Marriner Eccles, Governor of the Federal Reserve Board, before the House Committee on Banking and Currency, on September 30, 1941. Does this mean that only ...
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1answer
46 views

Why don't we mint more m0 instead of creating m1 through fractional reserve banking?

From what I understand, m1 money is just as liquid as m0 since an individual can withdraw it from the bank at any time and in any quantity (up to the amount (s)he deposited). Because of this I don't ...