第一章商业银行公司理财(52页PPT).pptx

PART Introduction to bank financial management in the financial-services industryChapter 1 Overview of banking and the financial-services industry China University of Mining and TechnologySchool of ManagementLEARNING OBJECTIVESnTo understand the functions of a financial systemnTo understand the role,importance,and the risks of bankingnTo distinguish between direct and indirect financenTo understand the“decline”of bankingnTo distinguish between traditional commercial banking and modern bankingnTo understand the dimension of bank competition and how regulation shapes themCHAPTER THEMEnThis chapter presents an introduction and overview of banking and the financial-services industry(FSI).nFinancial-services firms(FSFs)act as intermediaries in the allocation of financial resources.nAs financial markets become more complete,direct finance tends to reduce the importance of certain financial institutions and the process of indirect finance.nA financial-management perspective emphasizes the importance of understanding the risks of banking and how to manage them.Both market and regulatory discipline monitor and restrict bank risk taking.nExplicit price,user convenience,and public confidence are the primary dimensions of bank competition.KEY CONCEPTS,IDEAS,AND TERMS Bank holding company(BHC)Credit risk Dimensions of bank competition Direct finance VS indirect finance(intermediation)Discipline(market and regulatory)Financial markets Financial-services firm(FSF)Financial-services industry Financial system(core functions)Globalization Institutionalization Interest-rate risk Intermediation VS disintermediation Liquidity risk Pass-through finance Regulatory dialectic(struggle model)Risk management SecuritizationKEY CONCEPTS,IDEAS,AND TERMS Asset prices Confidence function Credit or defaut risk Expected inflation FDIC Improvement Act(FDICIA)Federal Deposit Insurance Corporation(FDIC)Federal Reserve System Federal safety net Fisher effect Five Cs of credit analysis Interest rates(nominal versus real)Office of the Comptroller of the Currency(OCC)Price function Privatization Prompt corrective action(PCA)Regulaion Techniques for managing the guarantee business Transactions cost Types and classes of commercial banks Section1.The functions of a financial system Section2.Financial-services firms and the financial-services industry Section3.Types and classes of commercial banks Section4.Bank holding companies:the dominant organizational form Section5.Intermediation VS disintermediation and indirect finance VS direct finance Section6.The end of banking as we know it?Section7.The role of bank regulation and supervision Section8.The regulatory dialectic(struggle model)Section9.The risks of bankingSection10.The dimensions of financial-services competition and the role of regulation in shaping themSection1 The functions of a financial systemnThe primary function of a financial system is:nresource allocation.Section1 The functions of a financial system Clear and settlepaymentsAggregate and disaggregatewealth and flows of funds Transfer economicresourcesfunctionsAccumulate,processAnd disseminateinformationProvide ways for managing uncertainty and controlling riskProvide ways for dealingWith incentive and asymmetric-Information problemsSection2.Financial-services firms and the financial-services industry A financial system can be viewed in terms of financial-services industry(FSI)consisting of finance-services firms(FSFs)BanksThrift institutionsInsurance companiesPension fundsFinance companiesMutual fundsNonfinancial corporationsThe major playersin the FSI(FSFs)The structural changes occurring in the FSI can be describe as its“-ization”.nThe role of banks in the FSI The view that commercial banks operate in the FSI means that their role will look diluted in this framework.Nevertheless,commercial banks are still the kingpins of the FSI.InstitutionalizationSecuritizationGlobalizationPrivatization“-ization”KEY CONCEPTS Commercial bank Investment bank Savings&loans Savings banks Credit unions Life(property and casualty)insurance companies Money market funds Check-cashing stores Nonfinancial corporations(NFCs)Depository institutions Nondepository institutions Pool and package loans Interest and principal paymentMortgage-backed securities rent-to-own stores State-owned enterprises Transforming economies Collapse of communism Thrift crisis Legal,political,social,and ethical significance Wholesale market PawnshopsSection3.Types and classes of commercial banks These are various types and classes of commercial banks in the United States(Box1-1 and Table1-1)The 1970 amendment to the Bank Holding Company Act of 1956 defines a commercial bank as an institution that“(1)accepts deposits that the depositor has a legal right to withdraw on demand and(2)engages in the business of making commercial loans”.In the 1980s,prior to the passage of the Competitive Equality Banking Act of 1987,organizations were chartered that engaged inone of these activities butnor both.They were callednonbank banks orlimited-services banks;those that did not make commercial loans were also known as consumer banks.By using this loophole,these organizations avoided being regulated by the Federal Reserve as bank holding companies.To attempt to level the playing field in the FSI,the Competitive Equality Banking Act of1987 banned furtherEstablishment of nonbank banks.Although the 160or so existing nonbankbanks weregrand fathered,their activities were restricted such that they could not cross-market products and services with their parent companies and after 1988 they were limited to annual growth of 7%.Bona fide trust companies and consumer banks were exempted from these restrictions and because of the thrift crises,nonbank banks were not excluded from bidding on failed S&Ls with assets of$500 million or more.TABLE1-1Charter(federal or state agency)nNational bank(office of the Comptroller of the Currency,OCC)nState bank(50 states&D.C.)Federal regulation(agency)nNational bank(OCC)nState member bank(Federal Reserve)nState-insured nonmember bank(FDIC)nBank holding company(BHC)(Federal Reserve)nBanks or BHCs with 500 shareholders or more(SEC)Structure or organization formnUnit BanknBranch BanknHolding-company banknOne-bank holding company(OBHC)nMultibank holding company(MBHC)Type of businessnWholesale banknRetail banknWholesale/retail bank(all things to all customers)nPrivate bankn“Shadow”bank Geographic marketnCommunity(local)banknRegional banknSuperregional banknMultinational(“money-center”)bankFederal reserve size classes(by assets)nTen largest banksnBanks ranked 11th through 100thnBanks ranked 101th through 1000thnBanks not ranked among the 1000 largest(“community banks”)Section4.Bank holding companies:the dominant organizational formnBecause bank holding companies(BHCs)are the dominant organizational form in U.S.banking,they deserve closer scrutiny.Using total deposits as the focal variable,Table 1-2 reflects the dominance of BHCs among banks and also among federally insured depository institutions,and show that dominance has increased from 1984 to 1994.nPanel A of Figure 1-1 presents an example of a BHCs organizational structure.A BHCs nonbank subsidiaries or affiliates are restricted from engaging in nonbanking activities not approved by the Fed.Table1-2 The Distribution of Federally Insured Depository Institutions by Type of Institution,1984 and 1994 1984 Mean Deposits Deposits per firm Number Percent (billions Percent (millions Type of Institution of Firms of Total of dollars)of deposits dollars)Banking organizations 11,342 38.0 1,613.7 61.4 142.3 Independent banks 5,698 19.1 209.9 8.0 36.8 One-bank holding companies 4,926 16.5 467.7 17.8 94.9 Multibank holding companies 718 2.4 936.1 35.6 1,303.7Thrift institutions 3,414 11.4 929.8 35.4 272.3 Savings and loan associations 2,882 9.6 697.5 26.5 242.0 Federal savings banks 264 0.9 121.6 4.6 460.6 State saving banks 268 0.9 110.7 4.2 413.0Credit unions 15,126 50.6 84.1 3.2 5.6Total 29,882 100.0 2,627.6 100.0 87.9 1994Banking organizations 7,898 36.1 2,382.7 71.7 301.7 Independent banks 2,634 12.0 170.0 5.1 64.5 One-bank holding companies 4,464 20.4 523.0 15.7 117.2 Multibank holding companies 800 3.7 1,689.6 50.9 2,112.1Thrift institutions 2,058 9.4 684.5 20.6 332.6 Savings and loan associations 776 3.5 147.2 4.4 189.7 Federal savings banks 756 3.5 357.5 10.8 472.9 State saving banks 526 2.4 179.8 5.4 341.8Credit unions 11,927 54.5 254.0 7.6 21.3Total 21,883 100.0 3,321.2 100.0 151.8Figure1-1 The Structure and Cash Flows of a Bank Holding CompanyPanel A.The structure of a bank holding companyBank holding company(“parent company”)NonbanksubsidiariesBanksubsidiariesExamplesFinance companyMortgage bankingFactoringLeasingData processingAAA derivativesNumber of bankscontrolled determinesOBHCMBHCabLeadbankOtherbanksOBHC=One Bank Holding CompanyMBHC=Multibank Holding CompanyabDownstream flows Upstream flows External creditor flowsEquity Dividends LoansLoans Principal Principal Principal Interest InterestInterest Management feesPurchase assets Loans Purchase assetsSource:Adapted from Eisemann and Budd1980.Panel B The cash flows of a bank holding companyPublic investorsParentSubsidiariesExternalcreditorsEquityDividendsDownstreamflowsUpstreamflowsExternalcreditorflowsTable1-3 The Diversity and Capitalization of Large BHCsPanel A.The Diversity of Large BHCs(June 30,1996)Company(State)Total Assets Banks Branches EmployeesChase Manhattan(NY)$322bil.2 745 68,828 Citicorp(NY)267 7 473 87,700 Bank America(CA)239 14 1,923 78,300J.P.Morgan&Co.(NY)199 2 4 15,390NationsBank(NC)192 6 1,948 62,137First Union(NC)140 12 1,997 45,353Bankers Trust(NY)115 3 0 5,427First Chicago NBD(IL)114 10 742 34,445 Wells Fargo(CA)108 1 1,580 41,548Banc One(OH)97 56 1,503 51,200 Total$1,793bil.113 10,895 428,328Panel B.The Ten Largest BHCs in Terms of Market Capitalization Market Capitalization Rank/Company June 28,1996 Ratio to Total Assets 1.Citicorp$39.8billion 12.3%2.Chase Manhattan 30.7 11.5 3.Bank America 27.6 11.5 4.NationsBank 24.7 12.4 5.Wells Fargo&Co.22.9 21.2 6.First Union Corp.17.1 12.2 7.J.P.Morgan&Co.15.5 7.8 8.Banc One Corp.14.8 15.3 9.Norwest Corp.12.5 16.1 10.First Chicago NBD 12.4 10.9 Total/Average$218.0billion 13.3%Section5 Intermediation VS Disintermediation and Indirect Finance VS Direct FinancenIndirect finance:the traditional role of depository institutions has been to gather deposits and make loans,known as indirect finance because the process involves an intermediary between economic units that need funds and those that supply them.nDirect finance:When an intermediary is not involved,the funding process is called direct finance and is illustrated by the issuance of commercial paper or corporate bonds by borrowers directly to investors.nPass-through finance.a shift from indirect finance to direct financeSection5 Intermediation VS Disintermediation and Indirect Finance VS Direct Finance1.The Creation and Characteristics of Finance Claims(Contracts)RelevantpartiesThe depositoror creditorThe borrowerThe intermediaryor bankTable1-4 The Intermediation Process and The Creation of Financial Claims or ContractsPanel A.The PlayersDepositor:Has a claim on the bank,an asset for depositor.Bank:Issues a claim against itself,a liability of the bank.Bank:Makes a loan to a borrower,an asset for the bank.Borrower:Issues a claim against itself,a liability of the borrower.Panel B.A Schematic View Intermediary$Borrower Bank Depositor Act as“delegated monitor”of the borrower for the depositorPanel C.Marginal T-Accounts The borrower The Bank The depositorCash(+)Debt(+)Loan(+)Deposit(+)Cash(-)Or (loan)Deposit(+)DDA(-)2.The Financial Cornerstones:Debt and Equity ClaimsnFinancial claims come into two basic forms:debt and equity.These two instruments are the financial cornerstones of capital markets and firms balance sheets.nFinancial claims can have many distinguishing traits.But there are four common characteristics among financial claims.CommoncharacteristicsRiskDenomination(size)MaturityLiquidityDebt and Equity ClaimsnA fixed or variable dollar claim-a fixed-or floating-rate loannA residual claim on the earnings-common stocknHybrid claim-preferred stock and convertible bondsnCommercial banks provide credit-risk diversification and other risk-manangement services;nThey provide maturity flexibility in terms of checking accounts,CDs,lines of credit,short-term loans,and long-term loans;nThey are the major providers of liquidity to the economy;nThey provide denomination divisibility in terms of savings accounts,large CDs,small loans,and large syndicated loans.3.The Pricing of Financial AssetsnA fundamental principle of financial economics is that the piece of any financial asset equals the present value of its expected future cash flows.nThe size,timing and riskness of cash determine the value of financial assets.nThe basic risks associated with bank financial assets are default or credit risk,interest-rate risk,and liquidity(or resale)risk.4.The Role and Function of Financial Markets and SecuritizationThree importantEconomicservicesDetermineThe pricesProvideliquidityReduceTransactions costsTwo principlefunctions of financial marketFundstransferRiskshiftingnFinancial markets also provide a mechanism for trading financial assets.Some financial assets are created and subsequently traded on organized financial markets or exchanges.Most bank loans share three characteristics that make them similar to OTC-type contracts:a.They are customized b.They are privately negotiated c.They lack liquidity and transparencyThese traits make bank loans rather difficult to quantify and manage,which creates the potential for the mispricing of bank stocks.5.Why Do Financial Intermediaries Exist?(deficit-spending units and surplus-spending units)nBecause financial markets are far from being complete and perfect,financial intermediaries(FIs)exist.The existence of inefficiencies in direct financing permits FIs to exist.Section6 The End of Banking as We Know It?Table1-5 shows the levels,changes,growth,and market shares of total assets for selected financial sectors in the U.S.for the years1978and 1995.Panel A.Total Assets($trillions end of period)Industry 1978 1995 Change Annual Growth(%)Commercial Banking 1.2 3.5 2.3 6.5 U.S.banks 1.1 3.1 2.0 6.3 Foreign banks 0.1 0.4 0.3 8.5Thrift institutions 0.7 1.2 0.5 3.2 Savings and loans 0.5 0.7 0.2 2.0 Savings banks 0.1 0.2 0.1 4.2 Credit unions 0.1 0.3 0.2 6.7Life insurance cos.0.4 1.5 0.2 8.1 Other insurance cos.0.1 0.5 1.2 9.9 Private pension funds 0.3 0.7 0.4 5.1 Finance companies 0.1 0.6 0.6 11.1 Mutual funds 0.05 0.8 0.7 17.7 Money-market funds 0.01 0.5 0.5 25.9Sec.brokers&dealers 0.03 0.2 0.2 -11.8 Total 2.88 9.6 6.7 7.3 Panel B.Market-Share Percentages:Then(1978)and Now(1995)Selected Ranks Industry 1978 1995 1978 1995Commercial Banking 41.4%36.4%U.S.banks 37.9 32.3 1 1 Foreign banks 3.4 4.2 Thrift institutions 24.1 12.5 Savings and loans 17.2 7.3 2 4/5