We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Risk2 - Essay Example

Comments (0) Cite this document
Summary
FINANCIAL MARKETS AND RISKS QUESTION 1 The need for maintaining safety and solvency in commercial banks: emphasis on adequate liquidity and capital adequacy. A bank is a place for the “safe-keeping” of funds (Caprio et al, 2006). This means that people and entities send monies to the bank and that means that aside the primary need to continue existing and operating as a going concern, a bank needs to have enough money to satisfy its primary safe-keeping responsibility it owes its customers…
Download full paper
GRAB THE BEST PAPER
Risk2
Read TextPreview

Extract of sample
"Risk2"

Download file to see previous pages These regulations cut across the need for adequate liquidity and capital. “Liquidity is the ability to make payments as the fall due” (Moir, 1999). This implies that liquidity refers to access to money or liquid resources that can be easily transformed into cash in a short time. This is what enables a business to pay for its cost of operations and trading activities. The lack of liquidity will cause a business to fold up. Liquidity is mainly borne out of cash inflows and short term convertibles to cash. These resources are used to fund working capital. A bank, like any other business needs to hold enough liquid resources to fund its operations and existence. It needs to pay its workers, pay for the premises they use for operations as well as working tools like computers, cars and other day-to-day expenses. Without this, a bank will obviously fold up. Due to the nature of banking, there is the need for banks to look beyond working capital for the maintenance of operations. They need to hold enough liquid resources to meet the cash demands of their clients within short notices. This therefore means that a bank needs to have enough cash in its vaults or within reach so that when entities banking with them call for their monies, they will be able to honour their legal obligation to pay customers as and when they come to make demands. This puts the need to hold sufficient cash or cash resources for the payment of clients an inherent part of the working capital structure of commercial banks. However, banks also have the duty of increasing the wealth of people saving with them. A rational person who holds money will want it to increase in value by earning some interest or profits through savings or investments. In the capitalist setting where people have the right to choose when and how to invest their money, banks have an obligation to come up with competitive interests for people who decide to save with them. Higher interest rates offered by commercial banks enables them to get more customers. This means that the commercial banks have the duty to invest the money of people who save with them in ventures that bring sufficient returns that enables them to pay high interests to their customers. Commercial banks therefore need to hold assets that can be used to re-generate revenue and sold for profits to attain the aim of providing high interest for their customers (Matz & Neu, 2007). As these assets generate revenues for the bank, the bank increases the wealth of the clients and earn more money through the sale of the assets. Thus, capitalisation is an important part of retail banking. Though the need to capitalise money deposited by clients is vital, clients also come in from time to time and demand their money. Due to the legal obligation of banks to make funds of their customers available to them when they need it, there is a strong need for banks to draw a balance between liquidity and capitalisation. A bank therefore needs to be careful to ensure that it has a fair balance between the two extremes. Investing too much money will mean shortage of money to pay customers who demand money. Also, failure to invest an adequate amount of money will mean that the bank will rake in lower ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Risk2 Essay Example | Topics and Well Written Essays - 2500 words”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1424462-risk2
(Risk2 Essay Example | Topics and Well Written Essays - 2500 Words)
https://studentshare.org/macro-microeconomics/1424462-risk2.
“Risk2 Essay Example | Topics and Well Written Essays - 2500 Words”, n.d. https://studentshare.org/macro-microeconomics/1424462-risk2.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
The influence of credit risk in financial institutions
Introduction The research study is related to the risk management issues that are associated with financial institutions. The purpose of the study is to identify and analyse the influence of credit risk in financial institutions. Credit risk has been defined by various financial institutions as the prospective reduction in the value of the on-balance-sheet and off-balance-sheet related assets owing to deterioration in the credit related profile of the clients of an institution (International Finance Corporation, 2010).
6 Pages(1500 words)Research Proposal
The stock
After a further four weeks of use, Nigel fractured his collar bone when the machine broke during exercise. The legal issues to be addressed are, whether the shop can rely on the exclusion clause and whether Nigel has any remedy to recover the damages for the loss caused to him due to the breaking of the rowing machine.
9 Pages(2250 words)Case Study
Contract Law and Tort Law
There was a notice which said "All activities undertaken at your own risk." The boys, accompanied by Potter went to a cafe, owned by "Thrills and Spells", for lunch. The floor was unfinished and several rolls of linoleum were lying around. Edmund, one of the pupils, tripped over a roll of linoleum, hurt his head and became unconscious.
8 Pages(2000 words)Case Study
Risk Management Case Study
Everyone must decide for themselves what levels of risk they are comfortable living with. Ideally this would involve everyone actively engaged in the management of the operation, especially family operations. Risk is the probability of an event occurring that can impact the current profit level, financial situation (equity position) and satisfaction and well being.
14 Pages(3500 words)Case Study
The Law of Contract Assignment
The shop assistant assured her that the stereo would be suitable for her purposes. Three weeks later the salon caught fire due to the stereo overloading the small capacity speakers. Several customers were injured in the fire and the salon was gutted. On being contacted by Laura the shop assistant asserted that any insurance they gave was superseded by the standard conditions of sale.
3 Pages(750 words)Essay
Risk Management Plan in hospital (2)
As expected, the risk management approach may help to eliminate, mitigate, prevent, and defend against human errors in care. Essentially, the risk management approach is a management discipline applicable initially into business models, applicable to all types of organizations and institutions.
27 Pages(6750 words)Essay
New World Essay
After World War I, the horrors of the war and the economic depression had influenced the minds of most Americans towards a policy of non-involvement and isolation. "Historians on both sides of the Atlantic challenged the thesis that Germany had been solely responsible for the war, and some argued that the blunders and ambitions of politicians in many countries had caused a war that no one wanted." (Bradley, 319).
4 Pages(1000 words)Essay
International Finance and Financial Management
Just like any analysis, the objective is to derive a forecast and profit from any future price movements. At the company level, it involves examination of its financials, management, business strategy and the competitive forces encircling the company. There are various approaches to conducting a fundamental analysis; top down approach starts with the overall economy and works its way down to industry groups and then to companies.
7 Pages(1750 words)Essay
Capital Budgeting Statistics Project
All these decisions involve huge investment, the benefits of which will be seen only in the long-term and these decisions are also irreversible in nature. By nature of these projects, long-term sources of funds become the best suited means of financing.
21 Pages(5250 words)Statistics Project
Violence in the Nursing Workplace
After launching his Value-Driven Health Care Initiative, Secretary Leavitt announced that more than 100 million Americans will be served by health plans that are committed to providing consumers with transparent quality and cost information. In this movement the federal government; half of the states; about 775 employers, including almost half of the top 200 U.S.
10 Pages(2500 words)Essay
Imac
The trial run on his computer would very much be easier in improving and devising the methods and the overall cooperating of the game, and many people had given the system’s performance good feedback. Unfortunately, to his dismay, just after
2 Pages(500 words)Assignment
International Econnomics: China
ent to note that many individuals do take the economy as a particularly dismal and dry subject that primarily deals with statistics in a dusty and tome manner. General development of the economy can as well be monitored factually from a China government (Atsmon and
5 Pages(1250 words)Term Paper
Let us find you another Essay on topic Risk2 for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us