...A REPORT ON DEPOSITORY INSTITUTIONS: COMMERCIAL BANKING INDUSTRY OF BANGLADESH Date of submission: 24th August 2015 Submitted to Farzana Lalarukh Associate Professor Department of Finance University of Dhaka Submitted by SL Name BBA ID Remarks 1 Sifat sadia 17-003 2 Barna Paul 17-047 3 Maghla Hossain 17-061 4 Saima Sultana 17-069 5 Nawsina Arif 17-085 Department of Finance University of Dhaka Date of Submission: 24th August, 2015 Department of Finance University of Dhaka Letter of Transmittal August 24, 2015 Farzana Lalarukh Associate Professor Department of Finance University of Dhaka Subject: Submission of Report on depository institutions: banking industry of Bangladesh. Dear Madam, It gives us enormous pleasure to submit the report on Depository institutions of Bangladesh as per the Advisor’s instruction. We expect this report to be informative as well as comprehensive as per requirement. Working with such a topic was an inspiring experience for us. We believe that the knowledge and the experience we gathered will facilitate us a lot in our future career life. With our limited knowledge, we have tried our level best to prepare the report worthwhile. Your acceptance and appreciation would surely inspire us. For any further explanations about the report, we will be gladly available to clarify the ins and outs. Sincerely, Sifat Sadia Roll no. 17-003 On behalf of Group...
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...credit crisis (which may be dated to March 2007 when major losses were announced by the U.S. subprime-based investors Accredited Home Lenders Holding and New Century Financial), key issues remain to be resolved. At the most basic level the questions are two. What caused the crisis? And in light of one’s answer to this first question, what should be done to minimize the risk of repetition if not of identical events then at least of something similar? To say that these questions remain to be satisfactorily answered is not the same as saying that there has been a shortage of attempts. Standard operating procedure starts by rounding up the usual suspects: unethical mortgage brokers, greedy bankers, naïve homeowners, and illinformed investors. Lists focusing less on individuals than mechanisms emphasize agency problems between brokers and banks, the originate-and-distribute model, excessive leverage and short-term funding, the perverse incentives created by executive compensation practices, conflicts of interest within the rating agencies, and permissive monetary policies. These long lists of causes lead to correspondingly long lists of reforms: regulate mortgage brokers, rating agencies, and executive compensation; force banks to keep a participation in any securities they originate; require banks to hold more capital; and revisit whether monetary policy should respond to credit booms and asset bubbles. This of course is only a very incomplete summary of a vast and rapidly-growing...
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...CHAPTER I INTRODUCTION 1.1 Background Basel Capital accord is a capital adequacy framework developed by the Basel committee. In 1988, the Basel Committee decided to introduce a capital measurement system commonly referred to as the Basel Capital Accord. This system provided for the implementation of a credit risk measurement framework with a minimum capital requirement of 8% on banks Risk Weighted Assets (RWA). The 1988 framework is also known as "Basel – I". Since 1988, this framework has been progressively introduced not only in member countries but also virtually in all other countries. The "international convergence on capital measurement and capital standard -2004" is popularly known as Basel-II. It is a capital adequacy related standard framed by Basel committee. After the successful implementation of 1988 accord in more than 100 countries, the Basel Committee on Banking Supervision reached an agreement on a number of important issues for promoting best and uniform banking practices as well as setting standards and guidelines for supervisory function. Following extensive interaction with banks, industry groups and supervisory authorities that are not members of the Committee, the revised framework was issued on 26 June 2004, which is being regularly revised and updated. The Basel-II aims to replace Basel I and to make the capital framework more risk sensitive. Basel II has recommended major revision on...
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...4/3/2012 Economic and Public Policy Issues Paper Assignment –Book Review Too Big to Function: The Absurdity of Market Regulation There are many theories as to what was the underlying cause of the Great Recession from which America is still recovering. Popular ideas generally include irrational exuberance on the part of commercial banks, executive compensation packages which encouraged bankers to over-leverage themselves, and the collapse of the sub-prime housing market. While it is probable that some of these factors played a role in the crisis, none of them can accurately explain the near complete collapse of the financial system that began in late 2007. In fact, the cause of the financial crisis can be directly traced to the failure of government regulators to recognize the dangers of interactions between several different laws designed to protect the system. In their book entitled Engineering the Financial Crisis, authors Jeffery Friedman and Wladimir Kraus lay out an argument asserting that the crisis was caused by an unforeseen interaction between capital requirements for banks and the use of Mark to Market accounting methods. They further contend that there was a “master regulatory mistake that precipitated the crisis: using the bond ratings produced by Moody’s, S&P, and Fitch as the determinant of the capital levels required of banks by law” (Friedman 148). The book contains four chapters; the first is devoted to the refutation of several prevailing...
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...COMMERCIAL BANKS Commercial banks are important financial intermediaries serving the general public in any society. In most cases, commercial banks hold more assets than any other financial institution, in some cases, even more than Central Banks. Apart from their many functions, commercial banks facilitate growth and development. They lend in many areas or sectors of the economy. Viewed from the real sector, they contribute to investments, employment creation, and by extension the process of economic growth. In Trinidad and Tobago there are 8 commercial banks as follows; • Bank of Baroda (Trinidad and Tobago) Limited • Citibank (Trinidad & Tobago) Limited • FirstCaribbean International Bank (Trinidad & Tobago) Limited • First Citizens Bank Limited • Intercommercial Bank Limited • Republic Bank Limited • Scotiabank Trinidad and Tobago Limited • RBC Royal Bank (Trinidad and Tobago) Limited There are many other institutions such as credit unions, development banks, mutual funds to name a few. However, notwithstanding this commercial banks can be described as the head of the financial system. They are by far the largest mobilizers of savings and providers of loanable funds. They now account for over 50% of the total assets of the financial system and far more than half of the financial savings of the domestic economy. (See Table 1) Assets of the banking System (2001-2008) [pic]With all these resources...
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...Introduction Following the recent global economic downturn, it is clear that the response of central banks and governments is likely to shape the future of our financial markets for many years to come. Their responses in regulating fields such as credit rating agencies, derivative markets and hedge funds will be crucial in relation to economic recovery. Over the course of our essay, we will also discuss areas such as international trade, geo-political issues and the role of monetary authorities in the future as the global economy aims to bounce back from the worst downturn since 1929. We will begin our assessment by first taking a look at the future regulation of financial markets. Regulation of Financial Markets Credit Rating Agencies Credit Rating Agencies (CRA) are responsible for assigning a credit rating to financial instruments such as bonds, companies, governments, etc. By current regulation any financial instrument must receive a credit rating from at least two CRAs. The problem with this is that there are only three companies which control roughly 85% of the market. These companies are Standard & Poors, Moodys and Fitch. The need for regulation in this market is now coming under increasing pressure. These companies first came under scrutiny after the collapse of Enron because the company still had a top AAA rating one week prior to filing for bankruptcy but subsequently the credit rating agencies were overshadowed by the failures of auditors and thus were...
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...A FRAMEWORK FOR PRUDENTIAL REGULATION AND SUPERVISION OF THE FINANCIAL SECTOR BY DR. OWEN JEFFERSON Recent developments in the financial sector has catapulted the issue of the safety and soundness of the financial system into the forefront of discussions in Jamaica. While not necessarily providing any consolation for us, it is important to note that this issue has also been plaguing many other countries and has become a matter of international concern. The number of countries experiencing significant banking problems has increased substantially in recent years - hitting industrial and developing countries alike - and the high costs and macroeconomic disruptions caused by banking crises have become a matter of increasing concern to the international financial community. Not since the Great Depression of the 1930's have so many banks failed as in the 1980's and the 1990's. A recent survey by the International Monetary Fund reported banking problems in 131 of its 181 member countries over this period, ranging from outright systemic crises to isolated causes of failing banks. We all remember the collapse of the Bank of Credit and Commerce International (BCCI) in 1990. There was the much publicised savings and loan debacle in the United States which cost some $150 billion. In Latin America, banks in four countries - Venezuela, Brazil, Mexico and Argentina - have recently had to struggle with crises of varying degrees of severity....
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...Executive summary In this paper, an attempt is made to delineate the deficiencies of the existing financial system in Bangladesh to cater to financing needs of SMEs or new potential entrepreneurs and a proposal has been given to develop the venture capital industry to meet financing and non-financing needs of SMEs. SMEs play a vital role within Bangladesh’s economy in terms of creation of industrial outputs and generation of employment. Even though they play a significant role they face problems in securing investment or manage finance to develop their ideas or to expand their existing business. It is not possible for Bangladesh to accelerate economic growth without catering to the financing needs of SMEs, Thus, the paper proposes the development of the venture capital industry as an additional financial intermediary to Cater to financing and non-financing needs of SMEs. The paper discusses available sources of finance for SMEs and the Constraints of these sources. There are basically three sources from which SMEs may receive finance. These are banks, non-government organizations (NGOs) and the capital market. Then, we discuss the advantages that venture capitalists have over banks in catering to the funding needs of SMEs. It is argued that venture capitalists perform the role of ‘active investors’ by way of offering both financial and non-financial commitment to the investee company, which is essential in a market characterized by a high level of uncertainties. Also, it is argued...
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...Overview: Commercial Bank Management Chapter 1 How large is the financial services industry (commercial banks, investment banking, insurance) as a proportion of the US Economy’s corporate assets? 10%? 20%? 50%? More? ~70% Why study commercial banks separate from other types of firms (Retail / Manufacturing)? Because commercial banks have some fundamental differences from non-financial firms: 1) Commercial banks have primarily financial assets; non-financial firms have primarily real assets 2) Because of the above, commercial banks are exposed to different types of risk than non-financials (some of which are related to banks’ financial assets, like interest rate risk and default risk.) 3) Commercial banks market products from BOTH sides of the balance sheet making it more difficult to balance their sources of funds (i.e., deposits) and uses of funds (new loans). Non-financials determine how much capital is necessary to purchase new assets and then (assuming the project is +NPV) determine how to fund the purchase. Big picture: How to non-financial firms earn profits? How to commercial banks earn profits? Commercial banks earn profits from generating higher levels of interest income and fee income than they incur in interest expense (paid on deposits and other liabilities) and operating costs. Non-financials earn net revenues generated from positive NPV investments, primarily in real assets Current Topics in the News… Bank Regulation and the Presidential...
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...Residential and Commercial Mortgages C. Business Loans III. Regulation LECTURE NOTES LO – Compare and contrast finance companies to commercial banks using information throughout the chapter. I. INTRODUCTION LO – Know the definition of finance companies (basically, the contents of the following paragraph). ● The primary function of finance companies is to make loans to both individuals and corporations. Services provided by finance companies include consumer lending, business lending, and mortgage financing. Some of the loans are similar to commercial bank loans, such as consumer and auto loans, but others are more specialized. Finance companies differ from banks in that they do not accept deposits, but instead rely on short- and long-term debt. Additionally, finance companies often lend to customers commercial banks find too risky. II. SIZE, STRUCTURE, AND COMPOSITION OF THE INDUSTRY ● Finance companies were originated during the depression when General Electric Corp. created General Electric Capital Corp. (GECC) as a means of financing appliance sales customers unable to get installment credit from banks. By the late 1950s, banks were more willing to make installment loans so finance companies began looking outside their parent companies for business. ● Finance companies have been among the fastest growing FI groups in recent years with the industry experiencing growth of over 1,757 percent in the last 32 years. GMAC Commercial Mortgage...
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...of Prime Bank Limited in Terms of Capital Adequacy By Md. Abdullah Al Mamun Pabna University of Science and Technology, Bangladesh Abstract - The study aims at evaluating performance of prime bank. Data of the bank is analyzed using capital adequacy ratio, debt equity ratio and advance to asset ratio for the period 2008 to 2012. The study finds, though high debt equity ratio bank maintains capital above regulatory requirement. This will help the researcher and bank to further improvement in capital adequacy to meet regulatory requirement and enhance bank performance. Keywords : capital, capital adequacy ratio, performance. GJMBR-C Classification : JEL Code: G21 PerformanceEvaluationofPrimeBank LimitedinTermsofCapitalAdequacy Strictly as per the compliance and regulations of: © 2013. Md. Abdullah Al Mamun. This is a research/review paper, distributed under the terms of the Creative Commons Attribution-Noncommercial 3.0 Unported License http://creativecommons.org/licenses/by-nc/3.0/), permitting all non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited. Performance Evaluation of Prime Bank Limited in Terms of Capital Adequacy Md. Abdullah Al Mamun Abstract - The study aims at evaluating performance of prime bank. Data of the bank is analyzed using capital adequacy ratio, debt equity ratio and advance to asset ratio for the period 2008 to 2012. The study finds, though high debt equity ratio bank maintains...
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...INTRODUCTION TO CAPITAL MARKETS What is investment banking? Investment banks act as intermediaries in capital markets, helping the matching of sellers and buyers of various securities and advising institutional investors, government and companies on their investment strategies, on their financing needs (helping them to raise money) and their acquisitions. Two main areas: (1) Securities or capital markets divisions: trading in the equity, fixed income ,FX and commodities markets and advising and intermediating for institutional investors in those markets. (2) Corporate Finance and public finance (often referred to as investment banking) advising corporations and governments on their financing needs, including the underwriting of securities, on their merger and acquisition activities, or on their restructuring. Securities and capital markets divisions Clients are usually * Institutional investors, corporates or public entities, not private clients; * Mutual funds asset managers; * Pension Fund asset managers; * The insurance companies; * Private Banks; * Hedge Funds; * The treasury departments of large banks or large companies. Capital markets divisions * Equity division: equity research, equity sales, equity trading on cash, flow derivatives and structured products * FIRC or FICC (Fixed Income, currencies and derivatives): * Fixed income cash products, interest and credit derivatives...
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...BUSINESS DFI 503: FINANCIAL INSTITUTIONS & MARKETS COURSE OUTLINE COURSE FACILITATOR MRS KITHINJI [Financial Markets, Financial Institutions, the Power of Information, and Financial Policies] WEEK 1. An Overview of Financial Institutions and Markets • The Financial System of an Economy • The Structure of a Financial System • The Stock Market 2. Emerging Markets, African Markets and Capital Market Development • Financial Markets and the Organized Exchange • Characteristics of Emerging Capital Markets • Indicators of Capital Market Development 3. Financial Regulation, Intermediation, Capital Market Structures and Development • The Players in a Typical Capital Market: - Capital Market Intermediaries - The Regulator: The Capital Market Authority - The Stock Exchange [NSE] - Investors - Government • The Institutional, Regulatory and Legal Framework in Financial Markets - Types of Regulations in Financial Markets - Market Based Banking Regulations - Crisis in Banking Regulation. 4. Securities and Their Characteristics • Shares, Fixed Income Securities, Derivatives • Challenges of Trading of securities in the Stock Market • Why Derivatives Trading is Absent in Most Emerging Markets 5. Financial Contracting Under Imperfect Information • Sources of Financial Information • The Principal-Agent Problem(Jensen & Meckling, Hairs & Raviv, Townsend’s CSV Model) ...
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...banking behemoths. Banks should then comply with the new capital requirements agreed by finance ministers by January 1, 2019. The question is, however, whether this is the right path to choose and whether these regulations will be able to prevent the world from any future financial markets crisis. So far, the proposed numbers themselves could hardly be described as tough, as the bounce in bank shares testified. Also, it seems that many important issues are not being addressed at all. (Plenty) But what are the issues that should be addressed? What would be the ideal regulatory state and is it possible to ever achieve it? Let us, first, start with our idea of the “ideal” international financial regulatory plan. After having researched various proposals for the international financial markets regulations, we reached a conclusion that finding the ideal path is going to represent a very difficult task and that none proposed regulation will be able to fit all the states. As mentioned in the article “Financial regulation: More questions than answers” which was posted in Businessline in the end of July, due to the variations in institutional legacies, traditions and systems in individual countries over the world, no one size can fit all. Also, however, we believe that as far as financial stability is concerned within any kind of arrangement that is deemed fit in a particular country, there is no need for a central bank to have a lead role. (Opinion) Any regulations will then require...
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...Batch: PGDM 2011 - 13 Term: IV ------------------------------------------------- ------------------------------------------------- Course: Commercial Bank Management (CBM) Credits: 3 ------------------------------------------------- ------------------------------------------------- Course Instructor: Prof. D N Panigrahi Objectives of the course: The course inputs are designed to accomplish the following objectives. * To help students to understand the role and functions of Commercial Banks, main strategic issues in retail and corporate banking and the risks faced by the Banking Industry in India. * To familiarise the students with the new Banking Practices and Processes including new banking technologies. * To familiarise the students with the legal and regulatory framework for banks in India. * To equip the students with the tools and techniques used in interpreting and evaluating the performance, profitability, productivity, and efficiency of the Commercial Banks. * To equip the students with the in-depth knowledge of Bank Financial Management Process including Treasury, Investment, Asset Liability Management & Risk Management. * To equip the students with the in-depth knowledge and skills in Credit Analysis & Appraisal Processes relating to the banks’ lending decisions like Working Capital Financing, Term Loan & Project Financing, Domestic & International Trade Finance including Export-Import Finance, BG (LG) & LC, Retail...
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