...The Bank Liquidity Crisis and Aircraft Finance: A Sector Review By Ronald Scheinberg Fewer lenders, higher pricing, yield protection among results of the worldwide liquidity crisis. The liquidity crisis in world financial markets precipitated in fall 2008 by, among other things, the collapse of Lehman Brothers, has continued unabated. This crisis has affected the extension of bank credit to every industry, with banks reluctant to make loans so as to preserve their capital, especially in anticipation of deteriorating performance of existing customers/borrowers in the face of the worldwide recession. One industrial sector particularly hard hit by the crisis is the financing and refinancing of commercial aircraft for both airlines and aircraft lessors. In this article, I review the myriad effects that the liquidity crisis has had on that sector, which may help shed some light on the crisis as a whole. The major manufacturers of commercial aircraft, Airbus, Boeing, Bombardier and Embraer, have been producing between 937 and 1,152 aircraft every year over the last five years. Commercial aircraft are rather expensive capital goods, with list prices ranging from $32 million for a 70-seat Embraer ERJ¬170 regional jet to almost $340 million for a 525-seat Airbus A380 superjumbo jet. It is estimated that some $70 billion of new commercial aircraft will be delivered in 2009, and many billions of dollars of other aircraft will need to be refinanced. In light of their large expense...
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...FRANKFURT—Five major central banks moved in concert Thursday to pump dollars into the European banking system by arranging three new funding operations, an action aimed at stemming a new liquidity crisis. European banks are moving to pump dollars into their banking system, as panic starts to seep in over how to prevent a sovereign debt crisis, David Wessel and Charles Forelle report on Markets Hub. (Photo: AFP/ Getty Images.) The European Central Bank said it will be joined by the U.S. Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to conduct three U.S. dollar liquidity-providing operations. The action addresses an acute shortage of dollar availability as U.S. lenders withhold funds out of concern that the European banking system is overexposed to the region's government-debt crisis. The tenders appear aimed above all at ensuring that European banks keep access to dollar funding, after months in which private-sector investors have refused to roll over existing credits. In the new tenders, banks bidding, say, at the ECB for funds, will receive dollars. But the Fed's actual counterparty will be the ECB, not the banks that use the facility, reducing the risks of the transaction for the Fed. [centrals0915] Agence France-Presse/Getty Images European Central Bank headquarters in Frankfurt. The euro surged by more than 1% against the dollar and the yen following the central banks' move. European equity markets also shot higher...
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...1 LIQUIDITY RISK MANAGEMENT: A COMPARATIVE STUDY BETWEEN CONVENTIONAL AND ISLAMIC BANKS OF BANGLADESH Banks conventionally fulfill the supreme responsibility of being a financial intermediary between the deficit and surplus unit of the economy. Liquidity risk refers to the excessive transaction cost, excessive loss of value and excessive exertion of time that banks have to face at the time of allocating liquidity to the third party when stipulated. Because of the unique constitutional features and regulatory conformity with the Shariah principle Islamic banks have to exert much more to manage liquidity. The core objective of this very research is to assess the extent of liquidity risk associated with financial institutions especially banks and to evaluate the concurrent liquidity risk management (LRM) along with a comparative analysis between conventional and Islamic banks of Bangladesh. The researcher has tried to investigate the significance of firm's size, net working capital, return on equity, capital adequacy and return on assets on liquidity Risk Management in case of Conventional and Islamic banks of Bangladesh. Secondary data had been the major stimulus of the research covering five year 20062010. For Islamic banks, a model estimation to predict the liquidity risk level was proven to be successful but the module failed to generate the desired result in case of the conventional banks. Moreover, net working capital in case of Conventional banks...
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... ID.No.091-11-924 Figure: Return on Asset (ROA) Interpretation: ROA (Return on Asset): ROA is a indicator of managerial efficiency, it indicates how capable the management of bank has been converting the institution’s assets into net earnings. In this example, the DBBL earned in year 2010 is 1.989693165 and in 2009 is 1.39102595.The Premier Bank in year 2010 is 2.632 and 2009 is 2.2988, which means the 2010 is than the 2009 by using tk. 100 of assets. Here we see that Premier Bank is higher on ROA, SO Premier bank is better than DBBL. Return on Equity (ROE): Figure: Return on Equity (ROE) Interpretation: ROE (Return on Equity): ROE is measure of rate of return following to this bank’s shareholder. If approximates the net benefit that the stockholder have received from investing their capital in the bank. For this example, DBBL shareholders will get 2010 is 28.63057606 and 2009 is 26.1431769. The Premier Bank shareholders get in 2010 is $28.0636 and 2009 is 23.4650, which mean the 2010 is than the 2009 by using tk. 100 of assets. Here we see that Premier Bank is higher on ROA, So DBBL is better than Premier Bank. NIM (Net Interest Margin): Figure: NIM (Net Interest Margin) Interpretation: NIM (Net Interest Margin): Net interest margin it measures how large a spread between interest revenue and interest...
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...Principles for Sound Liquidity Risk Management and Supervision September 2008 Requests for copies of publications, or for additions/changes to the mailing list, should be sent to: Bank for International Settlements Press & Communications CH-4002 Basel, Switzerland E-mail: publications@bis.org Fax: +41 61 280 9100 and +41 61 280 8100 © Bank for International Settlements 2008. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN print: 92-9131-767-5 ISBN web: 92-9197-767-5 Table of Contents Introduction ...............................................................................................................................1 Principles for the management and supervision of liquidity risk ...............................................3 Fundamental principle for the management and supervision of liquidity risk ...........................3 Governance of liquidity risk management.................................................................................3 Measurement and management of liquidity risk .......................................................................3 Public disclosure.......................................................................................................................4 The role of supervisors .............................................................................................................4 Fundamental principle for the management and supervision of liquidity risk ...........
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...Determinants of Banking Instability in Malaysia Final Year Project Proposal – April 2015 Submitted By: Name & Roll Number Submitted To: Supervisor’s Name: This proposal is submitted to SEGi UNIVERSITY on 10/04/15, in partial fulfillment of the requirement for the degree BBM. EXCLUSIVE RIGHTS ALL RIGHTS RESERVED. No part of this paper may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior consent of the author. DECLARATION I hereby declare that: * This undergraduate research project is the end result of my own work / research and that due acknowledgement has been given in the references. * No portion of this research project has been submitted in support of any application for any other degree or qualification of this or any other university. * The word count of this research proposal is 10,276 words. Name of the Student Signature Date ACKNOWLEDEMENTS I would like to thank my Final year project’s supervisor [NAME], who has been an inspiration and provided me information regarding banking instability, which proved to be very useful in completing this project. I also appreciate the hard work and efforts of my friends and former colleagues who has provided me with useful information / data which helped me choose this topic. PREFACE This research paper is submitted in partial fulfillment of the requirement for Bachelor of Business Administration (HONS)...
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...LIQUIDITY MANAGEMENT 2.0 OBJECTIVES: In this unit, an attempt has been made to understand the following aspects of liquidity management: ● Definition of Liquidity ● Dimensions and Role of Liquidity Risk Management ● Measuring and Managing Liquidity ● Measurement of Liquidity through Ratio Analysis 2.1 INTRODUCTION: The objectives of ALM are two fold: ensuring profitability and ensuring liquidity. Liquidity which is represented by the quality and marketability of assets and liability exposes the organization to liquidity risk. Unlike other risks like interest rate risk, market risk, operational risk etc. that can threaten the very solvency of the bank, liquidity risk is a normal aspect of every day management of a financial institution. In extreme cases, liquidity problems translate into solvency risk problems. As such, bankers should be more aware of the need for bank liquidity. 2.2 DEFINITION: Banks need liquidity to meet deposit withdrawals and to fund loan demands. The variability of loan demand and variability of deposit determine a bank’s liquidity needs. Liquidity represents the bank’s ability to accommodate decreases in liability and to fund increases in assets. A bank is said to have sufficient liquidity when it can obtain sufficient funds either by increasing liabilities or by converting assets, promptly at a reasonable cost. 2.3 DIMENSIONS & ROLE OF LIQUID & RISK MANAGEMENT: Bank’s liquidity management is the process of generating...
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...Liquidity risk & Management-Basic Bank Course Title: Management of Financial Institution Course Code: F-637 Submitted to Tahmina Akter, Assistant Professor department of finance university of Dhaka Submitted by Md Abdullah-Al-Hasan,ID-13007. Md Rukonuzzaman, ID-20026. Ajanta Shukla Tanma,ID-21050 Moin Uddin, Id-20035 AHMED SHARIF, ID-19011. Introductory Part Letter of transmittal 17 August, 2013 Tahmina Akter, Assistant Professor Department of Finance Faculty of Business Studies University of Dhaka Subject: Submission of the Term Paper Dear Madam, We are pleased to present you this term paper titled “Liquidity risk and management-Basic Bank” as partial requirement of the Management of Financial Institution course. Working for this report has been an enlightening & informative experience. Your guideline has been followed in every aspect of preparing this report. With our limited knowledge in this field we have presented what we believed to be relevant and rational information. We have enjoyed working on this report and hope that our work will meet the level of your expectation. We will be always available for any further query. Yours sincerely, Md Abdullah-Al-Hasan,Id-13007. Md Rukonuzzaman, Id-20026. AJANTA SHUKLA TANMA,ID-21050 Moin Uddin, Id-2003 AHMED SHARIF, ID-19011. LETTER OF ACCEPTANCE This report is prepared during the relevant documents...
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...Introduction A liquidity crisis may be created in the banking sector due to its over-reliance on domestic borrowing for implementing the annual development programme. If the government borrows hugely for implementing the ADP, the industrial sector will not get enough loans from the banking system, which will ultimately lead to a higher bank interest rate. The government is planning to borrow from banks of Tk 18,957 crore for meeting the deficit and spending in different sectors. The growth of the industrial sector will be hampered if the government does not stop borrowing from banks. Due to government borrowing banking sector is facing a great amount of liquidity crisis in the recent years. Liquidity crisis results in various problems to the economy. it rises interest rate, hinders economic growth, decreases confidence of banking people. So, it is one of the major responsibilities of the Bangladesh Bank to make proper steps to control liquidity crisis. What is liquidity? Liquidity refers to how quickly and cheaply an asset can be converted into cash. Money in the form of cash is the most liquid asset. Assets that generally can only be sold after a long exhaustive search for a buyer are known as illiquid. High liquidity means there is a lot of capital because interest rates are low, and so capital is easily available. Interest rates are very important in controlling liquidity. What Does Liquidity Crisis Mean? Liquidity crisis indicates a negative financial situation characterized...
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...Course Name: Commercial Bank Management Course Code: FIN 425 Submission page - Submitted To – Fahim Muntaha Course instructor, school of business ASA University Bangladesh (ASAUB) - Submitted By – KAMRUL HASAN CHOWDHURY ID No: 081-12-0414 S.M.IBRAHIM ID No: 081-12-0396 ISHRAT NAHAR ESHA ID No: 081-12-0408 MD.MAHAMUD SULTAN ID No: 081-12-418 ROKSANAQ HUQ TABARI ID No: 081-12-424 Section: FIN-3C 3rd Batch, (Summer Semester, 2011) Date of Submission: 14th August, 2011 - Letter of Transmittal- Date: 14th August, 20011 To Fahim Muntaha Course instructor School of Business ASA University Bangladesh (ASAUB) Dear Sir, Here is a report that we have prepared for our, FIN-425: Commercial Bank Management. The topic of the report is the “Reserve and Liquidity Management of Islami Bank Bangladesh Ltd.”. It was an interesting & outstanding research for us & we learned a lot about the reserve and liquidity policy provided by IBBL. We would like to thank you for allowing us to work on this topic and for your constant guidance and support. We want to declare that, we took help from Internet website of the particular bank & advices from Cash Manager of IBBL. There might be fault in this report, please kindly consider us if there is any kind of mistake. I therefore, hope that you would kindly grant our report. Thanking you, Name | Signature | Kamrul hasan joy | | S .m. Ibrahim | | Mahamud sultan | | Eshrat nahar Esha | | ...
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...Management The impact of the global financial crisis on the Multinational bank funding and its liquidity CandNo: 109098 Tutor: Dr Bruce Hearn, Dr Javad Izadi Zadeh Darjezi and Miss Madina Tash Date of Submission: 7th March 2013 Abstract This paper analyses the impact of the global financial crisis on the Multinational bank funding and its liquidity. In analysis of several articles, under the global financial crisis, multinational banks change their funding model to the stable wholesale funding and reduce the lending when the parent banks are financially weak. For its liquidity, multinational bank subsidiaries can rely on support from the bank group they belong to and therefore tend to hold a slightly lower liquidity. Content Abstract 1 Introduction 3 Literature Review 3 Analysis 5 Conclusion 6 Reference 6 Appendix 7 Introduction As the financial crisis existed through the fabric of the world’s financial system in the third quarter of 2007, it became clear that firm access to finance was going to be an early victim, including Multinational banks. During the local crisis, strong parent banks used their internal capital market to provide subsidiaries with capital and liquidity (Haas and Lelyveld, 2010). Domestic banks rely to a great extent on local funding, whereas an affiliate of a multinational bank can exploit both local funding possibilities and the funding capacity of its parent bank, all of which are embedded in the fund management of the banking conglomerate...
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...willing buyers and sellers. Another elegant definition of liquidity is the probability that the next trade is executed at a price equal to the last one.[citation needed] A market may be considered deeply liquid if there are ready and willing buyers and sellers in large quantities. This is related to market depth that can be measured as the units that can be sold or bought for a given price impact. The opposite is that of market breadth measured as the price impact per unit of liquidity. An illiquid asset is an asset which is not readily salable due to uncertainty about its value or the lack of a market in which it is regularly traded. The mortgage-related assets which resulted in the subprime mortgage crisis are examples of illiquid assets, as their value is not readily determinable despite being secured by real property. Another example is an asset such as a large block of stock, the sale of which affects the market value. The liquidity of a product can be measured as how often it is bought and sold; this is known as volume. Often investments in liquid markets such as the stock market or futures markets are considered to be more liquid than investments such as real estate, based on their ability to be converted quickly. Some assets with liquid secondary markets may be more advantageous to own, so buyers are willing to pay a higher price for the asset than for comparable assets without a liquid secondary market. The liquidity discount is the reduced promised yield or expected return...
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...Stress in liquidity is at the heart of any banking crisis in history. During the financial crisis of 2007-09, funding liquidity risk caused the collapse of interbank markets, which became the focus of authorities’ attention at restoring order. Accordingly, central banks and other regulatory bodies world-wide have been evolving prudential liquidity norms in order to impart stability to financial systems. Apart from implementing newer norms on liquidity, they have been devising ways of assessing objectively liquidity conditions in the markets. As an end to this objective, various central banks have started identifying the indicators of liquidity and preparing a composite index thereof in order to have a bird’s eye view of liquidity conditions across financial markets. In this study, a systemic liquidity index (SLI) is constructed considering prevailing rate variables across different financial markets in India. The SLI, so developed, is appropriately validated for its function as a metric for measuring systemic liquidity and its implications on the banks’ performance. Introduction “Unfortunately the word ‘liquidity’ has so many facets that is often counter-productive to use it without further and closer definition” - Charles Goodhart (Banque de France, 2008) The financial crisis of 2007-09 originated in the relatively small subprime lending market of the US, but engulfed the world financial markets very quickly and had devastating effect on the global economy. One of the important...
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...MANAGEMENT & COMPLIANCE LIquIdITy RISK – New Lessons and Old Lessons TABLE Of CONTENTS 2 3 12 14 14 14 17 19 Introduction Measuring Liquidity Risk Managing Liquidity Risk Standby Liquidity Reserve Syndication, Sales and Securitization Tactics for Liability Diversification Other Liability Management Tactics Conclusion Liquidity Risk- New Lessons and Old Lessons 2 INTROduCTION The flight to quality that began in 2007 reminded many banks of the importance of liquidity risk management. While maintaining ample liquidity for significant stresses is a costly proposition, there is a balance to be struck between short-term earnings and long-term survival. The crisis also reminded us that liquidity risk is a consequential risk. However, this time, none of the usual suspects such as credit and trading losses triggered the liquidity stresses. Instead, liquidity problems resulted from the belated recognition of risk in mortgagebacked securities which led to a massive flight to quality and, for some banks, the need to fund off-balance sheet commitments. While the initial cause of both problems was excessive exuberance in uS residential mortgage underwriting, problems quickly spread. 3 Liquidity Risk- New Lessons and Old Lessons I. MEASuRING LIquIdITy RISK In today’s complex product market, some banks have far more complex liquidity risks than others. Smaller, conservatively-run banks tend to make greater use of...
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...evaluate that Bank of Queensland’s liquidity and credit risk management during 2000 and 2010. The report first deals with liquidity risk. It starts with analysing liquidity risk by using various ratios such as quick ratio, financing gap etc. It then followed by evaluate the management of liquidity risk within 11years respectively. After comparing the actual ratio and real management, recommendations are provided. Similar analysis to credit risk, it is first analysed through expert system, loan credit rating and derivative financial instruments to evaluate BOE’s credit risk management. Finally, recommendations for improving risk management are provided. Most information we obtained from the company annual reports, bank homepages, textbook and relevant database such as Finanalysis and Bankscope. Thus, the information we provided is reliable. Table of Content 1. Introduction……………………………………………………………………………… 5 1.1 Background of Bank of Queensland …………………………………………………5 1.2 Structure……………………………………………………………………………… 5 2. Liquidity Risk………………………………………………………………………… 6 2.1 Causes of liquidity Risk………………………………………………………………6 2.2 Measurement of liquidity risk………………………………………………………8 2.2.1 Quick ratio………………………………………………………………………… 8 2.2.2 Financing gap………………………………………………………………………… 9 2.2.3 Liquidity Ratio………………………………………………………………………… 9 2.2.4 Non-Core Fund Dependent Ratio……………………………………………………10 2.3 Management of liquidity risk…………………………………………………………12 ...
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