...PREPARATION OF CREDIT REPORT AND SELECTION OF RIGHT TYPE OF BORROWERS 1. Preparation of a credit report as well as selection of right type of borrowers are specialised type of works usually done by a well experienced officer under the direct supervision of the Branch Manager/Departmental Head. 2. In preparing a "Credit Report" the concerned officer is required to take into consideration a number qualities of the concerned borrower. It is as such of paramount importance that banks have to be very careful while selecting right type of borrowers. 3. While selecting a borrower security will not be the only thing to be relied upon. 4. If the banker has to realise every advance by going to the court or selling the securities, it will mean considerable expenditure and waste of time, apart from the loss which may occur in a forced sale. 5. It thus indicates that in the extension of bank credit, nothing is more significant than the ability and character of the borrower. 6. Practical bankers and experts suggest that the safest and the most dependable security that could be obtained is the integrity and business like dealings of the borrowers. 7. In view of what has been stated above it is evident that an advance, to be safe, would be granted to a reliable and honest borrower, who has the capacity to conduct his business. The study/selection of a right type of borrower involves the study of the three "Cs" of the party, i.e. Character Capacity ...
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...Report on Bank Asia Limited May 21, 2013 | Author: Jannatul Ferdous | Posted in Credit Management Table of Contents * 1 Introduction * 1.1 Structure of the Corporate Office * 1.2 Directors’ and Key Persons’ Profile * 1.3 Mission Statement of Bank Asia * 1.4 Corporate Objectives * 1.5 SWOT Analysis of Bank Asia * 1.5.1 Strength * 1.5.2 Weaknesses * 1.5.3 Opportunities * 1.5.4 Threats * 1.6 Values Considered as Guiding Factors * 1.7 Equity Formation * 1.8 Performance of the Bank * 1.8.1 Profit and Operating Results * 1.8.2 Deposit * 1.8.3 Advance * 1.8.4 Foreign Exchange Business * 1.8.5 Investment * 1.8.6 Dividend * 1.9 Special Features of the Bank * 1.10 Products and Services * 1.11 Correspondence Relationship * 1.12 Customer Service * 1.13 Department: Cash * 1.14 Department: Accounts * 1.15 Department: Credit * 1.16 Department: Foreign Trade * 2 Introduction * 2.1 Types of Credit Facility by Bank Asia * 2.1.1 Funded Facilities * 2.1.1.1 Over Draft * 2.1.1.2 Secured Over Draft * 2.1.1.3 Term Loan * 2.1.2 Personal Credit * 2.1.3 Non-Funded Facilities * 2.1.3.1 Guarantee * 2.1.3.2 Features of Bank Guarantee * 2.1.3.3 Syndicate Loan ...
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...Professor Leigh Tesfatsion Department of Economics Iowa State University Ames, IA 50011-1070 Last Revised: 6 April 2011 © 2004 Pearson Addison-Wesley. All rights reserved 8-1 Key In-Class Discussion Questions • What basic “stylized facts” characterize the current U.S. financial system? • Do transactions costs and asymmetric information help to explain these stylized facts? • Enron Case Study (Mishkin p. 177, and asymmetric information problems in securities markets exemplified by the Enron bankruptcy scandal? online html notes “Enron Scandal & Moral Hazard”): In what ways (if any) are © 2004 Pearson Addison-Wesley. All rights reserved 8-2 Financial Structure Manner in which firms finance their activities using external funds. MIX SOURCE Equity Debt Securities Markets FIs 8-3 © 2004 Pearson Addison-Wesley. All rights reserved External Finance Sources 1970-2000 © 2004 Pearson Addison-Wesley. All rights reserved 8-4 The Decline of Banks as a Source of External Finance (Mishkin 12, Fig 2, p. 287) Source: Federal Reserve Flow of Funds Accounts; Federal Reserve Bulletin. © 2004 Pearson Addison-Wesley. All rights reserved 8-5 One reason for the decline…the U.S. savings & loan crisis in the 1980s Mishkin Chapter 11, Figure 1 © 2004 Pearson Addison-Wesley. All rights reserved 8-6 Recent Trends • Decreasing role for banks in supplying loans to U.S. firms. • Competing financial institutions now offering traditional banking...
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...Information Sharing and the effect on the supply of credit B.Sc. Thesis Finance Date: 2011-5-29 Name: Martijn Verwijs1 (Anr: 272713) Thesis supervisor: Erik von Schedvin 1 Email: m.m.verwijs@uvt.nl Table of contents Chapter 1: Introduction of the problem..................................................................................................... 3 1.1 Problem background........................................................................................................................ 3 1.2 Research question ............................................................................................................................ 4 1.3 Empirical approach.......................................................................................................................... 4 1.4 Main Findings.................................................................................................................................. 5 1.5 Overview ......................................................................................................................................... 5 Chapter 2: Literature review ..................................................................................................................... 6 Chapter 3: Data overview ....................................................................................................................... 12 Chapter 4: Empirical setup ...........................................................
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...Financial Institutions Chapter 7 Why Do Financial Institutions Exist? Chapter Preview A vibrant economy requires a financial system that moves funds from savers to borrowers. But how does it ensure that your hard-earned dollars are used by those with the best productive investment opportunities? Copyright ©2015 Pearson Education, Inc. All rights reserved. 7-3 Chapter Preview In this chapter, we take a closer look at why financial institutions exist and how they promote economic efficiency. Topics include: •Basic Facts About Financial Structure Throughout the World •Transaction Costs •Asymmetric Information: Adverse Selection and Moral Hazard Copyright ©2015 Pearson Education, Inc. All rights reserved. 7-4 Chapter Preview (cont.) • The Lemons Problem: How Adverse Selection Influences Financial Structure • How Moral Hazard Affects the Choice Between Debt and Equity Contracts • How Moral Hazard Influences Financial Structure in Debt Markets • Conflicts of Interest Copyright ©2015 Pearson Education, Inc. All rights reserved. 7-5 Basic Facts About Financial Structure Throughout the World • The financial system is a complex structure including many different financial institutions: banks, insurance companies, mutual funds, stock and bonds markets, etc. Copyright ©2015 Pearson Education, Inc. All rights reserved. 7-6 Basic Facts About Financial Structure Throughout the World • The chart on the next slide shows how nonfinancial business attain external funding in the...
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...Chapter-1 Introduction of the report 1.1 Origin of the report Reporting means the written presentation of the evidence and findings of a research. After completion of the internship program report submission is essential. The report is based on a topic that can satisfy both organization and my academic institution. Internship is the last part of my BBA course. Being a BBA student internship and report submission is essential for me. Without completion of internship and submission of report I cannot be able to complete my BBA course. This report is submitted to my internship supervisor, Shishir K. Rouph, Visiting Faculty, University Of Development Alternative, after completion of the three months internship program in the BASIC Bank Limited ( Bangshal Branch). I have assigned a topic “Credit Operating Procedure of BASIC Bank Ltd.” and the BASIC Bank authority gave me the opportunity to work at the Bangshal Branch for three months on the topic. 1.2 Rationale of the Study In the later 19th century, finance was a part of the Economics. But due to the globalization and more expansion of international trade, Finance plays the major role for the economic development. The development of a modern economy would not have been possible without the use of money. Bank is an important and essential financial institution for the necessity of the use of money and the protection of money. Due to the globalization and technological innovation, banking business has become...
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...Borrower: (AKA) | Co-Borrower (AKA) | | | Legal: | | USPS Address: | Current address: | | EXP | 1003-Vaildated | | | 1003 Initial Type Interview: LO Date: Borrower Date: | | | GFE Date TIL Date APR Range: | | | Section A Fee: Section B Fee: | | | APPRAISAL/APPRAISER | | | Appraisal Dated: Sales Price: Appraised Value: $ | | | Appraiser License Concessions: Max Loan (103.5%) | | | Appraiser Insurance HUD Statement Final Required: | | | Cost of Appraisal: Well Test Site Value | | | Appraiser: Septic Statement: Greater than 30% | | | ...
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...overall analysis of the repayment behavior of the SME loan borrowers of Brac Bank Limited. Before going to the analysis, it is mandatory to know something about the organization, its core products that it offers to its customers; about the SME loan, its classifications and the whole of its process starting from loan sanction to recovery and closing of the loan. That’s why, first of all, I made an overview of the organization, BRAC bank Limited, where I had completed my internship program. Here I tried to focus the bank’s history of origination, its mission and vision, major departments and business units and major products and services. Then I said something about Asset Operations Department, the department where I was to perform my job responsibility. SME is the next section where I gave my concentration. Here I focused on the terms and conditions of giving SME loan, enterprise selection criteria and documentation. Then talked about the procedure of SME loan where I delineated the sanction, disbursement, repayment and closing of SME loan. After talking about the whole process of SME loan, I made an attempt to analyze the repayment behavior of SME loan borrowers. For this end in view, I have collected information about 20 SME borrowers. Then I have chosen eight major variables which have an impact on the recovery rate of SME loan. That is, these are the variables which may change the repayment behavior of SME borrowers. I found some significant variable like age, experience...
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...I. Information Asymmetry Information asymmetry exists in transactions where one party has more or better information than the other leading to an imbalance of power. Adverse Selection is the associated problem of information asymmetry that arises before the parties to a contract reach an agreement. It occurs when bad credit risks (firms with poor investment channels and high inherent risks) become more probable to acquire loans than good credit risks (firms with better investment opportunities and less inherent risks). Moral Hazard is the associated problem of information asymmetry that arises after the parties to a contract reach an agreement. It arises when the borrower has an incentive to breach the loan covenants by investing in ‘immoral projects’ which are unacceptable to the borrower and also have a high possibility of default. Both these risks occur because of the lenders’ imperfect knowledge about the borrowers and their activities. For Financial institutions, information asymmetry inherent to credit disbursement is a key risk that needs to be managed. II. Bangladesh Bank Guidelines for Credit Risk Management As the central bank and apex regulatory body for the country's monetary and financial system, Bangladesh Bank provides a number of recommended policy and procedural guidelines to the financial sector that are directional in nature and aims to improve the risk management culture. Policy guidelines of Bangladesh Bank include Lending Guidelines, Credit Assessment...
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...19106-1574; phone: 215-574-3807; fax: 215-574-4303; email: Loretta.Mester@phil.frb.org. Hughes at Department of Economics, Rutgers University, New Brunswick, NJ 08901-1248; phone: 732- 932-7517; fax: 732-932-7416; email: jphughes@rci.rutgers.edu. The views expressed here are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System. This paper is available free of charge at www.philadelphiafed.org/econ/wps/. Introduction What do commercial banks do? What are the key components of banking technology? What determines whether banks operate efficiently? The literature on financial intermediation suggests that commercial banks, by screening and monitoring borrowers, can solve potential moral...
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...unions •Friendly societies Principal liabilities are deposits Non-deposit-taking institutions •Insurance companies •Investment banks •Pension funds •Unit trusts and OEICs •Investment trusts Principal liabilities are not deposits FINANCIAL SERVICES Financial intermediation provided by all financial institutions Insurance and pensions provided by insurance companies and pension funds Payments provided by banks and building societies Portfolio adjustment provided by unit trusts, open-ended investment companies (OEICs) and investment trusts FINANCIAL MARKETS Definition: Financial markets are markets in which funds are transferred from those who have excess funds (savers, lenders) to those who have a shortage (investors, borrowers). Structure: Debt and Stock Markets Primary and Secondary Markets Money and Capital Markets 2 4/12/2012 DEBT AND STOCK MARKETS Debt market: the market for trading debt instruments Debt instruments: • A paper or an electronic obligation that enables an issuer to raise funds by promising to repay a lender in accordance with terms of a contract. • Short-term, intermediate-term, long-term debt instruments • E.g.: bonds, notes, certificates,… Stock market: The market in which shares/equities are issued and traded either through exchanges or over-the-counter...
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...com/locate/jae The contracting benefits of accounting conservatism to lenders and borrowers$ Jieying Zhangà Leventhal School of Accounting, University of Southern California, Los Angeles, CA 90089, USA Received 1 March 2004; received in revised form 17 May 2007; accepted 8 June 2007 Available online 19 July 2007 Abstract This paper examines the ex post and ex ante benefits of accounting conservatism to lenders and borrowers in the debt contracting process. I expect conservatism to benefit lenders ex post through the timely signaling of default risk, as manifested by accelerated covenant violations, and to benefit borrowers ex ante through lower initial interest rates. Consistent with these predictions, I find that more conservative borrowers are more likely to violate debt covenants following a negative price shock, and that lenders offer lower interest rates to more conservative borrowers. r 2007 Elsevier B.V. All rights reserved. JEL classification: M41; G32 Keywords: Conservatism; Debt contracting; Covenant violation; Spread 1. Introduction While positive accounting theory suggests that accounting conservatism enhances efficiency in the debt contracting process (Watts and Zimmerman, 1986; Watts, 2003a, b), there is little empirical evidence on the debt contracting benefits of conservatism. In this paper, I provide evidence on the ex post and ex ante benefits of conservatism to lenders and borrowers. Specifically, I document that conservatism benefits lenders ex post through the...
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...The Portfolio Theory also known as Modern Portfolio Theory was first developed by Harry Markowitz. He had introduced the theory in his paper ‘Portfolio Selection’ which was published in the Journal of Finance in 1952. In 1990, he along with Merton Miller and William Sharpe won the Nobel Prize in Economic Sciences for the Theory. The theory suggests a hypothesis on the basis of which, expected return on a portfolio for a given amount of portfolio risk is attempted to be maximized or alternately the risk on a given level of expected return is attempted to be minimized. This is done so by choosing the quantities of various securities cautiously taking mainly into consideration the way in which the price of each security changes in comparison to that of every other security in the portfolio, rather than choosing securities individually. In other words, the theory uses mathematical models to construct an ideal portfolio for an investor that gives maximum return depending on his risk appetite by taking into consideration the relationship between risk and return. According to the theory, each security has its own risks and that a portfolio of diverse securities shall be of lower risk than a single security portfolio. Simply put, the theory emphasizes on the importance of diversifying to reduce risk. Early on, investors stressed on individually picking high yielding stocks to earn maximum profits. So if one particular industry was offering good returns; an investor would have landed...
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...Principal Agent Problems in the Financial Crisis of 2007-2009 BMI Master Thesis November 2009 Jasper Holke Klein Supervisor: Rob van der Mei [pic] Faculty of Sciences Business Mathematics and Informatics De Boelelaan 1081a 1081 HV Amsterdam Preface This paper is one of the last compulsory elements of the program Business Mathematics and Informatics at the VU University Amsterdam. The objective of this subject is to demonstrate the student's ability to describe a problem in a clear manner for the benefit of an expert manager. This is accomplished by doing a literature research and to apply this research to a practical situation. I have always had a strong interest in strategic thinking. One of the ways that this is modeled in the scientific theory is through game theory. From the broad range of subjects that are available in game theory I decided to focus on information asymmetry and, more specifically, on the principal-agent relationship as this theory is very widely applicable and has a strong explanatory power. In this way I was able to combine my interest in strategic thinking and the financial sector and able to give a clear explanation for the events that happened within the financial crisis of 2007 - 2009. Finally, I would like to thank my supervisor Rob van der Mei for his comments and suggestions. Amsterdam, November 2009, Jasper Holke Klein Summary This paper analyses the origin of the...
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...the Mortgage Industry: Lessons for the Future © Research Institute for Housing America May 2010. All rights reserved. Research Institute for Housing America Board of Trustees Chair Teresa Bryce, Esq. Radian Group Inc. Michael W. Young Cenlar FSB Nancee Mueller Wells Fargo Edward L. Hurley Avanath Capital Partners LLC Steve Graves Principal Real Estate Investors Dena Yocom IMortgage Staff Jay Brinkmann, Ph.D. Senior Vice President, Research and Business Development Chief Economist Mortgage Bankers Association Michael Fratantoni, Ph.D. Vice President, Research and Economics Mortgage Bankers Association Anatomy of Risk Management Practices in the Mortgage Industry: Lessons for the Future © Research Institute for Housing America May 2010. All rights reserved. 3 Table of Contents Executive Summary 1. Introduction: Findings and Recommendations 2. A Model for Mortgage Risk Taking: Growth, P / E and the Fallacy of ROE 3. Data and Model Limitations Data Integrity Economic Environment Mortgage Products and Risk Layering Borrower and Counterparty Behavior 4. Governance, Corporate Culture and Risk Taking: A Behavioral Economics Approach 5. Lessons Learned 6. References 7 9 19 27 29 31 32 38 43 53 57 Anatomy of Risk Management Practices in the Mortgage Industry: Lessons for the Future © Research Institute for Housing America May 2010. All rights reserved. 5 Executive Summary Not since the Great Depression has there been a...
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