Economics of banking full summary: Book, Lectures, Tutorials Questions and Answers

Risk-Weighted assets - -Translates assets into risk-assessed assets -Which business within banks is more cyclical? - -Investment banking, because there are deals going on; when the economy is booming, there's activity, and theres fees that investment banks collect -What incentives to banks have regarding grants of loans? - -Banks want to grant loans for the longer period, so they have to think strategically about how to manage their long term assets -True or false: Deposits are relatively stable sources of funding - -True -How and when does the risk of interest rate rise - -When dealing with fixed rate mortgages (or other sources of funding) -Risks to banks operations - -1. interest rate rising 2. Not being able to re-finance short term lending -Why is there little equity in a bank's capital structure? - -Not much equity in banks is partially due to the fact that equity is more expensive than debt -Why is it important for banks to have equity on their balance sheet? - -Acts as a market shock absorber -What is the management intention clause, and how is it related to bonds? - -The bank can choose