Lecture 6 Flashcards
(13 cards)
What does the balance sheet of a commercial bank loos like
Assets: Cash InvestmetnLiabilities, Loans
Liabilties: Deposit Liabilities, Non deposit Capital accounts
What are the 3 consideration in loan pricing
Prime rate, Base rate Picing , Non price adjistments, matched funding loan pricing
What is prime rate
Historically a benchamrk rate. Lowest loan rate posted bu commercial banks. The rate banks charge to their most creditworthy Custoemrs
Base Rate laon pricing
Marking up from a minimum offered to the least risky borrowers
What are three potential adjustments for Base Rates
Increased risk of default, term to maturity, customers acess to alternatives
Non price adjustments
alter the effective return under a given nominal rate
Matchign funding loan pricing
Fixed rate laons funded with deposits of the same maturity
5C of credit
Character, collateral, capital, collateral, conditions
Securization
Bundle of different type of leans put together. This backage is then sold to investors as a security
What are the major sources of income for banks
Deposits, intrest on loans, fees and services
What are the major expenses
Intrest paid on deposits, payment of federal fudnds, repurchase agreeements, borrows money
3 types of financial convenants on debt
Liquidity, Leverage, Coverage rations
Give an example of the 3 types of ratios
Debt/EBITDA, Current assets/Liabilities, EBIT/Intrest
