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16 views4 pages

lí thuyết định chế TÀI CHÍNH

Uploaded by

lehoacl32
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

ESSENTIAL FUNCTIONS OF A FINANCIAL SYSTEM


1) Money transmission
2) Services to those wishing to borrow
3) Services to those wishing to save
4)And in addition…. Insurance services/ Advisory services/Foreign
exchange/etc.…

2. FINANCIAL SYSTEMS: Financial systems are the set of institutions and


markets used to move money around the economy, and to provide finance and
investments. Like the economy as a whole, the purpose of the Financial Systems
should be to serve the interests of ordinary people (households).

3.REAL ASSETS: Are physical assets that have value due to their substance and
properties, it is the assets you can touch and use. Real assets include precious
metals, commodities, real estate, agricultural land, machinery and oil
Asset is equal to real assets + financial assets

4.FINANCIAL ASSETS:
- Cash, plus more or less 'liquid’ and more or less risky claims you have on cash
from others
- Financial assets represent legal claims to future cash or finance on others
expected often at a defined maturity. For example: cash, security, bank deposit,
loan, bonds

5.FINANCIAL LIABILITIES:
- Can be thought as "thing you owe". More correctly, they are financial claims
which others have on you.
- It is a legal obligation to deliver cash or another financial instrument to others
who have claim on you.
- A financial liability is a claim someone else has on you – so if a bank has given
you a loan, then that is a financial liability for you but a financial asset for the
bank. Your financial liabilities are someone else’s financial assets: your financial
assets are the financial liabilities of others

6. WHAT IS MONEY?
- A unit of measurement :we price goods and services and measure debts in
money units money was ‘invented’ as a way of doing accounts, and defining tax
liabilities
- A means of exchange: we exchange goods and services, and other financial
assets, for money
- A safe and liquid asset: safe in ‘nominal terms’, and ideally perfectly liquid
Money supply = Cash (currency at issue) + commercial bank deposits
- Nominal interest rate: The rate of interest unadjusted for inflation
- Real interest rate: Nominal rate of interest adjusted for inflation
- Securities: Is a financial claim which can be traded (bought and sold) on a
secondary market. Shares in listed companies (also known as equities or stocks)
are securities, as are corporate and governments bond

7.BONDS
- Listed companies also issue bonds (corporate bonds) which involve lending
money to the company, rather than owning a share of it, and so pay interest,
rather than a dividend.
- They are less risky than shares, and normally ‘mature’ after a few years.
- They are more often held by fund managers, but some are traded on the ASX
- Governments also issue bonds (government, or treasury, or sovereign bonds),
which are safer still, and in some cases risk-free.

8. MONEY MARKET AND CAPITAL MARKET


- Shares and bonds are long-lived and called ‘capital market’ securities.
- There are also ‘money market’ securities, which are debt securities that exist
for up to a year. These include ‘treasury notes’ (called ‘treasury bills’ in the US);
‘bank bills’.

9.PRIMARY MARKET AND SECONDARY MARKET


- When securities are issued for the first time, they are sold on the ‘primary
market’. Institutional investors (fund managers) are active in the primary market.
- Securities may be re-sold (traded) later on the secondary market, which
provides ‘liquidity’ and makes securities more attractive to investors

10. CENTRAL BANKS ESSENTIAL FUNCTION:


- They provide the currency of the nation on demand.
- They provide banking facilities to the central government – except for the ECB.
- They provide liquidity (cash) to the private banks, which allows them to control
official interest rates.
- They intervene in financial markets, to set official interest rates and for other
purposes.
- Financial system stability.

11. HOW DOES THE MONETARY BASE CHANGE?


- The Monetary Base will change if the Central Bank’s liabilities to the private
sector increase due to central bank acquires assets (buys those financial assets it
is allowed to buy) or if its other liabilities fall (government spends, foreign
central banks spend from their accounts). 
- When govt spend, MB increase. When govt taxes, MB is reduced (money is
destroyed)
- When the central bank buys government bonds from the government? Nothing
happen to MB; government balance is not part of MB

12. INSTABILITY IN THE MONEY MARKET


- The total demand for reserves in the banking system varies each day. If there
were not enough reserves to meet the needs of banks, then the cash rate would
rise above the RBA target (buy bonds) and to very high levels: if there were
excess reserves, the cash rate would fall to zero (sellbonds). The RBA needs to
manage the liquidity of the banking system if it is to control the cash rate.

13. CAN CENTRAL BANK BECOME INSOLVENT?


- Central Bank cannot run out of their own currency because they can always
create more of it and can pay any debt it owes denominated in the AUD therefore
Central Bank cannot therefore be insolvent. There is no need for central banks to
retain positive ‘net worth’. For them, negative net worth is meaningless.

14. DO CENTRAL BANKS CONTROL OR SET THE QUANTITY OF RESERVES


(OR THE MONETARY BASE)?
Not normally. Through periods of QE are potentially an exception to this.

15. What does it mean to say that the money supply and the monetary base
are endogenous?
- Money supply growth depends mainly on the growth in private bank deposit
liabilities
- Monetary base and reserve growth normally depends on the needs of the
private banking system
- Central banks must supply reserves as needed to control interest rates and
maintain financial stability

16. Do minimum reserve balance requirements matter?


Not much. They shift and stabilise the demand for reserves by banks. ESA/FF
Reserve requirements do not ever limit private bank lending (‘credit creation’)
because when bank need reserve and if central bank want to keep control of
interest rate, it has to supply them

17.What is ‘Quantitative Easing’, and how does it change the answers given
so far?
- It is an asset swap – not ‘free money’. It involves central banks creating reserves
by making large scale outright purchases of government securities and some
private sector securities from private banks and other dealers.
- It has been used when central banks don’t want to cut interest rates further, or
feel they cannot (a ‘zero-bound’?)
- It makes the monetary base exogenous (set by the central bank) and changes
the approach to setting interest rates. The money supply remains endogenous
(set in the economy).
18. What are the effects of negative interest rates?
- In most cases, the negative rates have been applied to bank reserves.
Particularly when, following QE, private bank reserves are so high, this acts as a
tax on the banking system.
- It depresses bank profits, unless banks recoup the cost by charging fees to their
customers
- It can incentivize banks to take more risks – banks in general cannot decrease
reserves in the system, unless they purchase currency, but they can (if allowed to
by regulators) seek to pass reserves on to other banks by making more risky
investments and advances.

19. Central banks and their government


- Central banks were originally set up to allow governments to spend, or ‘manage
government debt’.
- Modern central banks have a degree of independence from governments, but
this is in most cases recent and is always limited. Central banks are always
‘creatures of the state’, whether technically government owned or not.
Essentially, central banks are part of the central government. 
- The central bank manages the supply of ESA reserves to the banking system to
control the cash rate.

20. Main risks


1) Default risk (or credit risk): risk of non-repayment, more advances and more
risky advances should require more capital is held
2) Market risk (or price risk): risk of losses due to unexpected changes in
interest rates, exchange rates or securities prices, more exposure to market risk
should require more capital is held.
3) Operational risk (or other risks of losses): risk of losses due to fraud, systems
failure, changes in legislation, poor management decisions, or other shocks, more
risky business activities should require more capital is held

21. How does the bank make a profit? “Monetary destruction”


- Traditional banking profits come from interest charged on advances.
- Notice that all repayments – interest and principal – destroy deposit liabilities
and so decrease ‘the money supply’.

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