【正文】 2020 Pearson AddisonWesley. All rights reserved. 948 Interest Rate Risk: Duration Analysis %?? in market value of security ? percentage point ?? in interest rate x duration in years. ? Uses the weighted average duration of a financial institution’s assets and of its liabilities to see how worth responds to a change in interest rates. ? ?Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 940 Capital Adequacy Management: Preventing Bank Failure High Bank Capital Low Bank Capital Assets Liabilities Assets Liabilities Reserves $10M Deposits $90M Reserves $10M Deposits $96M Loans $90M Bank Capital $10M Loans $90M Bank Capital $4M High Bank Capital Low Bank Capital Assets Liabilities Assets Liabilities Reserves $10M Deposits $90M Reserves $10M Deposits $96M Loans $85M Bank Capital $5M Loans $85M Bank Capital $1M Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 932 Liquidity Management: Borrowing ? Cost incurred is the interest rate paid on the borrowed funds Assets Liabilities Reserves $9M Deposits $90M Loans $90M Borrowing $9M Securities $10M Bank Capital $10M Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 925 Table 1 Balance Sheet of All Commercial Banks (items as a percentage of the total, December 2020) Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 917 Financial Crises: Mexico 19941995 ? Financial liberalization in the early 1990s: – Lending boom, coupled with weak supervision and lack of expertise. – Banks accumulated losses and their worth declined. ? Rise in interest rates abroad. ? Uncertainty increased (political instability). ? Domestic currency devaluated on December 20, 1994. ? Rise in actual and expected inflation. Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 99 The Subprime Financial Crisis of 2020 2020 (cont’d) ? Agency problems arise (cont’d) – Commercial and investment banks (as well as rating agencies) had weak incentives to assess the quality of securities ? Information problems surface ? Housing price bubble bursts Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. Chapter 9 Financial Crises and the Subprime Meltdown Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 96 FIGURE 1 Sequence of Events in . Financial Crises Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 914 Dynamics of Financial Crises in Emerging Market Economies – Path two: severe fiscal imbalances: ? Governments in need of funds sometimes force banks to buy government debt. ? When government debt loses value, banks lose and their worth decreases. – Additional factors: ? Increase in interest rates (from abroad) ? Asset price decrease ? Uncertainty linked to unstable political systems Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. Chapter 10 Banking and the Management of Financial Institutions Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 929 Bank Management ? Liquidity Management ? Asset Management ? Liability Management ? Capital Adequacy Management ? Credit Risk ? Interestrate Risk Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 937 Asset Management: Four Tools ? Find borrowers who will pay high interest rates and have low possibility of defaulting ? Purchase securities with high returns and low risk ? Lower risk by diversifying ? Balance need for liquidity against increased returns from less liquid assets Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 945 Credit Risk: Overing Adverse Selection and Moral Hazard ? Longterm customer relationships ? Loan mitments ? Co