slike bài giảng quản trị ngân hàng chương 9 liquidity & reserve management-strategies & policies

William Chittenden edited and updated the PowerPoint slides for this edition. LIQUIDITY & RESERVE MANAGEMENT: STRATEGIES & POLICIES Chapter 9 Key topics 1. Liquidity: Supply and Demand 2. Liquidity management strategies 3. Estimating liquidity needs 4. Legal reserves and money position management 5. Factor in choosing reserve sources 7-2 Liquidity  The availability of cash in the amount and at the time needed at a reasonable cost  The size and volatility of cash requirements affect the liquidity position of the bank  Examples:  Deposits and withdrawals;  Loan disbursements and loan payments 11-3 Supplies of liquid funds  Incoming customer deposits  Revenues from the sale of non-deposit services  Customer loan repayments  Sales of bank assets  Borrowings from the money market 11-4 Demands for liquidity  Customer deposit withdrawals  Credit requests from quality loan customers  Repayment of non-deposit borrowings  Operating expenses and taxes  Payment of stockholder dividends 11-5 11-6 A financial firm’s net liquidity position L = Supplies of liquid funds - Demands for liquidity  Liquidity deficit (L < 0)  Liquidity surplus (L > 0)  Time dimension of liquidity  immediate liquidity (CD due to mature, deposit withdrawn tomorrow)  longer-term liquidity (arising from seasonal, cyclical & trend factor) → manager must plan how, when & where liquid fund can be raised 11-7 Quick quiz: Comprehensive problem Suppose that a bank faces the following cash inflows and outflows during the coming week: 1.deposit withdrawals are expected to total $33 million; 2.customer loan repayments are expected to amount to $108 million; 3.Operating expenses demanding cash payment will probably approach $51 million; 4.Acceptable new loan requests should reach $294 million; 5.Sales of bank assets are projected to be $18 million; 6.New deposits should total $670 million; 7.Borrowings from the money market are expected to be about $43mil; 8.Non-deposit service fees should amount to $27 million; 9.Previous bank borrowings totaling $23mil are scheduled to be repaid; & 10.A dividend payment to bank stockholders of $140 million is scheduled. What is this bank’s projected net liquidity position for the coming week? 11-8 Quick quiz: Comprehensive problem L = Supplies of liquid funds - Demands for liquidity = (108 + 18 + 670 + 43 + 27 + 23) – (33 + 51 + 294 + 140) = 889 – 518 = 371 → L > 0 → Liquidity surplus Essence of liquidity management  Rarely are the demands for liquidity equal to the supply of liquidity at any particular moment. The financial firm must continually deal with either a liquidity deficit or surplus  There is a trade-off between liquidity and profitability. The more resources tied up in readiness to meet demands for liquidity, the lower is the financial firm’s expected profitability.  High liquidity → high opportunity cost  Low liquidity → high interest cost & transaction cost 11-10 [...]... deposits or core liabilities)  Liquidity manager set aside liquid funds according to some operating rule Structure of funds approach Liability liquidity reserve = 0 .95 x (Hot money deposit & non-deposit funds – Legal reserves held) + 0.30 x (Vulnerable deposit & non-deposit funds – Legal reserves held) + 0.15 x (Stable deposit & non-deposit funds – Legal reserves held) Note: 0 .95 , 0.30, 0.15: common rule... thumb Structure of funds approach Total liquidity requirement = Deposit & non-deposit liability liquidity requirement and Loan liquidity requirement = 0 .95 x (Hot money funds – Legal reserves held behind hot money deposits) + 0.30 x (Vulnerable deposit & non-deposit funds – Required legal reserves) + 0.15 x (Stable deposit & non-deposit funds – Required legal reserves) + 1.00 x (Potential loans outstanding... confidence for reputation 11-12 Strategies for liquidity managers 2 Think about what is a liquid asset? Identify strategies for liquidity management • Strategies include: 1 Asset liquidity management (Asset conversion) 2 Borrowed liquidity or liability management 3 Balanced liquidity management 1 11-13 Asset liquidity management  This strategy calls for storing liquidity in the form of liquid assets (T-bills,... 11-20 Balanced liquidity management strategy  The combined use of liquid asset holdings (Asset management) and borrowed liquidity (Liability management) to meet liquidity needs  Some expected demand for liquidity is stored in assets  Some liquidity needs are backed by arranged credit line from potential fund suppliers  Unexpected cash needs are met by near-term borrowings  Longer-term liquidity needs... Loan forecast Monthly liquidity needs  The bank’s monthly liquidity needs are estimated as the forecasted change in loans plus required reserves minus the forecast change in deposits:  Liquidity needs = Forecasted ∆loans + ∆required reserves forecasted ∆deposits Estimates of liquidity needs Sources and uses of funds More simpler approach: Liquidity GAP measures  Management can supplement this information... parked in short -& medium-term assets 11-21 Guidelines for liquidity managers  They should keep track of all fund-using and fundraising departments  They should know in advance withdrawals by the biggest credit or deposit customers  Their priorities and objectives for liquidity management should be clear  Liquidity needs must be evaluated on a continuing basis 11-22 Methods for estimating liquidity needs... cover all of its liquidity needs  Applied by large financial institutions 11-18 Sources of borrowed funds 1 Federal funds purchased 2 Selling securities for repurchase (Repos) 3 Issuing large CDs (> $100,000) 4 Issuing Euro-currency deposits 5 Securing advance from the Federal Home Loan Bank (FHLB) 6 Borrowing reserves from the discount window of the Federal Reserve 11- 19 Borrowed liquidity (liability)... Sources and uses of funds approach  Structure of funds approach  Liquidity indicator approach  Signals from the marketplace Sources and uses of funds 11-23 Key steps… 1 Loans and deposits must be forecast for a given liquidity planning period 2 The estimated change in loans and deposits must be calculated for the same planning period 3 The liquidity manager must estimate the bank’s net liquid funds by... investments with specific loan and deposit flows  The bank can calculate a liquidity GAP by classifying potential uses and sources of funds into separate time frames according to their cash flow characteristics  The Liquidity GAP for each time interval equals the dollar value of uses of funds minus the dollar value of sources of funds Liquidity gap estimates (millions of dollars) Potential funding sources... Eurocurrency loans 11-16 Asset liquidity management is not costless and include opportunity cost:  Loss of future earnings on assets that must be sold  Transaction costs (commissions) on assets that must be sold  Potential capital losses if interest rates are rising  May weaken appearance of balance sheet  Liquid assets generally have low returns 11-17 Borrowed liquidity (liability) management . this edition. LIQUIDITY & RESERVE MANAGEMENT: STRATEGIES & POLICIES Chapter 9 Key topics 1. Liquidity: Supply and Demand 2. Liquidity management strategies 3. Estimating liquidity needs 4 firm’s net liquidity position L = Supplies of liquid funds - Demands for liquidity  Liquidity deficit (L < 0)  Liquidity surplus (L > 0)  Time dimension of liquidity  immediate liquidity. Demands for liquidity = (108 + 18 + 670 + 43 + 27 + 23) – (33 + 51 + 294 + 140) = 8 89 – 518 = 371 → L > 0 → Liquidity surplus Essence of liquidity management  Rarely are the demands for liquidity