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Contents
Contents
1 Essence of banking 7
1.1 Learning outcomes 7
1.2 Introduction 7
1.3 The financial system 8
1.4 Principles of banking 19
1.5 The balance sheet of a bank 29
1.6 Bibliography 39
2 Money creation 41
2.1 Learning objectives 41
2.2 Introduction 41
2.3 What is money? 42
2.4 Measures of money 44
2.5 Monetary banking institutions 45
2.6 Money and its role 46
2.7 Uniqueness of banks 47
2.8 The cash reserve requirement 51
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Contents
2.9 Money creation does not start with a bank receiving a deposit 52 2.10 Money creation is not dependent on a cash reserve requirement 63
2.11 Is “money supply” a misnomer? 65
2.12 The money identity and the creation of money 66
2.13 Role of the central bank in money creation 68
2.14 How does a central bank maintain a bank liquidity shortage? 69
2.15 Bibliography 71
3 Risk in banking 72
3.1 Learning outcomes 72
3.2 Introduction 72
3.3 The concept of risk 73
3.4 Interest rate risk 75
3.5 Market risk 84
3.6 Liquidity risk 86
3.7. Credit risk 93
3.8 Currency risk 99
3.9 Counterparty risk 102
3.10 Operational risk 103
3.11 Bibliography 107
© Deloitte & Touche LLP and affiliated entities.
360° thinking .
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© Deloitte & Touche LLP and affiliated entities.
360° thinking .
Discover the truth at www.deloitte.ca/careers
© Deloitte & Touche LLP and affiliated entities.
360° thinking .
Discover the truth at www.deloitte.ca/careers
© Deloitte & Touche LLP and affiliated entities.
360° thinking .
Discover the truth at www.deloitte.ca/careers
Download free eBooks at bookboon.com
Click on the ad to read more Banking: An Introduction
6
Contents
4 Bank models & prudential requirements 109
4.1 Learning outcomes 109
4.2 Introduction 109
4.3 Bank models 110
4.4 Rationale, objectives & principles of regulation38 120
4.5 Prudential requirements 129
4.6 Bibliography 141
5 Endnotes 143
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