IntroductionFirst Day IntroductionCourse IntroductionSimulationSlide 5Banking FundamentalsBanking GoalsFinancial InstitutionsCommercial BanksBank ServicesBank’s Main ActivityAssignment for Next TimeIntroductionFirst Day IntroductionCourseSimulationIntroductionCourse IntroductionSyllabus–Course Description–Required Resources–Grading–Tentative ScheduleSimulationStanford Bank Game–Simulated Bank Operation–Management Team ExperienceSimulationConcentration on:–Mechanics: Capital, Cost of Funds, Maximizing Fee Income –Management: People Issues, Time Management and Delegation, “Stick-with-it-ness” and what to do when “you really don’t know” and that’s ok!Banking FundamentalsSPREAD:Investment Return – Cost of FundsInvestment Return mainly from Loans and SecuritiesCost of Funds mainly from Capital and Borrowed FundsBanking GoalsProfitability (Not Size!)–Spread 4% +–ROA 1-1.5%–ROE 12% +Solvency–Capital to Assets 7-8%(No More, No Less)Financial InstitutionsCommercial BanksInvestment BanksSavings and LoansCredit UnionsInsurance CompanyMutual FundCommercial Banks“Accept Deposits and Make Loans”–But Also FDIC Insured & Fed RegulatedGlobal/International/Money Center–ChaseFull Service–BankAmericaRetail/Consumer–CitizensLimited Purpose / Mono-line–Credit Cards, Ag LoansBank ServicesPaymentsIntermediationOther Services–Guarantees–Insurance–Securities–Trust–Other Fin’l Svcs we will discussBank’s Main ActivityMaximize Shareholder Wealth–By managing Credit, Interest Rate, Liquidity, Operational, Capital and Fraud Risk–Subject to constraints from Market Competition, Social structures and Regulatory requirementsAssignment for Next TimeGo to Class Webpage (Syllabus)Go to Jan. 11th entryClick on, print and bring to
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