introduction to financial markets and financial institutions...introduction to financial markets and...

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Chapter 1 Introduction To Financial Markets

And Financial Institutions Chapter Objectives

The specific objectives of this chapter are to: ■ describe the types of financial markets that facilitate the flow of funds, ■ describe the types of securities traded within financial markets, ■ describe the role of financial institutions within financial markets, and ■ identify the types of financial institutions that facilitate transactions in financial markets.

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Definition of Financial Markets

Financial Markets are markets in which financial products are traded .

TIpSarh irBaØvtßúmaneKaledABIrTak;TinKña ³

- - C Yys MrYldl;h irBaØb,TanpÞal ; tamry³ecjpSaymUlb½RtfµI

- - erobcMkarC YjdUrn UvmUlb½RtEdl)anecjpSay .


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Role of Financial Markets

1. Surplus units: participants who receive more money than they spend such as investors.

2. Deficit units: participants who spend more money than they receive, such as borrowers.

3- Securities: Financing or investment instruments (some negotiable , others not ) bought and sold in financial market .


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Role of Financial Markets

1. Types of Financial Markets a. Money versus capital markets b. Primary versus secondary markets Money Market : Debt securities with maturity of less than one year . Capital Market : Debt securities with maturity of longer than one year . Primary Market :

kardak;lk;mUlb½RtCael IkdMbUgedayRkumh ‘une)aHpSayeTA


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eGayvin ieyaKKin RtUv)aneKeh AfaCakarlk;EckcayCael IkdMbUg .

TIpSardMbUg. TIpSardMbUg KWCaTIkEn øgEdl mUlb½RtRtUv)anlk;Cael IkTImYy

eTA[saFarN Cn eh IyGñkTij)anTijmUlb½RtedaypÞal ;BIRkumh ‘une)aH

pSayEdlGacCaRkumh ‘unsaCIvkmµ (Corporation) b¤Gg ÁPaBrdæaPi)al (Government Entity) mYyEdl)ane)aHpSaylk;mUlb½Rt . sac;R)ak;s Mrab;

TUTat;mUlb½RtRtUvbg ;eTA[Rkumh ‘une)aHpSay eh IyGñkTijPaKh ‘unTaMgenH

køayCaGñkkan ;kanb;¬m©as ;¦ PaKh ‘undMbUgeK .


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PaKh ‘un ikdMbUgeKGackan ; kab;PaKh ‘unTaMgenH b¤k_lk;PaKh ‘unTaMgGs ;

eTA[GñkepSgeTot . dMeN Ikar lk;PaKh ‘uneTA[saFarN ³Cn

Cael IkdMbUg RtUveKs Áal ;faCa : karnaMRkumh ‘uneTAkan ;saFarN ³

(Talking the company Public) . enHmann½yfa Rkumh ‘un

Elgkan;kab;edayvin ieyaKindMbUg b¤s ßabnik (Founder) eToteh Iy.


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Rkumh ‘unEdllk;PaKh ‘unrbs ;xøÜneTAkan ;saFarN ³Cn RtUv)aneK snµt;

fa : s MeN Ilk;mUlbRtCasaFarN ³ (going public) ekItmaneLIg .

enAkñúgRbeTsmYycMn Yn EdlCaRbeTskumµúynIs þ eKeRbIBakü Taking the

company private CMn YsBakü (Talking the company Public) .

cMeBaHdMeN Ikarlk;PaKh ‘unCael IkdMbUgenAkm


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Secondary Market :

TIpSarbnÞab; KWCaTIkEn øgEdlkarCYjdUrmUlb½RtRtUv)anekIteLIgCaRbcaM

rvagGñklk; n igGñkTijmUlb½Rt . TwkR)ak;EdlekItecjBIskmµPaB

CYjdUrenH RtUvbg ;eTA[PaKh ‘un ikEdllk; minEmn[eTARkuh ‘une)aHpSay

dMbUgenaHeT . mUlb½RtTaMgGs ;EdlCYjdUrenATIpSarbnÞab;GacRtUv)aneK

CYjdUrenAkñúgTIpSarmUlb½Rt (Securities Exchanges) b¤enAeRkATIpSar

mUlb½Rt EdleKeh Afa TIpSarrMlgbBa¢r ( Over-The-Counter) .


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• PaBxusKñarvag Securities Exchanges n ig Over-The-Counter - KWRtg ;fa Securities Exchanges manTIkEn øgCak;lak;s Mrab;[BaN iC ¢kr Securities Dealer b¤Q µÜjeCIgsarmUlb½Rt Securities Brokers

C YbTl;KñakñúgkarC YjdUrmUlb½Rt .

-c MEN kÉ Over-The-Counter vij BaN iC ¢krmUlb½Rt b¤Q µÜjeCIgsarmUl bRteFVIkarC YjdUrPaKh ‘untamry³karP¢ab; computer system b¤tamry³

TUrs ½BÞ eh IyEdlskmµPaBrbs ;eKmintamry³bN þajTIpSarmUlb½RteT.


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kt;s MKal ; ³ edaysarbec ©kviTüarIkc MerIn PaBxusKñarvsgTIpSarTaMgBIr

manlkçN ³minc,as ;las ; enAeBlEdlTIpSarmUlbRtnaeBlbc©úb,n ñ

BwgEp¥kkan ;EteRc Inel IbN þajkMBüúT½r CaCagkareRbIR)as ;TIkEn øgenAel I

TIpSarmUlbRts Mrab;karC YjdUrPaKh ‘un .


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- enAkñúgTIpSarrMlgbBa¢r Over-The-Counter Market ³ CaFmµta

GñkCYjdUrmUlb½Rt edIrtYnaTICaBaN iC ¢krmUlb½Rt ¬ Securities Dealer ¦ RBmTaMgbeg áItTIpSarmYy ( Make a market) edayxøÜnÉg kñúgkarC YjdUr

RbePTmUlbRtCaeRc In . eKCaGñkbeg áItTIpSar ( Market maker) .


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- Market maker eFVI[manTIpSarEdlEckecjCaBIrEpñk KW ³ EpñkTij

n igEpñklk; tamry³kardak;témø (Quoting a price) mYy EdlGñk

beg áItTIpSarGacTUTat;[Gñklk; (Bidding Price) b¤kñúgtémømYyEdl BYkeKGaclk;[GñkTij (Asking Price) . PaBxusKñarvag témølk;

n igtémøTij (Bid and Ask) RtUv)aneKeh Afa Kmøat (Spread) .


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Securities Traded in Financial Markets

1. Money Market Securities: -T-Bill -Certificate of deposit (CD) -Commercial paper (CP) -Banker’s Acceptance (BA) -Fed Funds -Repurchase agreements (REPO)


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Securities Traded in Financial Markets

2-Capital Market Securities a. Bonds : Long term debt obligations issues by firms or government b. Mortgages : Long term debt obligations created to finance the

purchase of real estate . c. Stocks


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Sources and Uses of funds of Financial Institutions - Depository Financial Institutions Generate funds from deposit - Non depository Financial Institutions Generate funds from sources others than deposits


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- Depository Financial Institutions Source of funds Uses of funds Commercial Banks : various deposits Commercial Loan Securities Purchase Saving Institutions : Deposit Residential Mortgage Loan Securities Purchase Credit Union : Deposit Various Loan

Non-profit Serve credit union members Small size


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- Non depository Financial Institutions Source of funds Uses of funds Financial companies : Securities Loans Services Investment Mutual Funds : Share Bonds Stocks Securities Firms : Services Securities Securities

Brokers Underwriter Dealer


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- Non depository Financial Institutions (Cont) Source of funds Uses of funds Insurance Companies : Insurance policies Long-Term bonds Stocks Pension Funds : Pensions Contribution Long-Term bonds Stocks


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Exhibit 1.3 Comparison of Roles Among Financial Institutions


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Exhibit 1.4 Asset Sizes of Financial Institutions (in Billions of Dollars)


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Exhibit 1.5 Summary of Institutional Sources and Uses of Funds


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Topic 2 s ßab ½n TT Yl beB a ØIr

Depository Institutions

FnaKarBaNiC¢ Commercial Bank

I- n iy mn ½y (Definition) ³

FnaKarBaNiC¢tMNa[Rkumh‘unénsßab½nbeBaØIr ehIymanmuxgarRbEhlnwgsßab½nsMéc

nigshCIB\NTan rYmmanmUlniFiR)ak;beBaØIr nigminEmnR)ak;beBaØIr dUcCab½NÑbMeBj

edImTun (Subordinate notes) nigskçIb½RtbMNul (Debenture) karpþl;km©ICaRTBü

skmµ (Assets) rYmmankarpþl;km©IeTAeTAelI Consumers , Commercial & Real

Estate .

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II- t Yn aT Irbs ;Fn aKarB aN iC ¢kmµ (The role of commercial banks) ³

FnaKarBaNiC¢ KWCaGnþrkarIhirBaØvtßúmYyd¾sMxan;CageK kñúgkarCYysMrYlnUvlMhUrmUl

niFiRTBüskmµ . RTBüskmµRbmaNCitBak;kNþalénFnaKarhirBaØvtßúTaMgGs; RtUv

)anbNþMúenAkñúgFnaKarBaNiC¢ . eRkABIesvahirBaØvtßú FnaKarBaNiC¢eFVIRbtibtþikar

CYjdUrmUlb½Rt enAelITIpSarhirBaØvtßúkñúgnamxøÜnpÞal; b¤CaGnþrkarI .

The role of commercial banks The main functions of commercial banks are accepting deposits from the public and advancing them loans . However, besides these functions there are many other functions which these banks perform . All these functions can be divided the following heads : 7 main functions of a Commercial bank

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1- Accepting Deposits 2- Giving loans 3- Over-Draft 4-Discounting of Bills of Exchange 5- Investment of Funds 6- Agency Functions 7- Miscellaneous Functions 1- Accepting Deposits The most importance function of commercial banks is to accept deposits from the public , Various sections of society , according to their need and economic condition , deposit their savings with the banks . For example , Fixed and low income group people deposit their savings in small amounts from the points of view of security , income and saving promotion . On the other hand, traders and businessmen deposit their savings in the banks for the convenience of payment.

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Banks formulate various deposit schemes . Generally there are 3 types of deposits which are as follows : i- Current deposit ii- Fixed deposit iii- Saving deposit 2- Giving Loans : The second importance function of commercial banks is to advance loans to its customers . Banks charge interest from the borrowers and this is the main source of their income . Modern banks give mostly secured loans for productive purpose . In other words , at the time of advancing loans , they demand proper security or collateral . Generally, the value . 3- Over-Draft (type of a loan) Bank loans to its customer’s up to certain amount through over-draft , if there are no deposits in the current account . For this bank demand a security from the customers and charge very high rate of interest.

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4- Discounting of bills of exchange : Under this system, banks advance loans to the traders and business firms by discounting their bills . In this way , businessmen get loans on the basis of their bill exchange before the time of their maturity. 5- Investment of Funds : The banks invest their surplus funds in securities market . 6- Agency Functions : Banks function in the form of agencies and representatives of their customers . The importance functions of these types are as follows. i- Banks collect cheques ii- Banks pay insurance premium of their customer . iii- Banks purchase and sell securities. iv- Banks arrange to send money from one place to another for the convenience of their customers. 7- Miscellaneous Functions : Beside the function mentions above , banks perform many other functions which are as follows :

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i- Banks make arrangement of locker for the safe custody of valuable assets of their customer such as gold, silver, legal documents etc. ii- Banks give reference for their customers iii- Banks collect necessary and useful statistics relating to trade and industry. iv- For facilitating foreign trade , banks undertake to sell and purchase foreign exchange . v- Banks advise their clients relating to investment decisions as specialist . vi- Banks issue letters of credit vii- during natural calamities , banks are highly useful in mobilizing funds and donations . Custody = Protection , Safe keeping calamities = disaster

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III- RbPBmUl n iF i n igkareRb IR)as ;mUl n iF irbs ;Fn aKarB aN iC ¢

Sources and uses of funds of commercial bank A- Bank’s own funds B- Borrowed fund A- Bank’s own funds Bank own fund are mainly of three types : (a) Paid up capital (b) Reserve fund (c ) Portion of undistributed of profit B- Borrowed fund The borrowed capital is a major and an importance source of fund for any banking business . 1- Borrowing from central bank The commercial banks in times of emergency borrow loans from the central bank of the country. The central bank extends help as and when financial help is required by the commercial banks.

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2-Other sources : Bank also raise funds by issuing bonds , debentures , Cash certificates etc.etc. Though it is not common but is a dependable source of borrowing . 3- Deposits : Public deposits are a powerful source of funds to a bank . There are 3 types of bank deposits (1) current deposits (2) Saving deposits (3) Time deposits .

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III- RbPBmUl n iF i n igkareRb IR)as ;mUl n iF irbs ;Fn aKarB aN iC ¢

Sources and uses of funds of commercial bank

RbPBmUlniF i (Sources of funds)

- RbPBR)ak;beBaØIr (Sources of funds) ³

!¼- Transaction deposits KWCaR)ak;beBaØIrenAkñúg Demand deposit account

b¤ Checking account EdlGtifiCn GacdkvijCasac;R)ak;tamviFIepSg² dUcCakar

eRbImUlb,Tanb½Rt b¤ b¤karbgÁab;[FnaKarepÞrTwkR)ak;cUlkñúgKNnIepSgeTot )an

RKb;eBlevla .

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Checking account man # RbePT ³

- Regular checking accounts ³ tRmUv[manTwkR)ak;Gb,rma ]>!/000 duløar.

kñúgkrNITwkR)ak;tMkl;minRKb;RKan;enaH RtUvbg;éføesvaRbcaMEx ]TahrN¾ * duløar

eTAeGayFnaKar .

- Activity accounts ³ \ttRmUveGaymanTwkR)ak;Gb,rma nig\tbg;éføesvaRbcaMEx

eT b:uEnþral;kardksac;R)ak; nigCYnkalkarbBa©ÚlR)ak;kñúgKNnI RtUv)anKitéfø

esvakmµ .

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-Interest-earning checking account ³ KWCa Now-account (Negotiable Order of

Withdrawal ) EdltMrUveGaymanTwkR)ak;Gb,rma kñúgkMritmYyx

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-Retail certificate of deposits (Retail CDs) tRmUv[manTwkR)ak;Gb,rmaBI

!/000$ eTA $ 5,000 ehIymanGRtakarR)ak;efr (Fixed interest rate) .

- Stock indexed CDs Gacpþl;karR)ak;x

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TwkR)ak;Gb,rmaFøak;cuH]TahrN¾ eRkamkMrit$ 1,000enaH FnaKarnwgKitéføesvakmµ.

%¼ Central bank funds purchased KWCakarTijmUlniFi¬xøI¦ edayFnaKarkNþal

edIm,IbMerI[tMrUvkarsnÞnIyPaBsMrab;ry³eBlxøI rbs;FnaKarBaNiC¢ nigsßab½nbeBaØIr

déTeTot .

^¼Borrowing funds from the C.B KWCakm©IBIFnaKarkNþal Edlpþl;lT§PaB[

FnaKarBaNiC¢x©ImUlniFiBIFnKarkNþalsMrab;mYyry³eBlxøI EdlehAfakm©Itambg¥Úc

Gb,har( Borrowing at discount window). GRtakarR)ak;RbePTenH ehAfaGRta

Gb,har EdlRtUv)ankMnt;eday C.B .

&¼Repurchase agreement (Repo)KWCakarlk;mUlb½Rt edayP¢ab;nwgkarRBmeRBog

BIsMNak;PaKIEdllk;mUlb½Rt karTTYlTijykvij .

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*¼Bond issued by the commercial banks

(¼Bank’s equity capital CaTUeTAtMNag[mUlniFi Edl)anmktamry³karecjnUv

b½NÑh‘un b¤karrkSaTuknUvR)ak;cMeNjminEckcay .

k areRb IR)as ;mUl n iF i ( Uses of funds by banks)

FnaKarBaNiC¢eRbIR)as;mUlniFi edIm,IbMerInUvRbtibtþikarrbs;xøÜn EdlenAkñúgenaHman

- Cash and deposit due from banks - Bank loan - Investment in securities - C.B funds sold (loaned out) - Fixed assets

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1- Cash : KWCasac;R)ak;EdlFnaKarrkSaTuksMrab;GtifiCnrbs;xøÜn EdlRtUvkardk

sac;R)ak;BIKNnI . sac;R)ak;enHmanbrimaNmYycaM)ac;sMrab;Fana)annUvsnÞIyPaB

rbs;FnaKar . FnaKarBaNiC¢rkSaTuksac;R)ak;mYymYyEpñkkñúgFnaKar nigmYyEpñk

eTotenAkñúgFnaKarkNþalsMrab;bMeBjkatBVkic©R)ak;bMrug (Reserves requirement). -and deposit due from banks : KWCasac;R)ak;EdlFnaKarrkSaTuk (Demand Account) sMrab;eRbIR)as;kñúgkarTUTat;mUlb,Tanb½Rt (Check Clearing purpose). 2- Bank loan : EckecjCa 1)- Business Loan & 2)-Consumer Loan

i-Business Loan : EckecjCa ³ Working capital loan & Term Loan

Working capital loan Cakm©ImankalvsanþxøIsMrab;ykeTAbMeBj[karcMNay RbtibtþikarCaRbcaMrbs;shRKas .

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Term loan CaRbePTkm©IeRbIsMrab;hirBaØb,Tan dl;karTijGclnRTBü ehIyman kalvsanþEvg mankalkMNt;c,aslas;GMBIry³eBl nigkarkk;bBa©aM(Collateral)

RBmTaMgRtUvmanÉksarRKb;RKan;sMrab;bMeBjtamlkçNÐepSg²énkm©I .

ii-Consumer Loan ³ KW\NTansMrab;pþl;eTA[buKÁl b¤RKYsar edIm,IeRbIR)as; kñúgkarTijTijTMnij nigesvakmµ eRbIR)as;epSg² .

\NTanenHmaneRcInRbePT ³ Closed-End credit & Open-End Credit

- Closed-End Credit : RtUv)aneRbIR)as;sMrab;TisedACak;lak; nigmankMritmYyc,as; las; RBmTaMgRtUvcuHkic©snüaEdlmanEcgGMBIviFIsg\NTan (repayment term)

nig éføcMNayepSg²Tak;Tgnwgkm©I (Credit costs)dUcCakarR)ak; nigkMéresvakmµ

FnaKarCaedIm . Closed end credit : mandUcCa ³ + Mortgage Loan , Automobile Loan , Installment Loans

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Installment Loans = You borrow once and repay according to schedule .Mortgage and automobile loans are typical installment loans. Installment loan payments are regular ( monthly , For example) and Fixed (they don’t increase or decrease) .

Open-End Credit : KWCa\NTankñúgkMritmYy EdlFnaKareRtomebIkpþl;eTA[Gñkx©I CabnþbnÞab; enAeBlmantRmUvkar\NTan . kareRbIR)as;\NTanRbePTenH PaKeRcInRbRBwtþi

eTAtamry³b½NÑ\NTan dUcCa (Visa card ,Credit Card..) EdlGacpþl;lT§PaBCUnGñk

eRbIR)as;b½NÑ\TanykeTAbg;éføTMnij nigesvakmµeRbIR)as;epSg²kñúgkMritGtibrmaNamYy

ehIyGñkeRbIR)as;b½NÑ\NTanmaneBl 20-30 éf¶ sMrab;sgvijmunnwgFnaKarKitkarR)ak;.

rIÉ Debit Card or ATM Card KWCab½NÑ pøasÞiksMrab;eRbIR)as;kñúgkarbg;éføTMnij esva

edayBMucaM)ac;eRbIsac;R)ak; edayRtUvdkTwkR)ak;eTAtaméføTMnij ecjBIKNnIrbs;GñkTij .

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1- Business loans - working capital loan - Term loans 2- Consumer loans - Closed end credit + Mortgage Loan , Automobile Loan + Installment Loans - Open end credit + Card issue by bank (Visa card ,Credit Card..) + Debit Card 3- Investment in securities Bank loans 4- C.B funds sold 5- Repurchase agreements 6- Assets - Fixed assets - Other real estate owned - Intangible assets - All other assets

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IV- s kmµPaB eRkAt aragt ul ükar (Off-balance sheet activities) ³

esvakmµFnaKarmYycMnYnRtUv)anpÁt;pÁg;dl;GtifiCn edayKµanTak;TgeTAnwgtarag

smtulüFnaKareT ehIyGacpþl;cMNUlCa Fees dl;FnaKar edayBMucaM)ac;eRbIR)as;

mUlniFieLIy .

- Loan commitments ³KWCakarsnüabMeBjkatBVkic©rbs;FnaKar kñúgkarpþl;km©Ikñúg

kMritNamYyeTAeGayshRKas enAeBlEdlshRKasRtUvkarmUlniFi .

- Standby letters of credit (LC or BA) ³ KWCakic©RBmeRBog EdlFnaKarra:b;rg

bMeBjkatBVkic©CMnYseGayGtifiCnxøÜn cMeBaHPaKITI3 kñúgkrNIEdlGtifiCn

rbs;FnaKarBMuGacbMeBjkatBVkic©xøÜn)an .

- Forward contracts ³ KWCakic©RBmeRBogrvagFnaKar nigGtifiCnxøÜn cMeBaHkarbþÚr

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nUvrUbiyb½NÑmYy CamYynwgrUbiyb½NÑmYyepSgeTot tamGRtabþÚrR)ak;EdlkMnt; nig sMrab;

RKaNamYyxagmux . Tamry³enH GtifiCnGacRKb;RKg)anCamun cMeBaHhaniP½y GRtabþÚr

R)ak; .

-Swap contracts ³ KWFnaKarmantYnaTICaGnþrkarIykr kñúgkarFanabg;karR)ak;eTA[

PaKITI# tamGRtakMritNamYyEdlRBmeRBogCamYyGtifiCnrbs;xøÜn .

v-r)ay karN ¾c MN Ul rbs ;Commercial (Income statement of commercial banks)

KWCakarbgðajlT§plénkarGnuvtþn¾rbs;sßab½n nigsßanPaBhirBaØvtßúbc©úb,nñ . Bt’manenH

bgðajlT§pl b¤plvi)akénkarsMerccitþrbs;KN³RKb;RKg. elIsBIenHeTotBt’manRtUv

)aneKeRbIR)as; edIm,IeFVIkarBüakrN¾EdlGacmanplb:HBal;pÞal;eTAelIkarsMerccitþ nig

karGnuvtþn¾ tamry³r)aykarN¾hirBaØvtßú .

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r)aykarN_rbs;FnaKarBaNiC¢kmµBak;B½n§nwg cMNUlkarR)ak;srub (Interest Income)

cMNaykarR)ak;srub(Interest Expense)cMNUlminEmnkarR)ak; (Non-Interest Income) cMNayminEmnkarR)ak; (Non Interest Expense)cMeNjsuT§muneBlbg;Bn§ (Net

income before taxes) cMeNjsuT§eRkayeBlbg;Bn§ (Net income after

taxes).

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VI-karRKb ;RKgs n Þn Iy PaB b MN ul n igPaBc MeN j bs ;Fn aKarB aN iC ¢kmµ Commercial banks liquidity , liability and profitability management

kMeNInkarRbkYtRbECgBIsMNak;sßab½nhirBaØvtßúBMuEmnFnaKar nigkarERbRbYld¾qab;

rh½sénGRtakarR)ak; )anpþl;sMBaFya:gxøaMgdl;karRKb;RKgnUvPaBcMeNj nig

snÞnIyPaBrbs;FnaKarBaNiC¢ .

karviPaKGMBItaragtulükar r)aykarN¾cMNUl nigGnu)athirBaØvtßú (Financial ratio)

epSg² rbs;FnaKar KWCaviFImYycaM)ac;sMrab;BRgwgkarRKb;RKgFnaKar .

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FnaKarCaeRcInmaneKaledAxus²Kña FnaKarxøHcg;[mankMenInxøaMgedIm,IsMerc)annUv

eKaledArIkcMerInry³eBlEvg ehIyxøHeTotcUlcitþenAes¶om edIm,IbnßyhaniP½yCa

Gb,rma .

ROE = Return on equity ¬plcMNUlelIPaKh‘un¦ b¤ cMNUleFobnwgmUlFnpÞal;

ROA = Return on assets ¬plcMNUlelIRTBüskmµ¦ b¤ cMNUleFobnwgRTBü

EM = Equity multiplier ¬emKuNh‘un¦

Net interest Margin = KMlatkarR)ak;suT§

AssetsRTBü = bMNul (liabilities) + mUlFnpÞal; (Equity Capital)

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KMlatR)ak;cMeNjRbtibtþikar =¬cMNUlRbtibtþikarsrub – cMNayBIRbtibtþikar¦¼ RTBüsrub

- R)ak;cMeNjelIPaKh‘unnImYy² = cMeNjsuT§bnÞab;Bn§ ¼ cMNUlPaKh‘unFmµta

karbkRsayGnu)atR)ak;cMeNj ³

Gnu)atnImYy²BinitüeTAelIEpñkepSg²énR)ak;cMeNjrbs;FnaKar

-ROA KWCasBaØaénRbsiT§PaBrbs;GñkRKb;RKg EdlR)ab;BIsmtßPaBénkarRKb;RKg

EdlbMElgBIRTBüeTAR)ak;cMNUl

- ROE sMrab;vas;EvgGRtacMNUlEdlhUreTAm©as;PaKh‘un

rUbmnþR)ak;cMeNj ³

edIm,IviPaKRbtibtþikarrbs;FnaKarmYy eKEtgEtviPaKeTAelIEpñknImYy²énGnu)at

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- ROE = ROA x Total Assets/ Total Equity Capital

b¤

Net income after taxes Net income Total Assets

= x

Total equity capital Total Assets Total equity capital

karviPaKcMNUleFobnwgTunpÞal; ³

ROE = Net income after taxes/ x Total Operation Income/ x Total Assets /

Total operation incomes Total Assets Total Equity Capital

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b¤ ROE = KMlatR)ak;cMeNjsuT§ x Gnu)ateRbIR)as;RTBü x emKuNrbs;TunpÞal;

= Profit margin x Asset Utilization x Equity multiplier

Edl - Profit margin (PM) = Net income / Total Operation income (1) - Asset Utilization (AU) = Total Operation income / Total Assets (2) - Equity multiplier (EM) = Total Assets / Total Equity Capital (3)

(1) bgðajBIRbsiT§PaBénkarRKb;RKgkarcMNay nigeKalneya)ayéføénesvakmµ

(2) bgðajBIeKalneya)ayRKb;RKgkarvinieyaKcMruH

(3) bgðajBIeKalneya)ayhirBaØb,Tan ³ RbPBmUlFnEdleRCIserIsedayFnaKar

¬bMNul b¤TunpÞal; ¦

31

rgVas;R)ak;cMeNj nigkarbkRsay ³

karviPaKedayEpñk²rbs;R)ak;cMeNj )anR)ab;eyIgGMBImUlehtu énkarlM)akkñúgkarrk

cMNUlrbs;FnaKar nigR)ab;GñkRKb;RKgsßab½nBIcMNUuEdleKRtUvedaHRsaybBaðaénkarrk

cMNUlepSg² . karsMerc)annUvR)ak;cMeNjx

32

enAeBlEdlFnaKarEsVgrkcMNUlx

33

karRKb ;RKgRTBüs kmµ (Asset Management) edIm,IbegáInR)ak;cMeNj FnaKarRtUvEtEsVgrkCamYyKñanUvR)ak;cMNUlx>¦

$- FnaKarRtUvEtRKb;RKgPaBravénRTBüskmµrbs;xøÜn edIm,I[xøÜnGacbMeBjtRmUv

karénR)ak;bMrugedayKµankarcMNayd_elIslub .

34

karRKb ;RKgPaBRKb ;RKan ;én T un (Capital Adequacy Management )

FnaKarTaMgLayRtUvEtsMerccitþGMBIcMnYnTunEdleKRtUvkan;kab;edIm,Iehtupl 3 ya:g

(Banks have to make decisions about the amount of capital they need to hold for three reasons ) !- TunFnaKarCYyTb;sáat;karbraC½yénFnaKar

@- cMnYnTunb:HBal;dl;plcMNUlcMeBaHm©as;kmµsiT§ ¬Gñkkan;kab;PaKh‘un¦énFnaKar

#- cMnYnTunFnaKarCacMnYnGb,rmamYycaM)ac; EdlRtUv)antRmUv[manedayc,ab;.

35

t ul üPaBrv ags uv t ßiPaB n igpl c MN Ul c MeB aHGñkkan ;k ab ;PaKh ‘un

Trade-off between safety and returns to equity holders

eyIgeXIjfa TunFnaKarmanKuNsm,tþi nigKuNvibtþi .

- TunFnaKarpþl;KuNsm,tþieFVI[karvinieyaKkan;EtmansuvtßiPaB edaykat;bnßynUv

»kasénkarkS½yFn

- KuNvibtþiBIeRBaHh‘unkan;EteRcIncMNUlkan;Ettic

- enAkñúgkal³eTs³mYyminc,as;las; kalNakarxatbg;FMelIR)ak;km©IekIneLIg

bNþaGñkRKb;RKgFnaKarcg;manTunkan;EteRcInedIm,IkarBarGñkkan;kab;PaKh‘un .

- pÞúyeTAvijRbsinebIeKeCÓCak;fa karxatbg;énR)ak;km©InwgminekIteLIgeT

eKRbEhlCacg;kat;bnßycMnYnTunFnaKarEdlmanemKuNx

36

- y uT §s aRs þs Mrab ;k arRKb ;RKgT un Fn aKar

(Strategies for managing Bank capital )

RbsinebIFnaKarmYyyl;eXIjfa vamanemKuNh‘un (equity multiplier) x

37

Subordinate notes = A short term debt security can be change to common stock . Debenture = A debenture is a medium to long-term debt format that issued by large company to borrow money . Miscellaneous = of many different kinds. Custody = right to take care s.one / s.th calamities = disaster pillars = metal , stone used as support for roof . Lump sum = (Total) Single payment for the total amount . Installment Loans = karsgbnþicmþg²

1

Topic 3 s ßab ½n TT Yl beB a ØIrmin Emn Fn aKar

Non Bank Depository Institutions

s ßab ½n s Méc

Thrift Institution

sßab½nsMécRtUv)anEckecjCa # Rkum sMxan;énsßab½nhirBaØvtßú ³ smaKmsMéc(Saving

association) FnaKarsMéc ( Saving bank) nigshCIB\Ntan ( Credit Union).

s maKms Méc (Saving association)

PaKeRcInmanTMrg;Ktiyutþi ( Legal form ) CasmaKmsgÁh ( Mutual Association )

EdlmanGñkep£IrR)ak;CashkmµsiT§kr b¤ CasmaKmPaKh‘un ( Stock association )

Edl)anbegIáteLIgCYydl;GñkcUlPaKh‘unenAeBlxVHluysMrab;sagsg;pÞH .

smaCikPaKeRcInCakmµkreragcRkvayvP½NÐ .

2

Mutual Association : Saving and loan association owned by its depositors and (in some cases) borrowers . Both collectively referred to as members . Mutual Associations do not

issue shares (Stocks) .

smaKmsMécxøH )anbþÚrmkCaRkumh‘unPaKh‘unvij edIm,IgayRsYleKogKrmUlFn

bEnßmtamry³kare)aHecjb½NÑh‘un . kalNasMerc)anpll¥BIRbtibtþikarGaCIvkmµ

smaKmsMécEdlCaRkumh‘unPaKh‘un Gacpþl;RbeyaCn_dl;PaKTunikxøÜn tamry³

PaKlaP nigéføh‘un .

3

Fn aKars Méc ( Saving bank )

FnaKarsMécmanlkçN³RsedogKñanigsmaKmsMécEdr EtminRbmUlpþMúeTAelI

Mortgage dUcsmaKmsMéceT . kareRbIR)as;mUlniFirbs;FnaKarsMécmanTisedA

ya:geRcIn.bc©úb,nñFnaKarsgÁhsMécmYycMnYn)anbþÚrTMrg;KtiyutþimkRkumh‘unPaKh‘un.

s h CIB\ N Tan ( Credit Union )

manTMrg;CaGgÁkarminEsVgrkR)ak;cMeNj EdlsmaCikmanlkç½NÐénkarrs;enARbhak;

RbEhlKña . shCIB\NTanmine)aHecjb½NÑh‘uneT . R)ak;beBaØIrenAtamshCIB

\NTaneKehAfa Shares ehIykarR)ak;Edlbg;cMeBaHR)ak;beBaØIrenH eKehAfa PaK

laP ( Dividends ) . eKaledArbs;shCIB\NTanKWbMerIplRbeyaCn¾CUnsmaCik.

4

dUecñHshCIB\NTanmantYnaTICaGnþrkarIsMrab;smaCikxøÜntamry³kareKogKrR)ak;

beBaØIrBIsmaCikEdlsnSMR)ak; nigpþl;km©IeTA[smaCikNaEdlRtUvkarmUlniFi. vibtþi

esdækic©enAtamtMbn;PUmisaRsþNamYy b¤kar)at;bg;kargarenAtameragcRk]sSa

hkmµNamYy Gacb:HBal;F¶n;F¶rdl;snÞnIyPaBrbs;shCIB\NTan edaysarkardk

R)ak;beBaØIrykmkcay b¤karKaµnlT §PaBsgbMNulBIsMNak;smaCik .

I- RbPBmUl n iF i ( Source of funds ) ³

!- R)ak;beBaØIr (Deposit) ³ sßab½nsMéc ¬sBa¢½y ¦ TTYlmUlniFiPaKeRcIn tamry³

R)ak;beBaØIrepSg² dUcCa ³ Pass book saving , Retail CDs , MMDAs , NOW

Deposit account... kareKogKrnUvRbPBmUlniFi kan;EtTamTarnUvkarcMNaykar-

5

karR)ak;kan;EteRcIn edaysarRbePTR)ak;beBaØIrx

6

BI karrkSaTuknUvR)ak;cMeNjminEbgEck nigkare)aHecjb½NÑPaKh‘un .

II- kareRb IR)as ;mUl n iF i (Use of funds)³

a)- Cash ³ sßab½nsBa¢½y mansac;R)ak;mYycMnYnsMrab;bMeBjkatBVkic©R)ak;bMrug tam

karkMnt;BIFnaKarkNþal nigsMrab;ebIkR)ak;CUnGtifiCn .

b)- Mortgage ³ mancMENkeRcInCageKenAkñúgRTBüskmµsrubrbs;sßab½nsBa¢½y. Ca

TUeTA Mortgages mankalvsanEvg. PaKeRcInén Mortgages RtUv)anpþl;CUn

GtifiCn sMrab;eRbIR)as;kñúgkarsagsg; b¤TijlMenAdæan .

c)- Securities & d)- Consumer and commercial loans : kalvsanrbs;km©I

RbePTenHmancenøaH !qñaM - $ qñaM CaTUeTAeKeRbIva edIm,Ikat;bnßykareRbIR)as;

Mortgages EdlmankalvsanþEvg EdlRbQmnwgGRtakarR)ak; .

7

III- k arRKb ;RKgh an iP½y GRt akarR)ak ; (Interest rate risk management) ³

sßanPaBesdækic© KWCaktþacm,génkarERbRbYltMrUvkar nigkarpÁt;pÁg;mUlniFisrubrbs;

RKYsar shRKas rdæaPi)al .

!-kMeNInesdækic© (Economic growth)

esdækic© karvinieyaK GRtakarR)ak;

@-GtiprNa (Inflation)

GtiprNa karsnSM karcMNay km©I GRtakarR)ak;

#- karpÁt;pÁg;rUbiyvtßúsrub ( Money supply )

8

karpÁt;pÁg;rUbiyvtßúsrub tMrUvkarmUlniFiefr GRtakarR)ak;

$- »nPaBfvikardæ ( Government budget deficit )

»nPaBfvikarrdæ tMrUvkarmUlniFisrub GRtakarR)ak;

%- lMhUrcUlmUniFibreTssuT§ ( Net inflows of foreign fund )

lMhUrcUlmUlniFibreTssuT§ karpÁt;pÁg;mUniFienAkñúgRsuk GRtakarR)ak;

eKaledAénkarRKb;RKgFnaKar KWGtibrmanIykmµénRTBüsm,tþirbs;PaKTunik Edl

EsþgeLIgtamry³kMeNIntémøPaKh‘un nigkarlUtlas;rbs;FnaKar . edIm,IsMerc

eKaledAxagelIenH karRKb;RKgFnaKarRtUvepþateTAelIkarsMerccitþrbs;GñkRKb;RKg

9

RKb;Can;fñak; nigRKb;EpñksMedAbegáInRbsiT§PaB nigKuNPaBénRbtibtþikar nigkarkat;

bnßyhaniP½ynana .

!¼- karv iPaK Gap ³

saßb½nsBa¢½yeRcInRbQmmuxCamYynwghaniP½yGRtakarR)ak;. karpøas;bþÚrGRta

karR)ak;TIpSar GaceFVI[b:HBal;dl;PaBcMeNjrbs;sßab½nsBa¢½y edaybegáItkar

cMNayelImUlFn nigbnßyR)ak;cMNUl . b:uEnþsßab½nsMéck_RbQmCamYynwghaniP½y

GRtakarR)ak;pgEdr edaysarRTBüskmµPaKeRcInmanlkçN³Ca Interest rate

insensitive eBalKWGRtakarR)ak;EdlRtUvbg;cMeBaHR)ak;beBaØIr nigkm©I minERbRbYl

eTAtamGRtakarR)ak;enAelITIpSar .

10

edIm,IbMeBj)annUveKaledAenHGñkRKb;RKgRtUvEtRbmUlkarykcitþTukdak;

eTAelI ³

- cegáamRTBü nigbMNulrbs;FnaKar EdlERbRbYleTAtamkarpøas;bþÚrGRtakarR)ak;

edayrkSaPaBefrénKMlatsuT§karR)ak; (Net interest margin = NIM) .

11

NIM = cMNUlkarR)ak;BI\NTan nigvinieyaK – cMNaykarR)ak;elIR)ak;beBaØIrnigkm©I RTBüTaMgGs;EdlbegáItcMNUl

= cMNUlkarR)ak;suT§bnÞab;BIcMNay¼RTBüsrubEdlbegáItcMNUl

]TahrN ¾ ³ sßab½nsBa¢½ymYy mancMNUlkarR)ak; $ ekadiduløar BI\NTanrbs;xøÜn ehIy @/^

ekadiduløa CakarcMNayelIkarR)ak; edIm,ITTYlykkarR)ak;beBaØIr nigkm©IepSg²eTot. Rbsin

ebIsßab½nenHman $0 ekadiduløar CaRTBüEdlbegáItcMNUl KMlatkarR)aksuT§KW ³

NIM = $ ekadi - @/^ekadi ¼ $0 ekadi = 0/0#% ekadi = #/% %

krNIenH ³ - eKminTan;snµt;fa CaR)ak;cMeNjBIkarx©I nigkar[x©IeT eRBaHeyIgBMuTan;)anKitBI

karcMNayepSg²EdlminEmnCacMNaykarR)ak; . enAeBlEdlkarcMNayTaMgenH RtUv)aneK

dk CaFmµtaKMlatR)ak;cMeNjnwgrYmtUc .

12

dUcKñaEdr RbsinebIcMNUlBI\Ntan b¤vinieyaKFøak;cuH elÓnCagcMNaykarR)ak; eTAelIR)ak;km©I

Net interest margin (NIM) nigRtUvkat;bnßy .

GñkRKb;RKgRtUvEtEsVgrkmeFüa)ayepSg² edIm,IkMu[karcMNayelIkarR)ak;km©IekIn

eLIgxøaMgeBkeFobeTAnwgcMNUlkarR)ak; EdlKMramkMEhgdl;KMlatcMeNjrbs;

sßab½nsBa¢½y .

13

- karRKb;RKg rMejacKMlatkarR)ak; (Interest sensitive gap management) ³ viFI

RKb;RKgKMlatenH tMrUveGayGñkRKb;RKg eFVIkarviPaKeTAelIkalvsan nigkalanuvtþ

(Opportunity) énéfø EdlmanTMnak;TMngCamYyRTBü EdlmankarR)ak; R)ak;beBaØIr RBm

TaMgR)ak;km©IBITIpSarR)ak; .

KMlatrMejackarR)ak; = rMejackarR)ak;elIRTBü - rMejackarR)ak;elIbMNul

Interest sensitive gap (Gap) Interest rate sensitive assets (RSA) Interest rate sensitive liability(RSL)

RbsinebI RSA enAkñúgry³eBlnImYy²¬éf¶ s)aþh¾ Ex¦ elIsbrimaN RSL enaH RtUv

)aneKniyayfa vamanKMlatviC¢man ehIymanrMejacelIRTBü .

KMlatviC¢manelIRTBü =RTBüEdlmanrMejackarR)ak; - rMejackarR)ak;elIbMNul > 0

14

]TahrN¾ ³ sßab½nsBa¢½ymYymanRTBüEdlmanrMejackarR)ak; 250 M $ ehIybMNul

EdlmanrMejackarR)ak; 150 M $ dUcenHrMejacRTBümanKMlat 100 M $ ¬viC¢man¦.

RbsinebIGRtakarR)ak;ekIneLIg KMlatkarR)ak;nwgekIneLIg BIeRBaHcMNUlkarR)ak; Edl

begáItedayRTBüekIneLIgeRcInCagkarcMNayelIR)ak;km©I dUcenHsßab½nsMécmankar

ekIneLIgcMNUlkarR)ak;suT§ .

enAkñúgsßanPaBpÞúyBIenH ]bmafa rMejackarR)ak;rbs;bMNulFMCag rMejackarR)ak;rbs;

RTBü dUcenHsßab½nsBa¢½ymanKMlatGviC¢man .

KMlat¬GviC¢man¦rbs;bMNul = rMejackarR)akrbs;RTBü- rMejackarR)ak;elIbMNul < 0

meFüa)aykñúgkarvas;KMlat rMejackarR)ak; (ISGAP)

15

ISGAP = Interest sensitive gap

]TahrN¾ ³ ebIrMejackarR)ak;énRTBü(RSA) esµInwg 150M$ ehIyrMejackarR)ak;én

bMNul(RSL) esµIrnwg 200M$

dUecñH ISGAP = RSA – RSL = 150 – 200 = - 50 M$ .

- sßab½nsBa¢½ymYyEdlman ISGAP viC¢man KWmanrMejacRTBü

- sßab½nsBa¢½ymYyEdlman ISGAP GviC¢man KWmanrMejacbMNul .

cMENkGnu)at ISGAP eKGacbegáItdUcxageRkam ³

ISGAP ratio = ISGAP/ Total assets = - 50 / 150 = - 0.333

- ISGAP ratio > 0 mann½yfasßab½nsBa¢½ymanrMejacRTBü

- ISGAP ratio < 0 mann½yfasßab½nsBa¢½ymanrMejacbMNul .

16

krNImYyepSgeTot ³

eRbobeFobGnu)atén RSA & RSL EdleKehAfaGnu)atrMejackarR)ak; (ISR)

Interest rate sensitive ratio (ISR)= RSA/RSL = 150/200 = 0.75

enAeBlenHeKsnñidæanfa ³

- ISR1 bBa¢ak;fasßab½nsBa¢½ymanrMejacRTBü .

sßab½nsBa¢½ymYyEdlmanrMejacRTBü sßab½nsBa¢½ymYyEdlmanrMejacbMNul

- ISR>1 - ISR< 1 - ISGap >1 - ISGap 1 - ISGap ratio

17

edIm,ITb;sáat;cMeBaHkarFøak;cuH ISGAP GñkRKb;RKgmanlT§PaB ³

- EktMrUvrcnasm

18

-km©IBITIpSarR)ak;

-KNnIsBa¢½y ry³eBlxøI

-R)ak;beBaØIrTIpSarR)ak;

RTBüEdlminGacdak;éføCafµI

- sac;R)ak;Edldak;kñúgXøaMgFnaKar nigR)ak;beBaØIr enAFnaKarkNþal

¬R)ak;bMrugpøÚvc,ab; ¦

-\NTanry³eBlEvgEdlmanGRtakarR)ak;efrpþl;eTA[GtifiCn

-mUlb½Rtry³eBlEvgEdlmanGRtaefr

-GKarrbs;FnaKar nig]bkrN_ RBmTaMgRTBüEdlminbegáItcMNUlepSgeTot

19

bMNulEdlminGacdak;éføCafµI

- KNnIR)ak;beBaØIrtamtRmUvkar

- KNnIsBa¢½y nigKNnIesaFnivtþn_ry³eBlEvg

- mUlFnpÞal;Edlpþl;edaym©as;FnaKar

@¼- Interest rate swaps (IRS) :

pþl;lT§PaBsßab½nsBa¢½ybþÚr (swaps) BI fixed rate payment (Out flow) eTA

Variable payment (In flow) .

#¼- Interest rate future contract ³

viFIenH pþl;lT§PaBdl;karTijcUlnUvmUlb½RtedayKittamtMélmYysMrab;

kalbriecäTNamYyénRKaxagmux. Gñklk; future contract mankatBVkic©lk;mUlb½Rt

tamtMélEdlmanEcg kñúgkic©snüatamkalbriecäTRBmeRBogmYyénRKaxagmux .

20

#¼- Interest rate future contract ³

viFIenH pþl;lT§PaBdl;karTijcUlnUvmUlb½RtedayKittamtMélmYysMrab;

kalbriecäTNamYyénRKaxagmux. Gñklk; future contract mankatBVkic©lk;mUlb½Rt

tamtMélEdlmanEcg kñúgkic©snüatamkalbriecäTRBmeRBogmYyénRKaxagmux .

21

$¼- karvas;Evgry³eBlénRTBüskmµ nigRTBüGkmµ

Measuring duration of assets and liabilities

CaFmµtasßab½nsBa¢½ymankarGPirkSeKalneya)ayR)ak;km©Irbs;eK GRtabraC½y

(default rate) CaFmµtaticCag 1% . smasFatunimYy²énRTBüskmµ nigRTBüGkmµrbs;

sßab½nsMécmYy Gacmanry³kalxusKña . sßab½nsMécmYyKaµnhaniP½ykarR)ak; kalNa

vamanrMejackarR)ak;énRTBüskmµ esµInwgbMErbMrYlkarR)ak;énRTBüGkmµ¬bMNul¦ KWesµIr

sUnü . karEktMrUvGRtakarR)ak;sMrab;rbs;bBa©aM (Adjustable rate mortgages ) RtUvRbRBwtþi

eTACaerogral;qñaM edIm,ITb;sáat;haniP½yGRtakarR)ak; eRBaHedaysarGtifiCneRcInEtsg

bMNulcMeBaH mortgages rbs;xøÜnmunkalvsan .

22

IV-karv ay t Mél GMB IT in ñn ½y rbs ;s ßab ½n s Méc (Performance evaluation of saving institution)

dUcFnaKarBaNiC¢Edr Tinñn½yrbs;sßab½nsMéc GacRtYtBinitü)antamry³karviPaKr)ay

karN¾hirBaØvtßú Biessr)aykarN¾cMNUl-cMNay nigGnu)atepSg² .

V- k areRbobeFobrv ags ßab ½n s Méc n igFn aKarB aN iC ¢

( Comparison between thrifts and commercial banks)

FnaKarBaNiC¢ sßab½nsMéc

GtItkal

-manRTBüskmµCamUlb½RteRcIn -manRTBüskmµCamUlb½RteRcIn

-pþl; Mortgage tictYc -pþl; Mortgage eRcIn

-pþl;km©IBaNiC¢kmµ -minpþl;km©IBaNiC¢kmµ

- Transaction account )anrYmcMENk -esÞIEtKµanR)ak;beBaØIrrebobenHeT

RbmaNBak;kNþalénmUlniFirbs;FnaKar

23

- Small time deposit )anmancMENkeRcInelIslub

kñúgRTBüskmµrbs;sßab½nsMéc

-Large time deposit KµanenAtamsßab½nsMéc

bc©úb,nñ

-KMlatrvagsßab½nsMéc nigFnaKarBaNiC¢kñúgkarpþl; Mortgage Loan )an

fycuHya:gxøaMg

-Transaction account sMrab;FnaKarBaNiC¢)anfycuH ehIymankMrit

Rbhak;RbEhlKñaCamYysßab½nsMéc

- Small time deposit mancMENkkñúgbMNulrbs;sßab½nTaMg 2 esÞIrEtRbhak;

RbEhlKña

- PaBxusKñarvagsßab½nsMéc nigFnaKarBaNiC¢enAkñúgRbtibtþikarGaCIvkmµ

naeBlbc©úb,nñ KWesÞIrEtkt;sMKal;Bmu)an .

24

VI- Gn þrkmµrbs ;s ßab ½n s Méc CamYy s ßab ½n h irB a Øv t ßúepSg²

Interaction of saving institution with other financial institution ³

-FnaKarBaNiC¢ ³ epþatkarpþl;km©IsMrab;BaNiC¢kmµ

-FnaKarsMéc ³ epþatkarpþl;km©IsMrab;Gcln³RTBü (Mortgage lending) .

-smaKmsMéc nigkm©I ³ mantYnaTICaRbéBNIkñúgkarpþl;km©IsMrab;GclnRTBüEdr.

-shB½n§\NTan (Credit Union) ³ pþl;km©IEtÉktþCn EdlCasmaCikrbs; shB½n§

\NTan .

-RKWHsßanmIRkUhirBaØvtßú ³pþl;\NTanCnbTdl;ksikr nigshRKasFntUcsMrab;begáIt

nigBRgIkmuxrbr b¤TMnij meFüa)ayksikmµ .

-Rkumh‘unFanara:b;rg ³CaRKwHsßanpþl;esvaKaMBardl;rUbv½nþbuKÁl nignItibuKÁlcMeBaH

eRKaHfñak;nana Cm£W GKÁIP½y b¤mrN³PaBCaedImEdleFVI[xatbg;RTBüsm,tþib¤cMNUl.

- sgÁhmUniFi (Mutual funds) ³ KWCaRkumh‘unvinieyaK Edllk;h‘uneTA[GñkvinieyaK

25

tUctac kñúgeKalbMNgRbmUlmUniFiykeTATijmUlb½RtepSg² edIm,ITTYl)ancMNUl

sMrab;ykeTAEbgEckPaKlaP nigR)ak;cMeNjeTA[GñkvinieyaKvij .

mUniFiesaFnnivtþ (Pension funds)³KWCaRKwHsßanhirBaØvtßú mantYnaTIRKb;RKgmUlniFiEdl

ÉktþCn)ansnSM eBalKW)anbg;viPaKTankñúgry³kalbMeBjkargar(Working years)

edIm,IebIkR)ak;esaFneTA[GñkcUlrYmvij cab;BIeBlcUlnivtþ .

-Rkumh‘unhirBaØvtßú ³epþatkarpþl;km©Imanlkç½NÐ manry³kalxøI nigmanhaniP½yx

26

lk;mUlb½Rt karpþl;buerRbTantamviFITijmUlb½RtTaMgRsug b¤mYyEpñkBIGñkpSayecj

enAelITIpSarbzm karTijnigkarrMlayshRKasbBa©ÚlKña .

s h CIB\ N Tan (Credit Unions)

- manTMrg;CaGgÁkarminEsVgrkR)ak;cMeNj eKaledArbs;shCIB\NTanKWbMerI

plRbeyaCn¾CUnsmaCik . RbPBmUlniFirbs;shCIB\NTan)anmkBI

R)ak;beBaØIrrbs;smaCik .

s ßab ½n mIRk Uh irB a Øv t ßú ( Micro Finance Institution)

!- tYnaTI ³

-pþl;Tundl;ksikrsMrab;Tij]bkrN¾ meFüa)ayksikmµ BRgIkmuxrbr nigkarbNþúHbNþal

27

- pþl;Tun[ksikrGacrkSaTuk nigGaclk;ksiplrbs;xøÜnenAeBlEdlmantémøsmRsb

- kat;bnßykareRbIR)as;\NTan EdlmanGRtakarR)ak;x

28

#- TidæPaBsßab½nmIRkUhirBaØvtßú enAkm

29

Mortgage = niekçb

niekçbKWCa ³ kic©RBmeRBogedIm,Ix©IR)ak;BIFnaKar b¤BIsßab½nhirBaØvtßú edIm,ITijpÞH

b¤rbs;rbrepSg² ehIyrbs;rbrenaH KWCavtßúbBa©aM edIm,IFanakarx©IR)ak; .

bg¥ÚcGb,har (Discount window) ³

FnaKarkNþal KWCaRbPBmYyd¾sMxan;sMrab;pþl;mUniFikm©Imanry³kalxøIeTA[FnaKar

epSg². kar[x©IenHeKehAfakarx©Itambg¥ÚcGb,ha ehIyGRtakarR)ak; EdlFnaKar

kNþalkMnt;ykBIkm©IenHeKehAfa GRtaGb,har (Discount Rate).

enAGaemrik km©Itambg¥ÚcGb,harman # RbePT KW \NTanbzm (Primary Credit)

\NTanbnÞab; (Secondary Credit) nig \NTantamrdUvkal (Seasonal Credit) .

30

-\NTanbzm (Primary Credit) ³ KWmanry³kalxøI 2 b¤ 3 s)aþh¾ RtUv)anpþl;[

cMeBaHFnaKarmanmUldæanhirBaØvtßúrwgmaM ehIyGRtaGb,harPaKeRcInmankMritx

31

R)ak ;b MrugkatB Vk ic © (Reserve requirement) ³R)ak;bMrugkatBVkic©RtUv)anKNnaKitCa PaKryénR)ak;beBaØIrenAtamFnaKar EdlehAfaGnu)atR)ak;bMrugkatBVkic© ehIyEdl

FnaKarRtUvrkSaTukCasac;R)ak; b¤RtUvdak;ep£IrenAkñúgKNnIxøÜnenAÉFnaKarkNþal . sMrab;

RbB½n§FnaKarR)ak;bMrugkatBVkic©RtUv)anGnuvtþEtcMeBaHR)ak;beBaØIrcrnþEtb:ueNÑaH .

in billion Required reserve ratio 25% 20% Total Deposit 100 100 Total reserves 30 30 Required reserve 25 20 Excess reserves 5 10 Money multiplier 4 5 Lending capacity 20 50

32

- Total reserves = Excess reserves + Required reserve - Lending capacity = Excess reserves * Money multiplier - Required reserve ratio = Required reserve/ Total deposit

!¼-R)ak;bMrugGtierkekIneLIgBI 5 billion eTA 10 billion edaysarFnaKarRtUvrkSaR)ak;bMrug

katBVkic©Cagmun . kMenInR)ak;bMrugGtierkeFVI[lT§PaBpþl;km©Irbs;FnaKarekIneLIg 20

billions eTAdl; 5o billions .

@¼- kMeNInemKuNrUbiyvtßúBI $ eTA % dg . KYrrMlwkfa emKuNenHKWCaTMhMRcassmamaRt

CamYynwgGRtaR)ak;bMrugkatBVkic© . ebIGRtaR)ak;bMrugkatBVkic©fycuHBI 25% mk 20%

enaH emKuNrUbiyvtßúRtUvekIneLIgBI $¬=!¼@%¦ eTA %¬=!¼0>@0¦ EdlbBa¢ak;faFnaKar

GacbegáItrUbiyvtßú\NTan tamry³karbegáItR)ak;beBaØIrcrnþ b¤kar[x©IeRcInCagmun .

1

Topic 4 Yem Channarom MBA , Ph.D Candidate s ßab ½n h irB a Øv t ßúepSg²eTot

Other Financial Institutions Ep ñkT I1 Rk umh ‘un Fan ara :b ;rg

Part1: Insurance Companies I- l k çN ³s MKal ; (The characteristics) ³ karFanara:b;rg KWCaesvaKaMBar (Protection) buKÁl ¬rUbv½nþbuKÁl b¤nItibuKÁl¦ cMeBaHpl

b:HBal;epSg²EdlGacekIteLIgCayfaehtu (Uncertainty) . karFanara:b;rg KWCakar

eFVIsMNg . ]TahrN_ ³ karFanara:b;rgsuxPaB edayRtUvbg;éføcMNaykñúgkarBüa)al

CMgW >>>>> . Insurance Transaction Premiums Purchasing a contract Protection against financial loss

Insurance Company

(the insurer)

The insurer (Policy holder)

2

PaKIcUlrYmkñúgkic©snüaFanara:b;rg man ³

- GñkFanara:b;rg ( insurer) KWCaRkumh‘unFanara:b;rg b¤Pñak;garFanara:b;rg - nigGñkRtUv)anFanara:b;rg (the insured ) KWCabuKÁlCab;kic©snüa ( Contract )

CamYyRkumh‘un Fanara:b;rg .

bnÞab;BI)ancuHkic©snüaFanara:b;rgrYcehIy GñkFanara:b;rgmankatBVkic©

eFVIsMNgcMeBaHkarxUcxat b¤kar)at;bg ; enAeBlmanhaniP½y ekIteLIgedayécdnü

EdlmUlehtuhaniP½yenaH BMuEmnCaGMeBIectnarbs;GñkRtUv)anFanara:b;rgeT .

sMNgRtUveFVIeLIgtamTMhMénkarxUcxatCak;Esþg tamTwkR)ak;Fanara:b;rg .

3

I- s k þan uBl én h an iP½y (Potential risks) ³

buKÁlmñak;²EtgEtRbQmnwghaniP½yepSg² EdlGacekItmanCayfaehtu ehIyEdl

GacbNþal[mankarxUcxat b¤)at;bg;epSg² .

RbePThaniP½ymandUcCa ³

-haniP½ybuKÁl (Personal risks) ³ GayuCIvit Cm£W eRKaHfñak;cracr CraPaB b¤kar)at;

bg;GCIB >>>>> .

- haniP½ykatBVkic© (Liability risks) ³ CaskmµPaBEdlbgár[manrbYssñam Bikar

søab; b¤xUcxatRTBüsm,tþi .

General liability insurance policies normally cover property damage and

injury of a third party .

bBaðaTaMgenH CahaniP½y EdlbuKÁlmYycMnYncg;bgáartamry³karepÞr b¤rMElkhaniP½y

eTARkumh‘unFanara:b;rg .

4

Risk Management

Risk Identification

Potential Personal Losses

Potential Property Losses

Risk Elimination

Financial Impact Frequency of losses

Decision ??? Risk

reduction

Risk elimination

Risk retention

Risk transfer to insurance company

5

k arFan ara :b ;rgC Iv it (Life insurance)

eKalbMNgénkarFanara:b;rgCIvit (Reasons for purchasing life insurance)

-pþl;R)ak;cMNUlsMrab;smaCikRKYsarrbs;GñkRtUv)anFanara:b;rg kñúgkrNIGñkRtUvFana

ra:b;rgTTYlmrN³PaB

- pþl;R)ak;sMrab;TUTat;bMNul nigBn §GakrGclnRTBü epSg² EdlGñkFanara:b;rgenA

CMBak;eRkayTTYlmrN³PaB

-RbmUlpþMú (Accumulate) R)ak;kñúgTMrg;CakarvinieyaK

RbePTénkarFanara:b;rgCIvit (Type of life insurance)

- karFan ara :b ;rgFmµt a (Ordinary life insurance) ³

6

a)- karFanara:b;rgCIvitTaMgRsug (Whole life insurance)

b)- karFanara:b;rgCIvitmankMnt; (Term life insurance) ³

c)- karFanara:b;rgCIvitEdlpøas;bþÚr (Variable life insurance) CaRbePTmYyEdlman

karERbRbYleTAtamtMél¬ekIn b¤fy¦ énR)ak;cMeNj)anmkBIkarvinieyaKbuBVlaP .

d)-karFanara:b;rgCIvitTUeTAnigpøas;bþÚrTUeTA (Universal life and Variable life insurance)

CakarFanara:b;rgmYy GnuBaØati[GñkRtUv)anFanara:b;rgmansiT §pøas;bþÚrnUvR)ak;buBVlaP

nigsMNgénCIvit Edlmankñúgkic©snüa .

- karFan ara :b ;rgC Iv itCaRk um (Group life insurance) ³ CaRbePTénkarFana

ra:b;rgkñúgcMnYneRcInEdlsßiteRkamkarTTYlénesvaFanaEtmYy CaTUeTAman dUcCakar

cMNayluy b¤min)ac;cMNayluyedaybuKÁlikRkumh‘unenaHeT EtRtUvecjeday

nieyaCk .

7

- karFan ara :b ;rg\ N Tan C Iv it (Credit life insurance) ³ CakarFanaKaMBar

dl;Gñkpþl;km©I (Lenders) RbQmnwgmrN³PaBrbs;Gñkx©IR)ak; (borrower) kñúgkar

sgbMNul .

eKGac)a:n;sµanGMBIxÞg;cMNayepSg² edIm,IkMnt;TwkR)ak;Fanara:b;rg EdlGñkRtUv)an

Fanara:b;rgRtUvkar sMrab;pþl;[RKYsarrbs;xøÜnkñúgkrNIEdlxøÜnTTYlmrN³PaB

dUcxageRkam ³

!- Setting the estate ³ karcMNaykñúgkarbBa©úHsB GakrelIkarepÞrmrtk dIFøI>>.l.

@- Repayment of debts ³ bMNulepSg²EdlBMuTan;sgrYc .

#- Emergency fund ³ R)ak;bMrugsMrab;eRbIR)as;kñúgkarcMNay\teRKagTuk dUcCakar

CYsCullMenAdæan karBüa)alCMgWCaedIm .

8

$- Education fund ³ karcMNaysMrab;karsikSarbs;smaCikRKYsar .

%- Income (family years) ³ KWCaR)ak;cMNUleRKagTuksMrab;bMerI[bnÞúkcMNaykñúg

karciBa©wmkUn rhUtkUnenaHRKb;v½y !* qñaM .

^- Income (middle years) ³ KWCaR)ak;cMNUleRKagsMrab;bMerI[bnÞúkcMNayrbs ;

RbBn§ b¤bþI kñúgcenøaHeBlmYycab;KitBIkUneBjv½y !* qñaM rhUtdl;eBlEdlRbBn§ b¤bþI

cUlnivtþ .

BinitüemIltYrelx tarag $-@ kñúgesovePA

- Estimating of life insurance

- And Life insurance company assets (distribution of U.S life insurance

company)

9

-karFan ara :b ;rgc MeB aHkar)at ;bg ;s mt ßPaBrkc MN Ul

Disability income insurance

-karFan ara :b ;rgs uxPaB ( Health insurance)

-karFan ara :b ;rgRTBüs m,t þi k atB Vk ic © n igkarx Uc xat

( Property , Liability and casualty insurance)

10

!- Fanara:b;rglMenAdæan House owners insurance

karFanara:b;rglMenAdæanGacman ^ Ebb epSgKña KWBI H0-1 eTA HO-6 kñúgenaHmanEcg

GMBIkarFanara:b;rg EdlbNþalmkBImUlehtuepSg² ³

HO-1 HO-2 HO-3 HO-4 HO-5 HO-6 Basic Broad Special Renters Old home Condominium Coverage on Form Form Form Form Form Form Building 1-11 1-17 all risk non 1-11 none personal property 1-11 1-17 1-17 1-17 1-17 1-17 1. theft 7- Fire or lighting 14- Explosion of steam hot 2. Breakage of glass 8- windstorm water system 3. Volcanic eruption 9- Explosion 15- Vandalism 4. Falling objects 10- Riot 16- Freezing 5. Weight of ice or sleet 11- Aircraft 17- damage from artificially 6. Accidental of discharge or 12- Vehicle generated current overflow of water or steam 13- Smoke

12

@- karFanara:b;rgrfynþ ( Auto insurance ) ³

kic©snüaFanara:b;rgyanynþmaneKaledAKaMBarcMeBaH ³

-katBVkic© kñúgkrNIrgrbYs nigxUcxatRTBüsm,tþi EdlbNþalmkBIeRKaHfñak;cracr

-karcMNaykñúgkarbMrugTuknUvfñaMeBTü nig]bkrN¾rMurbYsenAkñúgrfynþrbs;GñkRtUv)an

Fanara:b;rg

-eRKaHfñak;cracrCamYyyanynþdéTEdlKµankarFanara:b;rg

III- h an iP½y n igc MN Ul rbs ;Rk umh ‘un Fan ara :b ;rg

Risk & Revenue of insurance company

tamry³karlk;kic©snüaFanara:b;rg Rkumh‘unFanara:b;rg)anTTYlcMNUlbuBVlaP kñúg

13

kMritmYyEdlGacbg;sMNgeTAeGayGñkFanara:b;rg)anRKb;RKan; BIeRBaHFmµtamanEt

mYyEpñktUcénGñkFanara:b;rg EdlGacCYbRbT³haniP½y .

Net Revenue = n [ R-L (1-p) ]

- n cMnYnqñaMénkic©snüa

- L sMNgkic©snüaFanara:b;rg

- R buBVlaPbg;Fanara:b;rg

- p lT§PaB EdlGñkRtUv)anFanara:b;rgminTTYleRKaHfñak;

- ! - p lT§PaB EdlGñkRtUv)anFanara:b;rgmaneRKaHfñak;

]TahrN¾ ³ kic©snüaFanara:b;rgrbs;Rkumh‘unFanara:b;rgmYysMrab;ry³kal !qñaM man

tMél L=$10,000 RtUv)anlk;cMnYn n=100 kic©snüa . lT §PaBEdlGñkTijkic©snüa

14

Fanara:b;rgKµaneRKaHfñak;eBj !qñaM KW p=0,99 . buBVlaPFanara:b;rgmankMritesµInwg

R=160$ . edaysnµt;fa Rkumh‘unFanara:b;rgenHKµancMNUl nigcMNayepSgeToteT .

dUecñHcMNUlsuT §RtUvesµInwg ³

Net Revenue = n [ R-L (1-p) ] = 100 [ $160 – ($10,000 x 0.01)] = $6,000

IV- Gn þrkmµrv agRk umh ‘un Fan ara :b ;rgCamYy s ßab ½n h irB a Øv t ßúd éT

Interaction of insurance companies with other financial institutions

sßab½nhirBaØvtßú Gnþrkmµrbs;Rkumh‘unFanara:b;rg

FnaKarBaNiC¢ nig - Rkumh‘unFanara:b;rg CYnkalRbkYtRbECgCamYyFnaKar

smaKmsMéc BaNiC¢ nigsmaKmsMéc edIm,ITTYlR)ak;beBaØIrmankalkMnt;

15

- Rkumh‘unFanara:b;rg CYnkalRbkYtRbECgCamYyFnaKar

BaNiC¢tamry³karebIkKNnIcrnþ EdlGaceRbIR)as;mUlb,

Tanb½Rt)an

- Rkumh‘unFanara:b;rgxøH)anrMlaycUl( merge) kñúgFnaKar

BaNiC¢edIm,ImanlT §PaBbMerIesvakmµFnaKar)aneRcIn

Rkumh‘unhirBaØvtßú Rkumh‘unFanara:b;rgmYycMnYn)anTij Acquisition edayRkum

h‘unhirBaØb,Tan ehIykøayCasm

16

Ep ñkT I2 ³ mUl n iF ies aFn n iv t þ Pension Funds

I- l k çN ³s MKal ; (The characteristic )

mUlniFiesaFnnivtþ RbmUlpþMúRTBüskmµCaR)ak;snSMBIGñkcUlrYm EdlmankatBVkic©bg;

R)ak;viPaKTanesaFn eTA[mUniFiesaFnnivtþ kñúgry³kalEdlxøÜn¬GñkcUlrYm¦

bMeBjkargar ehIymUlniFiesaFnnivtþRtUvebIkpþl;Casac;R)ak;esaFnCabnþbnÞab;eTA

[GñkcUlrYmvijcab;BIeBlcUlnivtþ .

II- karEbgEckRbePTeTAtamGñkerobcMhirBaØb,Tan ( Classification by sponsor)

-EpnkaresaFnnivtþsaFarN³ (Public pension plan)

-EpnkaresaFnnivtþÉkCn (Private pension plan)

17

III- karEbgEckRbePTeTAtamkarkMnt;lkç½NÐ(Classification by defined attribute)

EpnkarkMnt;R)ak;esaFn nigR)ak;viPaKTan ³ RtUv)anvaytMéledayEp¥kelI ry³ eBleFVIkargar b¤ebovtSTTYl)ankñúgGMLúgkargar .

karpþl;R)ak;esaFnnivtþman # RbePT ³

1-karpþl;R)ak;esaFnnivtþefr ( Flat benefit)

2-karpþl;R)ak;esaFnnivtþEp¥kelImFüménkargar ( Career average)

3-karpþl;R)ak;esaFnnivtþsMrab;Etry³eBlqñaMcugeRkay ( Final pay)

1-karpþl;R)ak;esaFnnivtþefr ( Flat benefit) ³ CakarKiteTAelIcMNUlEdlGñkeFVI kargar TTYl)anR)ak;ebovtSefrmYynigGaRs½yelIry³eBlénkareFVIkargar .

18

]TahrN_ ³ nieyaCikmñak;)anbMerIkargarGs;ry³eBl 20qñaM . Kat;manbMNgQb;

edIm,IcUlnivtþenAkñúgcenøaHeBl 10 qñaM xagmux . kñúgkrNIenH nieyaCkRtUv

cMNayR)ak;esaFnnivtþ[Kat;RbcaMqñaM $2,000 . dUcecñHRbsinebIKat;cUlnivtþ\LÚvenaH

R)ak;esaFnnivtþEdlKat;RtUvTTYlKW $ 40,000 = ($ 2,000 x 20 year). EtebIkñúgry³

eBl 5 qñaMxagmux KW $ 50,000 = ($ 2,000 x 25 year).

2-karpþl;R)ak;esaFnnivtþEp¥kelImFüménkargar ( Career average)

CaviFImYyEdlesaFnnivtþRtUvKiteTAelIkarpþl;[R)ak;esaFnnivtþCamFümkñúgGMLúg

eBlTaMgGs;énkareFVIkargar rYmCamYyemKuNPaKryEdlnieyaCikTTYl)anBIkMNt;

rbs;mUlniFiesaFnnivtþ ¬mann½yfaGñkebIkR)ak;esaFnnivtþmancMENkPaKry

EdlTTYl)anelIcMNUlRbcaMqñaMenAkñúgmUlniFiesaFnnivtþ KitCamYyR)ak;ebovtS

mFümkMLúgeBleFVIkargar¦.

19

]TahrN_ ³ nieyaCikmñak;)anbMerIkargar 20 qñaM . KatmanbMNgcUlnivtþenAry³eBl

10qñaM xagmux . nieyaCkRtUvcMNayR)ak;esaFnnivtþCamFüm[Kat;RbcaMqñaM KW

$48,000 nigcMENkPaKrysMrab;mUniFiesaFnnivtþ cMnYn 4% sMrab;RKb;qñaMbMeBj kargar . dUecñHebIKat;cUlnivtþ\LÚvenaH R)ak;esaFnnivtþEdlKat;RtUvTTYl KW ³

$ 38,400 = ( $48,000 x 4% x 20 years) 3-karpþl;R)ak;esaFnnivtþsMrab;Etry³eBlqñaMcugeRkay ( Final pay)

CaviFImYyEdlRsedogKñaeTAnwg karpþl;R)ak;esaFnnivtþEp¥kelImFüménkargar (

Career average) Edr xusKñaRtg;fa viFIenHeKepþatkarKitKUrEteTAelIebovtSmFüm

cugeRkayénkargar . ]TahrN_ ³ ebIebovtSRbcaMExKitCamFümsMrab;ry³kal 5qñaM

cugeRkaymuneBlcUlnivtþmankMritesµInwg $75,000 nigcMENkPaKrysMrab;mUniFi esaFnnivtþ cMnYn 2.5% sMrab;RKb;qñaMbMeBjkargar 20qñaM . dUecñHebIKat;cUlnivtþ\LÚv

enaH R)ak;esaFnnivtþEdlKat;RtUvTTYl KW ³ $ 37,500 = ( $75,000 x 2.5% x 20 years)

20

IV- Gnþrkmµrbs;mUniFiesaFnnivtþCamYynwgsßab½nhirBaØvtßú

Interaction of pension fund with other financial institutions ³

sßab½nhirBaØvtßú GnþrkmµmUlniFiesaFnnivtþ

FnaKarBaNiC¢ - FnaKarBaNiC¢xøH RKb;RKgmUlniFiesaFnnivtþ

- mUlniFiesaFnnivtþ Tij\NTanBaNiC¢kmµ Edllk;eday

FnaKarBaNiC¢enAelITIpSarTutiy³

21

Rkumh‘unFanara:brg Rkumh‘unFanara:b;rgxøH erobcMsMrab;mUniFiesaFnnivtþ

mUniFisgÁh mUniFiesaFnnivtþCaeRcIn )aneFVIkarvinieyaKeTAkñúgmUlniFi

sgÁh

FnaKarvineyaK - mUlniFiesaFnnivtþ TijmUlb½RtfµI²enAelITIpSarbzm

edaypÞal;BIFnaKarvineyaK

- FnaKarvineyaKpþl;esvaRbwkSadl;GñkRKb;RKg mUlb½Rt

rbs;esaFnnivtþ

TIpSarhirBaØvtßú karcUlrYmrbs;mUlniFiesaFnnivtþ

TIpSarrUbiyvtßú mUlniFiesaFnnivtþmanRTBüskmµmYycMnYnCamUlb½RtTIpSar

rUbiyvtßú(Money market securities)

22

TIpSarsBaØab½NÑ RbmaNCa 16% énRTBüskmµmYycMnYnCamUlb½Rtrbs;

mUlniFiesaFnnivtþCasBaØab½NÑ

TIpSarh‘un RbmaNCa 32%énRTBüskmµCamUlb½Rtsrub rbs;mUlniFi

esaFnnivtþ

Ep ñkT I# ³ mUn iF is g Áh mutual fund

I- l k çN ³s MKal ; (The characteristic )

Figure 4-4 Indirect investment by Mutual Fund

Investments : CDs Notes Bonds Common stocks Treasury securities

ABC Mutual fund

Small investors

funds

Investments

funds

Shares of mutual funds

23

sgÁhmUniFiCaRkumh‘unvinieyaK Edllk;PaKh‘unrbs;xøÜneTA[vinieyaKKintUctac

b¤GñkmanTunsnSMtictYc edIm,IRbmUlmUlniFiykeTAvinieyaKTijmUlb½RtepSg² . II- TsSn³énkarvinieyaKkñúgmUlniFisgÁh(Investment philosophy of mutual fund)

!- Open-end mutual fund ³KWCasgÁhmUniFi Edle)aHecjPaKh‘unlk;eTAeGayvini

eyaKin ehIyTTYlTijPaKh‘unenHvij kalNavinieyaKKincg;lk;PaKh‘unrbs;xøÜn .

Open-end mutual fund BMumankMnt;cMnYnPaKh‘unEdlRtUve)aHecjeT .

@- Close-end mutual fund ³ KWCasgÁhmUlniFi Edle)aHecjPaKh‘unEtmþg kñúgcMnYn

kMnt;NamYysMrab;lk;[vinieyaKKin . kalNaPaKh‘unenHRtUv)anlk;ecjGs;

vinieyaKKinGacTijPaKh‘unenH BIvinieyaKKinNa Edlcg;lk;PaKh‘unenHenAtamTIpSar

h‘un .

24

III- K uN s m,t þién karv in iey aKk ñúgs g Áh mUn iF i n igpl c MN Ul

(Advantage of investing in mutual fund and Return)

KuNsm,tþi Advantage ³

!- Bhukmµ (Diversification) /

@- karvinieyaKeLIgvijedaysV½yRbvtþi

#- kardkTunedaysV½yRbvtþi /

$- snÞnIyPaB ³ vinieyaKinGaclk;PaKh‘unrbs;xøÜneTA[sgÁhmUniFivij b¤lk;

PaKh‘unenHenAtamTIpSarhirBaØvtßú )anRKb;eBl .

nig %- karbþÚreKaledAvinieyaK

25

IV- RbePTepSg²én s g Áh mUn iF i (Type of mutual fund )

CaTUeTAsgÁhmUniFiman 10 RbePTepSg²Kña GaRs½yelIeKaledAénkarvinieyaK ³ 1- Aggressive growth fund 2- Corporate Bond and preferred stock fund 3- International fund 4- Growth fund 5- Growth and income fund 6- Income fund 7- Money market mutual fund 8- Balanced fund 9- Sector funds or specialized fund 10- Index fund

26

1- Aggressive growth fund ³ sgÁhmUniFiRbePTenH Casßab½nEdlha‘nRbfuyCa

mYyhaniP½yx

27

4- Growth fund : maneKaledArkcMNUl[)ankMritGtibrmatamry³ Capital gain

edayepþatkarvinieyaKeTAb½NÑh‘un rbs;shRKas Edlpþl;nUvkMeNInéføh‘un

elÓnCagGtiprNa . 5- Growth and income fund : EsVgrkcMNUlCaPaKlaP nig Capital gain eday

epþateKaledAeTAelIkMeNIn nigesßrPaBéføPaKh‘unry³eBlEvg . 6- Income fund pþl;karR)ak; nigPaKlaP . 7- Money market mutual fund KWCasgÁhmUniFiEdlvinieyaKEteTAelIsBaØab½NÑ

(Bonds 0r debt securities) EdlmankalvsanþxøI . 8- Balanced fund manTisedAvinieyaKcMruHeTAelI Common stock nig bonds

ehIyCajwkjy)anvinieyaKeTAelI preferred stock Edr .

28

9- Sector funds or specialized fund : vinieyaKeTAelImUlb½RtshRKaskñúgEpñk

esdækic© b¤]sSahkmµ EdlmanPaBCak;lak; . karvinieyaKRbePTenH manhaniP½y

x

29

V-pl c MN Ul Edl TT Yl )an B Ik arv in iey aKk ñúgs g Áh mUn iF i

Return on mutual fund

sgÁhmUniFiGacpþl;plcMNUl 3 ya:geTA[vinieyaKKin ³

!- PaKlaP (Dividends) ³ mUlniFisgÁh EbgEckcMNUlBIkarR)ak; nigPaKlaP Edl

)anmkBIkarvinieyaKrbs;xøÜneTAeGayvinieyaKKin EdlCaPaKTunik edayKitCaTwkR)ak;

kñúgkMritmYyesµIr²Kña sMrab;PaKh‘unnImYy² .

karEbgEckPaKlaPGacRbRBwtþieTACaerogral;Ex RtImas b¤RbcaMqñaM .

@- Capital gain distribution ³ mUlniFisgÁhEbgEckR)ak;cMeNjBIkarlk;mUlb½Rt

eTAeGayPaKTunik rbs;sgÁhmUlniFi EdlR)ak;cMeNjenH)anmkBIpldkrvagéføTij

nigéfølk;mUlb½Rt .

30

#- karekInéføPaKh‘unrbs;sgÁhmUniF i Appreciation of Net asset value per share (NAV) ³ éføPaKh‘unrbs; sgÁhmUniFi

GacERbRbYlCaerogral;éf¶ . ebImUlb½RtPaKeRcInEdlmankñúgsnñiFimUlb½Rtrbs;sgÁh

mUlniFiekIneLIgenaH NAV kñúgmYyPaKh‘unk¾RtUvekIneLIgEdr . kñúgkrNIenH ebI

PaKTunikénsgÁhmUniFilk;PaKh‘unrbs;xøÜn enaHeKnwgTTYl)annUvtémømYyx

32

VI- r)ay karN ¾rbs ;s g Áh mUn iF i (Mutual fund statement) ³

vinieyaKKinEtgEtmanr)aykarN¾sþIBIsgÁhmUniFiCaerogral;RKa b¤tamkaresñIsMu . kñúg

r)aykarN¾enaH manbgðajBt’man dUcCa karEbgEckPaKlaP Capital gain

distribution karvinieyaKCabnþbnÞab; éføPaKh‘un nigcMnYnh‘un .

VII- Gn þrkmµrv ags g Áh mUn iF i n igs ßab ½n h irB a Øv t ßúepSg²

Interaction of Mutual fund with other financial institutions

¬BinitüemIlkñúgtaragén Text Book ¦

33

Ep ñkT I4 ³ Rk umh ‘un h irB a Øv t ßú Financial Companies

Rkumh‘unhirBaØvtßú KWCaGñkpþl;\NTanmanlkç½NÐsMrab;ry³eBlxøI nigmFüm eTAeGay

GñkeRbIR)as; nigshRKastUctac edaytMrUveGaymankarkk;bBa©aMvtßú .

RbePTRk umh ‘un h irB a Øv t ßú Financial Companies

!- Rkumh‘unhirBaØvtßúBaNiC¢kmµ Commercial finance Companies ³

Rkumh‘unhirBaØvtßúBaNiC¢kmµ CaGñkpþl;\NTan[shRKasEdlRtUvkar TunRbtibtþikar

(Working capital) nigTunvinieyaK (Investment capital) .

TMrg;énkarbBa©aM ³

-karkk;bBa©aMedaysnñiFiTMnij dUcCavtßúFatuedIm TMnijBak;kNþalsMerc nigsMerc

34

-karkk;bBa©aMeday\NeTyü edayshRKasGacyk\NeTyü eBalKWCa\NTan

EdlshRKas)anpþl;eGayGtifiCnrbs;xøÜn tamry³karl;k;TMnij eTAkk;bBa©aMedIm,I

x©I\NTanry³eBlxøI BIRkumh‘unhirBaØvtßúBaNiC©kmµ .

@- Rkumh‘unhirBaØvtßúGñkeRbIR)as; Consumer finance Companies ³

#- Rkumh‘unhirBaØlk; Sales finance Companies ³

35

Risk Identification GtþsBaØaNkmµhaniP½y Risk retentionkarrkSaTukhaniP½y HO = Homeowners policy

Sleet = ePøoglayRBil

Vandalism =karbMpøicbMpøajya:gsahav

artificially = Ekøgkøay sib,nimitþ/ EdlminEmnecjmkBIFmµCati Condominium = Condo Acquisition = s.th acquired ,esp is regarded as useful. = Possession , belonging .

1

Topic 5

T IpSarPaKh ‘un n igT IpSarmUl Fn

Stock Market and Capital Market

TIpSarPaKh‘unCaTIkEnøgmYy EdlGnuBaØati[GñkpÁt;pÁg;mUniFi (Surplus Unit) EbgEck

eTAeGayGgÁPaBxVHxat (Deficit Unit) .GñkpÁt;pÁg;KWCaGñkvinieyaK EdlEsVgrk Return

BIkarvinieyaK .

I- RbePTén PaKh ‘un (Type of stocks )³

PaKh‘un KWCamUlb½RtCYjdUr)an pSayecjedaysarCIvkmµ (Corporation)

CatMNag[mYyPaKénedImTunsaCIvkmµ ehIyCakmµsiT§rbs;GñkcUlh‘un . PaKh‘un

KWCamUlb½RtGacepÞr)an . PaKh‘unman @ RbePT KW ³

!>! PaKh‘unFmµta (Common stock)

2

b½NÑPaKh‘unFmµta tMNag[kmµsiT§enAkñúgshRKas Edlpþl;siT§[Gñkkan;h‘unGace)aH

eqñateRCIsRkumRbwkSaPi)al nigTTYlPaKlaP ( dividend ) tamesckþIRbkasrbs;Rkum

RbwkSaPi)alsaCIvkmµ . karbg;R)ak;PaKlaP eFVIeLIgxus²Kña enARbeTsxus²Kña.

!>@ PaKh‘unGaTiPaB (Preferred stock) ³ PaKh‘unGaTiPaB CaTmrg;mYyénmUlFn

rbs;m©as;PaKh‘un EdlenABImuxlMdab;PaKh‘unFmµta kñúgerogbg;PaKlaP . CaTUeTA

PaKh‘unGaTiPaBRtUv)anbg;edayGRtaPaKlaPsnüa EdlminekIteLIgenAeBlEdlRkum

h‘un TTYl)ancMeNjx

3

II- T IpSars Mrab ;e)aHb ½N ÑPaKh ‘un (Market for stocks issue) ³

- TIpSarbzm - TIpSarbnÞab;

- TIpSarTI# nigTIpSarTI $

III- k arv in iey aKrbs ;Fn aKarrwk (Investment of banker) ³

FnaKarwkbMeBjmuxgar # ya:gsMrab;saCIvkmµkñúgdMeNIrkarbeBa©jFnb½NÑfµI ³

- pþl;eyabl; (Consultant)

- begáItbNþajEckcaykargar (Forming distribution network)

- GMN³GMNaghaniP½y (Bearing risk)

!- pþl;eyabl; (Consultant) ³

- erobcMkarcuHeQµaH nigRbmUlBt’man

4

-eBlevlaénkare)aHpSay

- karkMnt;éføFnb½NÑ

@- muxgarCaGñkbegáItbNþajEckcaykargar (Forming distribution network) ³

- rcnasm

5

!- lkçN³erobcMTUeTA (General Organizational features) ³

TIpSarPaKh‘un CaGgÁPaBsµ½RKcitþmYy EdlbegáIteLIgedaybuKÁlmYyRkumpþl;CaPaKh‘un

edIm,IbegáItsßab½nmYy ehIynigb½NÑPaKh‘undéTeTot EdleKGacTij niglk;va . TIpSar

lk;b½NÑPaKh‘unKWCaTItaMgCak;EsþgmYy EdleKbBa¢ÚnkarbBa¢aTijlk; sMrab;karRKb;

RKg.

]TahrN¾ ³ enAeBlEdlRkumh‘unRtUvkarTuneRcIn edIm,ITUTat;karvineyaKrbs;xøÜn Rkum

h‘unGacx©Iluy b¤lk;b½NÑPaKh‘unén Common stock eTAeGayvinieyaKKin .karlk;

PaKh‘unfµIenH elITIpSarh‘unedayRkumh‘un ehAfaTIpSarbzm . TIpSarPaKh‘un edIm,I

eGaymaneQµaHl¥ RtUv)aneKCYjdUrenATIpSarbnÞab; kñúgcMeNambNþavinieyaKKin .

- rebobTIpSarPaKh‘undMeNIrkar How stock exchange work ³

6

CaTUeTATIpSarPaKh‘unGacRbtibtþikarLayLúg nigTIpSarQµÜj .

]TahrN¾ ³Gñk)anTTYlPaKh‘unCamrtk cMnYn 1,000 PaKh‘un nUvsþúk GM EdlGñkGac

lk;vaecj.bNþaPaKh‘un GM rYmCamYybNþaPaKh‘unRkumh‘unepSgeTotcMnYn 1,700

PaKh‘un RtUv)aneKCYjdUrenAelITIpSarPaKh‘unjÚy:k (NYSE = New York Stock

Exchange) . edIm,Ilk;sþúk GM rbs;elakGñk GñkbBa¢aeTAQµÜjkNþalEdlbBa¢Únkar

bBa¢aenaHeTAdl;eGRkg;TIpSarPaKh‘untamry³ Computer b¤ TUrs½BÞ .

1Ch01_newChapter 1Definition of Financial MarketsRole of Financial MarketsRole of Financial MarketsSlide Number 5Slide Number 6Slide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Securities Traded in Financial MarketsSecurities Traded in Financial MarketsSources and Uses of funds of Financial Institutions��- Depository Financial Institutions�Generate funds from deposit ��- Non depository Financial Institutions�Generate funds from sources others than deposits- Depository Financial Institutions� Source of funds Uses of funds ��Commercial Banks : various deposits Commercial Loan� Securities Purchase��Saving Institutions : Deposit Residential Mortgage Loan�Securities Purchase��Credit Union: Deposit Various Loan - Non depository Financial Institutions�� Source of funds Uses of funds ��Financial companies : Securities Loans� ServicesInvestment�Mutual Funds : Share BondsStocks��Securities Firms : ServicesSecurities � Securities - Non depository Financial Institutions (Cont)�� Source of funds Uses of funds ��Insurance Companies : Insurance policiesLong-Term bondsStocks�Pension Funds : Pensions Contribution Long-Term bonds�Stocks��Exhibit 1.3 Comparison of Roles Among Financial InstitutionsExhibit 1.4 Asset Sizes �of Financial Institutions �(in Billions of Dollars)Exhibit 1.5 Summary of Institutional Sources and Uses of FundsSlide Number 22

F.I_2_newTopic 2� sßab½nTTYlbeBaØIr � Depository Institutions� FnaKarBaNiC¢ Commercial Bank�I- niymn½y (Definition) ³ �FnaKarBaNiC¢tMNa[Rkumh‘unénsßab½nbeBaØIr ehIymanmuxgarRbEhlnwgsßab½nsMéc nigshCIB\NTan rYmmanmUlniFiR)ak;beBaØIr nigminEmnR)ak;beBaØIr dUcCab½NÑbMeBj edImTun (Subordinate notes) nigskçIb½RtbMNul (Debenture) karpþl;km©ICaRTBü skmµ (Assets) rYmmankarpþl;km©IeTAeTAelI Consumers , Commercial & Real Estate .II- tYnaTIrbs;FnaKarBaNiC¢kmµ (The role of commercial banks) ³�FnaKarBaNiC¢ KWCaGnþrkarIhirBaØvtßúmYyd¾sMxan;CageK kñúgkarCYysMrYlnUvlMhUrmUl niFiRTBüskmµ . RTBüskmµRbmaNCitBak;kNþalénFnaKarhirBaØvtßúTaMgGs; RtUv )anbNþMúenAkñúgFnaKarBaNiC¢ . eRkABIesvahirBaØvtßú FnaKarBaNiC¢eFVIRbtibtþikar CYjdUrmUlb½Rt enAelITIpSarhirBaØvtßúkñúgnamxøÜnpÞal; b¤CaGnþrkarI . �The role of commercial banks �The main functions of commercial banks are accepting deposits from the public and advancing them loans .�However, besides these functions there are many other functions which these banks perform . All these functions can be divided the following heads :��7 main functions of a Commercial bank �1- Accepting Deposits�2- Giving loans �3- Over-Draft �4-Discounting of Bills of Exchange �5- Investment of Funds �6- Agency Functions�7- Miscellaneous Functions �1- Accepting Deposits�The most importance function of commercial banks is to accept deposits from the public , Various sections of society , according to their need and economic condition , deposit their savings with the banks .�For example , Fixed and low income group people deposit their savings in small amounts from the points of view of security , income and saving promotion . On the other hand, traders and businessmen deposit their savings in the banks for the convenience of payment.Banks formulate various deposit schemes . Generally there are 3 types of deposits which are as follows :�i- Current deposit�ii- Fixed deposit �iii-Saving deposit �2- Giving Loans :�The second importance function of commercial banks is to advance loans to its customers . Banks charge interest from the borrowers and this is the main source of their income . �Modern banks give mostly secured loans for productive purpose . In other words , at the time of advancing loans , they demand proper security or collateral . Generally, the value . �3- Over-Draft (type of a loan)�Bank loans to its customer’s up to certain amount through over-draft , if there are no deposits in the current account . For this bank demand a security from the customers and charge very high rate of interest.4- Discounting of bills of exchange :�Under this system, banks advance loans to the traders and business firms by discounting their bills . In this way , businessmen get loans on the basis of their bill exchange before the time of their maturity.�5- Investment of Funds : �The banks invest their surplus funds in securities market . �6- Agency Functions : �Banks function in the form of agencies and representatives of their customers . The importance functions of these types are as follows.�i- Banks collect cheques �ii- Banks pay insurance premium of their customer . iii-Banks purchase and sell securities. �iv-Banks arrange to send money from one place to another for the convenience of their customers.�7- Miscellaneous Functions :�Beside the function mentions above , banks perform many other functions which are as follows :i- Banks make arrangement of locker for the safe custody of valuable assets of their customer such as gold, silver, legal documents etc.�ii-Banks give reference for their customers �iii-Banks collect necessary and useful statistics relating to trade and industry.�iv-For facilitating foreign trade , banks undertake to sell and purchase foreign exchange .�v-Banks advise their clients relating to investment decisions as specialist . �vi-Banks issue letters of credit�vii-during natural calamities , banks are highly useful in mobilizing funds and donations . �Custody = Protection , Safe keeping�calamities = disaster � III- RbPBmUlniFi nigkareRbIR)as;mUlniFirbs;FnaKarBaNiC¢ � Sources and uses of funds of commercial bank �A- Bank’s own funds�B- Borrowed fund �A- Bank’s own funds�Bank own fund are mainly of three types :� (a) Paid up capital� (b) Reserve fund � (c ) Portion of undistributed of profit�B- Borrowed fund�The borrowed capital is a major and an importance source of fund for any banking business .�1- Borrowing from central bank�The commercial banks in times of emergency borrow loans from the central bank of the country. The central bank extends help as and when financial help is required by the commercial banks. �2-Other sources :�Bank also raise funds by issuing bonds , debentures , Cash certificates etc.etc. �Though it is not common but is a dependable source of borrowing . �3- Deposits :�Public deposits are a powerful source of funds to a bank . �There are 3 types of bank deposits (1) current deposits (2) Saving deposits (3) Time deposits .� III- RbPBmUlniFi nigkareRbIR)as;mUlniFirbs;FnaKarBaNiC¢ � Sources and uses of funds of commercial bank �� RbPBmUlniFi (Sources of funds) �- RbPBR)ak;beBaØIr (Sources of funds) ³�!¼- Transaction deposits KWCaR)ak;beBaØIrenAkñúg Demand deposit account �b¤ Checking account EdlGtifiCn GacdkvijCasac;R)ak;tamviFIepSg² dUcCakar eRbImUlb,Tanb½Rt b¤ b¤karbgÁab;[FnaKarepÞrTwkR)ak;cUlkñúgKNnIepSgeTot )an RKb;eBlevla .� Checking account man # RbePT ³�- Regular checking accounts ³ tRmUv[manTwkR)ak;Gb,rma ]>!/000 duløar. kñúgkrNITwkR)ak;tMkl;minRKb;RKan;enaH RtUvbg;éføesvaRbcaMEx ]TahrN¾ * duløar eTAeGayFnaKar .�- Activity accounts ³ \ttRmUveGaymanTwkR)ak;Gb,rma nig\tbg;éføesvaRbcaMEx eT b:uEnþral;kardksac;R)ak; nigCYnkalkarbBa©ÚlR)ak;kñúgKNnI RtUv)anKitéfø esvakmµ .Interest-earning checking account ³ KWCa Now-account (Negotiable Order of Withdrawal ) EdltMrUveGaymanTwkR)ak;Gb,rma kñúgkMritmYyx

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