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RECAP:FINANCIAL INSTITUTIONS, CENTRAL BANK,

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Management of Financial Institutions - MGT 604
VU
LECTURE # 45
RECAP
1) FINANCIAL ENVIRONMENT & FINANCIAL INSTITUTIONS
ROLE OF FINANCIAL INSTITUTIONS
LONG RUN PERFORMANCE OF
FINANCIAL INSTITUTIONS FOR ECONOMIC GROWTH
CAPITAL MARKET
STOCK MARKETS
BOND MARKETS
COMMODITY MARKETS
MONEY MARKETS
DERIVATIVES MARKETS
FUTURES MARKETS
BORROWERS OF FINANCIAL MARKETS
LENDERS OF FINANCIAL MARKET
2) FINANCIAL INSTITUTIONS
TYPES OF FINANCIAL INSTITUTIONS
CENTRAL BANK
COMMERCIAL BANKS
INVESTMENT BANK
SAVING BANK
MICRO FINANCE BANK
ISLAMIC BANK
AGRICULTURE BANK
SME BANKS
NON-BANKING FINANCIAL INSTITUTIONS
INVESTMENT COMPANIES
BROKERAGE HOUSES
LEASING COMPANIES
INSURANCE COMPANIES
MUTUAL FUND
FINANCIAL INSTITUTION & THEIR FUNCTIONS
3) CENTRAL BANK
Activities & Responsibilities
Monetary Policy
Central or National "Bankers Bank"
Interest Rate Intervention
Limits of Enforcement Power
4) Central Bank
 Policy Instruments
 Interest rate Intervention
 Limits of Enforcement Power
 Interest Rates
 Open Market Operations
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Management of Financial Institutions - MGT 604
VU
Repo Market known as repurchase operations
Direct Operations
Buying or selling securities ("Direct Operations")
Foreign exchange operations such as forex swaps.
Capital Requirements
Reserve requirements
Exchange Requirements
5)
Balance of Trade
Balance of Payments
Factors that can affect BOT
1. Exchange rates
2. Trade agreements or barriers
3. Other tax, tariff and trade measures
4. Business cycle at home or abroad.
Current Account Surplus & Deficit
Capital or Financial Account Surplus & Deficit
Balance of Payments Equilibrium
Challenges of a Central Bank
1. Economic Growth
2. Poverty Reduction
3. Inflation
4. Stability in Forex Rate
Independence of Central Banks
6 to 11)
 State Bank of Pakistan
 History
 Functions
 Primary Function
 Secondary Function
 Non-Promotional Function
 Regulation of Liquidity
 Banking Assets & Liabilities
Various Departments of SBP
 Agricultural Credit
 Audit
 Banking Inspection
 Banking Policy
 Banking Supervision
 Corporate Services
 Economic Policy
 Exchange and Debt Management
 Exchange Policy
 Human Resource
 Information System
 Islamic Banking
 Legal Services
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Management of Financial Institutions - MGT 604
VU
Payment System
Research
Statistics
Real Time Gross Settlement System (RTGS System)
Small and Medium Enterprises
11 & 12) Macro Economic Performance of a Country
 National Income
 Concepts of National Income
 Difference b/w GDP & GNP
 Regulating risk and the importance of risk management
 Basel 2 Type Rules for Insurers
 GLOBAL FINANCIAL SYSTEM
 INTERNATIONAL FINANCIAL INSTITUTIONS
 International Monetary Fund
 The World Bank
 World Trade Organization
 Role of WTO in Pakistan Trade Environment
 Asian Development Bank
 ADB Projects in Pakistan
 Paris Club
13) Pakistan Economic Aid & Debt
 The major causes of poverty in Pakistan
 Key challenges facing the Government of Pakistan
 Future Prospects for Pakistan's Economy
 Macroeconomic Stability
 Strengthening Institutions
14) Increasing Foreign Direct Investment
 Foreign Interest in Local Financial Markets
 Enhancing and Sustaining a Growing GDP
 How can Pakistan improve and sustain its growth rate?
1. Industrial Sector
2. Inter-provincial harmony in Pakistan
3. Achieving a Favorable Balance of Trade
4. Managing the Debt
5. Economic Resilience
15 to 19) Role of Commercial Banks
Purpose of a bank
Commercial Lending
Banking Services
A Bank's Profit
Services Typically Offered by Banks
Types of banks
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Management of Financial Institutions - MGT 604
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Banks in the Economy
Role in the money supply
Size of Global Banking Industry
Bank Crisis
Challenges within the Banking Industry
1. Economic Environment
2. Growth Strategies
3. The Management of the Banks
 Public perceptions of banks
 Profitability
 SWIFT Society for Worldwide Interbank Financial Transactions
 COMMERCIAL BANKING IN PAKISTAN
 CAMEL
These are:
1) Capital Adequacy,
2) Asset Quality,
3) Management Soundness,
4) Earnings and Profitability,
5) Liquidity and Sensitivity to Market Risk.
 Deposit Mobilization
 Credit extension
 Banking spreads
 Asset composition
 Problem bank management
BANKING SECTOR REFORMS in Pakistan
1. Privatization of Nationalized Commercial Banks
2. Corporate governance.
3. Capital Strengthening.
4. Improving Asset quality.
5. Liberalization of foreign exchange regime
6. Consumer Financing
7. Mortgage Financing
8. Legal Reforms
9. Prudential Regulations
10. Micro financing
11. SME Financing
12. Taxation
13. Agriculture Credit
14. E-Banking
15. Human Resources
16. Credit Rating
17. Supervision and Regulatory Capacity
18. Payment Systems
 Commercial Banking in a Free Society
 Private Deposit Insurance
20) Branch Banking in Pakistan
Remittances
Demand Draft
Telegraphic Transfer
Mail Transfer
Online Fund Transfer
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Management of Financial Institutions - MGT 604
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Types of Account
7. Individual
8. Joint Account
9. Sole Proprietorship
10. Club & Societies
11. Joint Stock Companies
12. Agents
Operations & Status of Accounts Nature of Accounts
7. Current Account
8. Profit & Loss Sharing
9. Current foreign currency
10. Saving Foreign Currency
11. Term Deposits
12. BBA "Basic Banking Account"
Commercial Banks Loan Facilities:
Types of Loan
Personal finance
Mortgage Finance
Business Finance
21) Role of Commercial Banks in Micro Finance Sector
22 to 26 ) Mutual Funds
History
Usage
Net asset value
Turnovers
Expenses and TER'S
1. Management Fees
2. Non-management Expenses
3. Service Fees
4. Fees and Expenses Borne by the Investor (not the Fund)
5. Brokerage Commissions
Types of mutual funds
Open-end fund
Exchange-traded funds
Equity funds
1. Capitalization
2. Growth vs. value
3. Index funds versus active management
Bond funds
Money market funds
Funds of funds
Hedge funds
Mutual funds vs. other investments
1. Share classes
2. Load and expenses
Criticism of managed mutual funds
28) Investment Banking
 Organizational structure of an investment bank
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Management of Financial Institutions - MGT 604
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The main activities and units of Investment Banks
Size of industry
Recent evolution of the business
New products
Possible conflicts of interest
Types of Investment banks
29 & 30) Letter of Credit & International Trade
 Terminology
 How it works
 Legal principles governing documentary credits
 The price of LCs
 Legal Basis for Letters of Credit
 Risks in International Trade
31 & 32) Foreign Exchange & Role of Financial Institutions
Market size and liquidity
Market participants
o  Banks
o  Commercial companies
o  Central banks
o  Investment management firms
o  Hedge funds
o  Retail forex brokers
 Trading characteristics
Factors affecting currency trading
o  Economic factors
o  Political conditions
o  Market psychology
 Algorithmic trading in forex
 Financial instruments
o  Spot
o  Forward
o  Future
o  Swap
o  Option
o  Exchange Traded Fund
 Speculation
33 & 34) Leasing Companies
 Conceptual background
o  Leasing of real property
o  Leasing of tangible personal property
 Real leases
o  Private property rental
o  Commercial leasehold
Advantages of commercial leasing
Disadvantages of commercial leasing
 The Leasing Sector in Pakistan and its Role in Capital Investment
35 & 36) Insurance Companies
 Principles of insurance
Indemnification
 When is a policy really insurance?
o  Does the contract contain adequate risk transfer?
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Is there a brightline test?
o
"Safe harbor" exemptions
o
Risk limiting features
o
Insurer's business model
 Gambling analogy
 History of insurance
 Types of insurance
 Types of insurance companies
 Life insurance and saving
 Size of global insurance industry
 Financial viability of insurance companies
 Controversies
o  Insurance insulates too much
o  Closed community self-insurance
o  Complexity of insurance policy contracts
o  Redlining
o  Health insurance
o  Dental insurance
o  Insurance patents
o  The insurance industry and rent seeking
o  Criticism of insurance companies
37) Role of Financial Institutions in Agriculture Sector
39) SME sector & Financial Institutions
 SME Policy in Pakistan
 Government of Pakistan & its Role
40) Financial Crimes
 Money Laundering
 Modern development
 Process
 Irregular funding
 Captive business
 Legal considerations
 Fighting money laundering
 Using information technology
 September 11, 2001 and the international response to the underground economy
41) Financial Institutions & Risk Management
42) Banking Crimes
43) Collapse of Enron
44) Misleading in Baring Bank, Black Wednesday, Soloman Brothers and Treasury
Fraud.
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Table of Contents:
  1. Financial Environment & Role of Financial Institutions:FINANCIAL MARKETS &INSTITUTIONS
  2. FINANCIAL INSTITUTIONS:Non Banking Financial Companies
  3. CENTRAL BANK:Activities and responsibilities, Interest Rate Interventions
  4. POLICY INSTRUMENTS:Open Market Operations, Capital Requirements
  5. BALANCE OF TRADE:Balance of Payments Equilibrium, Public Policy and Financial Stability
  6. STATE BANK OF PAKISTAN:History, Regulation of Liquidity, Departments
  7. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS:Banking Inspection Department
  8. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.):Debt Management
  9. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.):Training Programs by SBP
  10. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.):Human Resources Department
  11. MAJOR DRIVERS OF FINANCIAL INDUSTRY:GLOBAL FINANCIAL SYSTEM, The World Bank
  12. INTERNATIONAL FINANCIAL INSTITUTIONS:ADB Projects in Pakistan, Paris Club
  13. PAKISTAN ECONOMIC AID & DEBT:Macroeconomic Stability, Strengthening Institutions
  14. INCREASING FOREIGN DIRECT INVESTMENT:Industrial Sector, Managing the Debt
  15. ROLE OF COMMERCIAL BANKS:Services Typically Offered by Banks, Types of banks
  16. ROLE OF COMMERCIAL BANKS:Types of investment banks, The Management of the Banks
  17. ROLE OF COMMERCIAL BANKS:Public perceptions of banks, Capital adequacy, Liquidity
  18. ROLE OF COMMERCIAL BANKS:Problem bank management, BANKING SECTOR REFORMS
  19. ROLE OF COMMERCIAL BANKING:Private Deposit Insurance,
  20. BRANCH BANKING IN PAKISTAN:Remittances, Online Fund Transfer
  21. ROLE OF COMMERCIAL BANKS IN MICRO FINANCE SECTOR
  22. Mutual funds:Types of international mutual funds, Mutual funds vs. other investments
  23. Mutual Funds:Criticism of managed mutual funds, Money Market Fund
  24. Mutual Funds:Balanced Funds, Growth Funds, Specialized Funds, Measuring Risks
  25. Mutual Funds:Cost of Ownership, Redemption Fee, Reports to Shareholders
  26. Mutual Funds:Internet Fraud, The Pyramid Scheme, How to Avoid Investment Fraud
  27. Mutual Funds:Investing In International Mutual Funds, How to Pre-Select a Mutual Fund
  28. Role of Investment Banks:Recent evolution of the business, Possible conflicts of interest
  29. Letter of Credit:Elements of a Letter of Credit, Commercial Invoice, Tips for Exporters
  30. Letter of Credit and International Trade:Terminology, Risks in International Trade
  31. Foreign Exchange & Financial Institutions:Investment management firms, Exchange Traded Fund
  32. Foreign Exchange:Factors affecting currency trading, Economic conditions include
  33. Leasing Companies:Basic Purpose of Leasing, Technological Benefits
  34. The Leasing Sector in Pakistan and its Role in Capital Investment
  35. Role of Insurance Companies:Indemnification, Insurer’s business model
  36. Role of Insurance Companies:Life insurance and saving
  37. Role of financial Institutions in Agriculture Sector:What is “Revolving Credit Scheme”?
  38. Agriculture Sector and Financial Institutions of Pakistan:What is SMEs
  39. Can Government of Pakistan Lay a Pivotal Role in this Sector?:Business Environment
  40. Financial Crimes:Process of Money Laundering, Terrorist Financing
  41. DFIs & Risk Management:Managing Credit Risk, Managing Operational Risk
  42. Banking Fraud & Misleading Activities:Rogue Traders, Uninsured Deposits
  43. The Collapse of ENRON:Auditing Issues, Corporate Governance Issues, Corrective Actions
  44. Classic Financial Scandals:Corruption, Discovery, Black Wednesday
  45. RECAP:FINANCIAL INSTITUTIONS, CENTRAL BANK,