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Raising bonds, not enough
Reflect on group work – quote
Australian review
Presentation in week 10 and 11
Get a picture done
Great financial crisis, liquidity issues.
Financial system - exchange goods and services (flow of
funds)
Stability and reliability
Interim and final has different conclusions.
Bank operations and regulations
Basel 3: new banking regulations
Why they propose that and is it effective
What we missed and what do we achieve
Why is the financial system the heart of free market
economics?
It facilitates the movement of money from the spenders
and savers.
Fair treatment does not involve shielding consumers from responsibility for their
financial decisions, including for losses and gains from market movements. Some
investor losses are an inevitable feature of a well-functioning market economy,
which allows risk-taking in search of a return.
However, the Inquiry is concerned that consumers are taking risks they might not
have taken if they were well informed or better advised.

What happened in the crisis?

Firms guaranteeing the instruments faced disappearing net worth’s Banks caught in the mess needed additional equity capital to meet regulations Who in the financial system were involved in the crisis and what were instruments Sub prime loans packaged into collateralized debt obligations Synthetic cdo were created to remove these assets from the balance sheet and are derivatives of that pool of assets. Credit default swaps were created to protect buyers from credit default but they were traded on secondary markets and this led to the creation of a multitude of credit default swaps involving counter party obligations leading to a complex web of interactions.Confidence and trust in the system are essential ingredients in building an efficient. resilient and fair financial system that facilitates economic growth and meets the financial needs of Australians. .

Week 2 Not in equities and bond market but cdo market selling SPV –special purpose vehicle Special purpose vehicle has different ratings Houses price drop People couldn’t pay back. P&L statement write down. equities hit Credit default swap is like insurance Credit assessment issue – should be about 50% Need to consider the leverage part Matching issue of short term bonds to long term bonds Credit rating issue Risk management Transparency issue Regulation: Issues -Endorsement -Framework-Basel 3 – countries -Understand the commercial banks -Importance for off balance sheet accounts -liquidity transformation -underwriting – listing of IPO -capital base strong enough to take care of off balance exposure -tier 1 solid capital in assets ensure that money not taken out of this tier .

Cki-cheung kung infrastructure DB-advisory company DAf –der aus fund Pss-public sector superannuation Css-commonwealth super scheme . Hedge fund –gather peoples funds and with a certain mandate –like long short funds – use computer systematic trading with inputs to trade. Proprietary trading.use bank funds to bet on current monetary conditions.Need to read the terms of the book and the terms of the chapters. Need to demonstrate practical abilities for the exam.-banks can lose money Private equity.KKR one of the largest fund management from us -GE money put them up for sale. Why HSBC goes into commercial banking PROFITABLE Off balance sheet (capital) Less regulatory Capital adequacy Commercial bank Revenue less than investment bank Multiple avenues for getting funds Australian government GFC Insurance companies-life insurance policies Credit union – act as a bank (self-insure) lend to members and get returns tier 1 capital higher than the big banks.

Sas-state super .