ry Banleing and France. @ Bank Funcling + How dees » bonlt yolse funels. There ove 3-mwua © non -daposit bovrosing © Soures of fends Jor bonks: v0 De sits: Common shrks ond heteheol Eeuming bt mesons Hat most > Gorks oe Aihty luerged! finenerb tnstilabon s, — of Pee fance come from poorly - (Fist 0° Sources) 4) Deposits - seromt Types F cle posts Cheeky Acconts ton be withcewn upon clemonal > Soviags deposits — Pg terest, (hela mit rob), clo not have % cpedlfle moturily, ond wsuolly aon be witkchowo upon dlomonal fied males ond? > fine de poits— Coifcaten of clepost (CD) — hore Fited or floching infeed rede. (Some of teem eves con be solel i» open id pri te mohnly bs cose lepostoo need’ fsl) wittclow) perk / impoedd fon poet fe motunl abel. ty case depositor wents [Ce vith drow fords These snctusle bonlt borrvslag i> tee Federal finds te Fed state bool. <4 us), tasviag obligetions eoltete b ony -Ceom in He form Fsiving Secuntts ) poy no interest ond 5 eitey a) Non-deposit Borowing Th most, discoont uvfaclow ta mone mnosve oY rateem fined morket jin bond morlled (20)_ Kesewe Resprivemets oncl Borrowing in Re Federe) a — st. By tow, all Bonk connct invest $A for erry] 22 i oblais in depo berks must merten 0 fixed percorere 4 they depot beosiny accouat ot Fed (ore. of 12 Fed bts). This speed vad fa calleel Kesone Kahlo, onl Ho alloy omouts ove cabled Keptureel Kesenst. th non fateastThs tose : ° we yaho ctiHers by Gye rl cleat. Fed defines tur 4 clepostts troascehins ond nen—trenssehins clepos! ts, Ine J Demerd deposits ond ofr Sou di J chee ke ble clepests vings onl ofime ole pos ts [x= Deles ming Retewe yeh is a ven comploy prs | Kewshh spect, kagpuite fesemes ofe [ee overage amout 4 exh Gp 4 ckpostts heleh at 1 elne of eoth buses cloy in He compat tion pera (ole) | deposit Computation pore) nattiplicd by fesewe vepulvemed + 4 eoch Gpe- | > Thee must be match be actral yeseme ond veqyuiived) vesemes. Three posstilihes avise hese; i) Aefrel veseves = Reapurredl Yesewes / 2) Aetud veserves > tequied Yesewe> — as Hey are plud Us Mon inten cayning accent, Here is opportenTy cosh associ unt /t- 3) fetal feseren < yesyubed feseres —> Penalties are nposedl en bonks Bones Comparer shat +f Heir_teyuied Yeseres con boraw Nesowes From banks ttt fave exeon yesene. This market where benles Can bertew oy lend feseniey is calle! federed fencls monet , ond tea sates ate‘ _calleal_fecksed fund vate: 2b Bortowlns ot Fed Discount wsladow + Fecl— fe bonk +f last tesort. Beats Lemprtenly shoit of fils con borne fon Fed ab ity discomt wnides, Bot colleterod ts repaid (E bith, Commercis) oncl Inetusttel loon Cor) with 90 dep or less fe motunG). The interes arte 14 Fed chorges te borrow funds ot cliscomt urindous is called He ciscant vite his yale is osoally get belw He_molet releCsntinual borrow viewed ass vn biy forbs ood lao amon nS) abs the ; nk! finer) woolen d nt ale elt Be Shorten obbiatin soe . en / ower - ov mone mug insbromente repo or repuichose agreemet derinedl 3b In ermedinte oy dng Gun borroutty + Bones ea fly vite puter- nechooed money clomestic ond tater calleel mene contr on Bons tet vedse most 4 tric pres fon marleets, Haw rely boyy on Laps fv for funds, — offer worle! femous Beale pat on pod fe bonles ; Dons, e-g. CHK bonlt, Jf margor onol ter bhend , feeptenel bons reley (Hot 1360) » Papen of het a= Repeletion pe inpoed * chy an He maximo ree pe cool be pod Pf henls om dopo | ») Geogrephaa) Kerbictions + Each sete hy te ott wath own tater ctete broneh bent fe Commercied benl - Glass - stesg el) Act (1943) sstmed bob adler vile achwit X fe — This act boveed commercial bony Copied Regpiemeat’s fer Commercial Bonks- | oy Copllel stmetoee of boris Jebt+ eqpel ‘ —clebt+ eqful — confer Lai fon reg oe em bornwesl 2 So, Hey are. Alt leseseged eee Bh ho of au Capitel Ie todel aves rs very bw- Gp low thon wsdl iden relly lon i cure boolts. Howeres, Ht grites vive yor corfun 100 oq atfrom low loved 44 Cogito Even Cryo ty copied i by adlesyvole becaure covteun poeaticd Uelrbitien clest oppor on pelt. shed os 1) iateng rate ae 4 lotten 4 credit ond bl gatas on customer (soonps, cops floss). 40 a bork hosed sale in 1983, Epil adeyuney These po ase tefenrd Prior te 1969-902 Gpihd repeiemes pe 4 avels anes, reperclley te Gg held bya bank- th credit sk of avets - f as Credit risk-based © Hed veyuremned>. Basple Committee (1488) ; = consistency in He evelvetion +f capi oceyurry 5 Con siclera ton fegordony nse prfil of abente Consider tuo bonlts s+ hove # l/omon aseti, bud vate Hered vis exposure (Aetfoutt nse) Cag Bon on B 6 expose te de Assets Typed $402,000 & ocr | [nse is yerles for T bith § Son on Tl) $10,009) bent B become Commere) 4 (02, 0¥0 lonners $ Son oe Ve Conmeroul leen = __——~ lon bene A, os “pad ds BE am Ore mejor short coming 4 Cre boxed iste wilebres wos sive of | 1 | Lay fstoe_ov manta pn ses P el ie | exposed. | Kis based! Copitel Gruidebines Capited b doficed as ennsisly of | Tier 4: ond Tew 2 Copidel .———— LULU ; Ae eh level 44 opth Even Cryelly capi bs» adeyrote \ because corlain poteatisl Uebrbsdies cleat appear o” baba. sheet-c. betten 4 cyedit and enbligadin> on cuslomged jnteas rete afro (soomps, cops, flones)- seo Seley on its Por te 19.9- 90% Copied repeiemests 4" ° bontt ee at 7 oh. ln 1985, Ol! © ausets, regricllen te Sper 4 avels 7 ord ; Dine are ¥ te ate hell by a Bante fhese th_eredit sk of 4 on ‘ e vemeds fe as credit risk based Copied yep Basgle Commillee (1188) ; A - consiben hy te evelvotion 4 expited adlequrey > Consiolerai00 roping pt papi. 4 abonl consider taro Lois Ht hove #7090” aueti, but sith dhiflead vst expousre (cleft #0) A ha ‘ Ban B 9 exposure te lssets ype. $ 400/000 3 aayom | ple fe role T bibh § Sov, oP FU $109, 0v0 bone B become w Conard 910 bomeerd $ S00 " fracas foal auch UBRET ea903 LO it uidetten was [stve 4 One major sheit coming af Creadt hosed 15 which a bok say be Leyuidile factor on mnesieet prion senatie Ks bnsed Capita) Gruileines_ Capital 1s daticd! as evoke of Ther 4: ond Mev 2 Copidet . _ _ ieeeTies 4 Coptlel: Fut gl. tefenred lo a, One capil 4 bostootly aonuish S 7 is ; , , ; fea cen haldlers eyo, certain Capes f prefereel Sbdy and iter Ly irfemsh 19 cansublelsted subsidinvies ; cplteds it sactudler loon -lows Tier 9 capital dalled Suppleme tory fesewe, cer teun Gpes q prefeneel stock, expels olebk, hy brdl Copied Inutwomeads and sudorctnatal oleh. Tese peidbies exteblsh a creclit sk _welght for atl assets. weigh cleperds pon Credit visk associate! wilh each avet There ose four credit sk classification fos bon ke: ol, doh, $o/, ond loo! Exonple: Haw to caleulete credit vist Ru weft Exompl qe A ; ved 7 yaebeloe ose cop! i or US Trea.wry bl) Shp» Gook yahoo fe awet melipled by 1 colt 8 wah aa runic) bones fo deteame He omout 4 core ond . ' Sol. Municip yevewe bonds Sayplem entory capitl Heke bork meee esidashed mort fey ° a vl loot. commercial loons di Asset Boot yoke Us Fieasoy {00 A Mosict cbligoho (00 207 Poe Lesidstied mertpege Sov Sot. 280 Commercial boens B00 joo, oD Biel boot. volt $ (000 - Lit work ted Ardy — - oFo Pate a &e minimom Core (Ther 1) Copitet vepuivement is 9h qd te ; ae 4 vets; te minimum fe feb cop ited (Cote Sopp + Bh q rit weighted assets. From previous example, bank. hay val wery hed aueb are 35°72, The minimon Coxe copitel is 3 40 (389 r04): Ke minim tofep Copied veguitem ent I> $486 (08 #5 Fo). 7 re implirhoy He new copited 1 Commeredel [ons 1» open morlteb Thus boake Orprtel for Bute! beau. This felled inf Secud Aye ton of loons oy Fatenst vote, vat onal rnojor Conan, is incmportel wf copied reyphoe uicoline is — 2 sell He dant need G mando Contval Bent ond the Creation of Money Supply of mom ts crested tRrovgh a comploa ihfecachin bf Serer] eememit argent: wwhd perform differed forchons of gl feresk dames. There ant tacheles Centro (a ee) Bonk, | Howee held gl v sot Savers Y' bomw _ | Bape Fon us peopective ove ite Fedond Resome(Fed) tne crestecl th (913. Mosh loge commend) bonks eee enol by Seun-menber Board of Groves onel one fpeae’ eleaceone Paget oFFuso inportent 1 . cle a a a few deecdor cies Sed reel 3) Gave of omadued fo Tere aetiatios (ome 4 Ken) while He 2) Auset Secunbigacton i eee ea eed 3) Hei nsome Hews the Conte bon intlames Supply mm oy Tabs wed by fed inflame mane, Sop in Ha economy cel gee ‘i a love) of tnferest_rete- There tools ave: one vemoat open meted epershone, ayer rue Sauce + yale. jose mal cisteiot v0 > Frosh Here instameds fet ites 0” in He prcen 4 | Geet mares BR Commocelad books chon) Resene boaleny sylem— mesns benkts must Kesewe Legpuemehss fr | hold of “eseme Some portion fonds Heed He Severs deposit sn Hea form te fequivee! fesewe yatio- apprved y fed. This soho of fesems tb deposit > A basic watio af (At fer cheeba ble/tronsechon actauts (depnmd epost) : ab shorter acco time deposits — fesewe vaho 15 37. > fo rron-tronsechionl ped citer Oak of brolt or deposit in kd fis sesene sto con be mosrt Open Market Opere hon s Buying ond sedliay 4 pe secusities ih opes markets. These pecurrbier nq jnchds T-bill, bonds. T bill vs lenge nd mere Uapuiel mkt Hen boul only Federal open Moris? committee (Fome) unit of fecl % cherged # bs + cherge or “af easel Tr etki at Has chen qr of many Sop. ey o — alli, ecommic achvition md ke ed a. verichlo, [eo set He clirection 4 lvection 4 mune by ply. Paget o8sells pr Seounthler- > Decrepr money supply h 1. eeonomes- Hos hikes He thteast yx > Syvegie, Wepud > sla elasn ord > reverses mores sp d ecorom > lowers interes rite : | > Ineteese Ldyeiclé | > Hel Hes Hi hsb Ina tepmnchne aprerests Fed bays 9 posiaer + amount a Jeoyritin fom A Seller tat ew bw repurchvse Ha seme number ' Ddeoviities for igh pre ot Pome fodnre dik, usally a fom weahs- In perene ego , He feel Sells Seeraics ond maker a Commtocr? Ce bey tom back of a Aijher pice dace Discont Kote» Alreod) diseaued in preview» prjes Deseo! 7 —————— Dilforeat Rind of Mon py Severd differed Gyper ond cteral different meonints gf wrord meng: ? Fink qo mae ps some thy whieh sewer as numevaure— unit of acco. |e unt tot is vsed Te messuce wealth. | ' " yout | mn ty Bob ts jen accepted pay | Rad fanchon 4 mare, — So! ety , ee ach rm || for ponds ond services, orol capital tronsachons r ucces rom preseat Ce fetore- 3rol faaehion is Store valve Fo comy ve40 > | | || | _ Paget oFBacker Sys tem Barter oem @® Sumer (Lraqy) 2S00-30P0 Bc, menea bey useel fe See pry’ useal brsley, wool and silver: Barter trade requires 4 Double Coeielrnn % wonts — this yesuth t. Sf Haye ix Ao money th $e system, exch ttem vy would be pres hh tems otter Selable stems at 3 poods (4.7, 2) sy He market, Hon For exomple, 4 Here ore j . tet each got worlol be pp Ke ber be rapptem fe quer n ments. They bipher tromsaction bos OY Commer follow: XY, KF YoF a) 2 we ne) item x widl be pa! both » Gem a Yond Z Sopp we add 10 nore. item A fe mnacket TRon ix requir Bae $0, 4 gow" onl & pre wwe wo wo Pho reader! now: goat XoB, yo z Gy as He Hees In mon Wet jnevearer (Unesily), TA pris incon exponent a fie jy Hee formele: a vt aq pe - G@(G-!) Ge ged pier feqyue a , er ate 4 4 peo! Evolution 4 payne ayer + Barter : Commodity mame - ferns used a money (stevie gatue) — sioer fell fhm ly | sell | Gon, C40 BC cya (ir keg) vee of sete ee > Greece (330 Bc) Aletander Great — Cog ber his nage, tne Money —» CChina) 100 AD —> dt resol pry prew 4 : af eens prin Gy ther reaetd) th nplohion > Max \ arco pole brow it tee cdes a epee mane fe Longe 0 ‘00 |» Bank Garvened +s Groldamiths cerelayeel inte books (1630 AD) Drtevest Feme England > Tey Initiated loons G basheser ond sfertedl earnitg > ese goidamits Kare had 1 svecl more pee! receiphs tea geld hh Hee vault{ ome ey Honiles to (rechonel feserne) Mlay, aroun 10D AD, MON) chonger> an making (won! ond on 4 beach, ens 0» benwm) 1860 - 1B62 Lon clemond Celvil) wer th usa) fronlole da USA oF teat Gms. cumendies were Or 3 In da lthy deposits (set cheery fAccowt— payas -5 Demend epost | > Moreton 10, C00 > Tle Nabi) Bank Note. (1860- 1435) tsved by Fedeod gost ts replace parte canvas (by inposies tex) ee Efet Money» fed ML Money fi Gort deoree. ths elbimineted fh neeel te Gdd x Hlvet > Seigniotege — prt earned by govt by creal=y currency nastes > Morey. A Sock) Convestion Page +t Ity Money bro Ponelony Aypegetes 9: fe measure He omavt 4 . moey avodlebh te Ke exesory of a hine. : The rust basi. monetony apaeye mone ty bese. ( guneeey jn eveidchon Of r ons ) pis bdel Yeseqve th bonlt-y spew ot boy . toed yexeme Ma: Yelena Ge comeny a tsn # Cheel] oetnd A He eneneny + haat He reps Art p+ Seviy aceonh of books ort Ref inyhitshan + ovat ref Mg: Mot Certe Haale assehs (ony lar veberly af Mme Kato a money soppy i cena ‘income GDP) «Gabba. se omut o fron sochons carried by « allay. | veloe'ty mearvier anere | dappst, dom mored popes. Trecavny secutie)Money pe Monetory Ai fe gates _>: Te measure He omort of money avodleb fe ‘d oH carey of oy hine. the rrost basi 8% mone Tavy a3 ; . one tiny aregale 5 mone ly base (cuneny cvevlehion oF oo ms) pls trbel vesewe i boalt’y sph M4: yelen fen & coment « crs + cheely octont ih te cea xR tna Mrs Me Soong actonts ak books on Ref jnshidshion sorernght reps Mg: M4 Certesa Kinmnold asceks (ery lar Veloce? mae velo ef Mays Kato of murey supply be eeenong SncomeG BPP) tn Clesule tions caied by a dally. veloa'ty mensuier auerege omunt a4 tronsee! capes commerce) paper, Tee2a0r seeutre) din Fre Mone ntiphers & ansion of tee Money SuPPY « ‘the Bolege Yo bon king system's feserves ancl Asyrege ints. (fheogh Hs te otter monetory aggeget): onol boronset prs could be qororetged os f 1a Fed, berks, Saver Ths is compen Intevadion of fovr poshies: sg fom Fel Feau ee FP Kescive * malhplies = £3 Be BF §3 His for 1963- Milton Fredmon o Anne schoerte bot fhe mone Ter) toby 4 us fom 1960- 1960- Fhe total mane wh Essno my ts gente’ ten omout vneeted by Fed. few Assumphions: 5 Fed injects $ low th Eesnemry Cb» ?) <> Bonks hold 107. checleing deposits 3 fe see > Saves ondl buvines>, puns divide tReir monetary auels as lashte) = 20k onl De post) = ol (PereBent loan: excess yesewe for interest . Tien sachon The Feel injects Flow nto economy (by porehesing asset, Sey Tbills fron book). TRis tiansechion sncrerses Hee meneny Supply my by $12 | Upte ths point miles 1s 4] Transachon —— an ‘ . fhe feceyreat 4 $10 duiles his money (aceordey assunplon) Into er. cash ond Boll checluy accout Cp). So, he Reeps goovas Cashic) and $ Gov as demand dpi): However, He deposit $8c0 does not choge Mg. There ts yet © Boo lew cash In civculehon ancl $800 move deposits (0) $0 (i= C¥+ Dt) Tian sachon 3+ ES ; The benk holds lor oy clepost (164 | $800) as vesewe and loads te vemanf amopnt. So Yesewe #8 (tor x tm) "Bo , and fle exes fave fos boon a fesewe \< (sei0Fa 2-5 Fo) 15 1 He loon (walted out Cosh dupoit § Bre The customer who borawed £720 5 is TS iteel t of Hee bone usith (ash $720 Th je Couted os par i = Boewwe 1m 46 Frank sP0 anoney 7p _ ow Ke money Suppl ts $ 000+ ¥720 = 5i#20 ‘ansodhon ds now tee berrower in ‘tansettas 3 spend HL Be fo porchare stems. This transection did not clonge te money Avpply - Cook Sinply Chonyed fone nsaction Ss . , ok tron soehon 4 naw Reeps go of SP To $ —=—— The seller Gordsx Sewer in ancl depooits Boi, ef 4 Po inle beak a» cheek’ accont.-So he Keeps (Bi » 8F20)= 5144 ond depose GO" $720 (Gi. w $720} 85H): note. This tiensachon diel not chinge nner y supply. ‘nsacon_6e Bank holds lon ope OBR (ot £5462 $54.6) ond Ipc ont 40s exces) Yerewe Gor ¥ 546° S18: 4). nwo fhe transac increased money supply bas $18.4: Now tole) money Sopply Is (Siow +$ Poe $518. go <8 2838: 4) Fiansoctin Tansoction Zi ———— he bore tronsectan Specds ES1BYo to parchoe gos and AeMese Ths deco nt chaye money sopply Fionsach Bs Seller deposits Gor 4 5.516 yo as( ig: #2) ond keeps oet. 5518-40 (gor. #*$1Btr = F708 62) t Bonk recency $416 7 Reep lor it (lox ane pes 447) sand lord cot 07, of $414-P (qoi. # 3414-42) = $3937 Now te money Sept Is ($to00-+ $920 +8 S18: 40 + $373.28 = v4 65) _- and this pres Pr till rok pean Sey bs Lead out WR WE sPo.p, ewe. D, SEI Pe § 1oyd $20 S18 Yoloo Bol # Jol = $72 ) = Vv ‘, “Ly Bent lean 78 of Sells items and tecewe $16 Gan! Ce seyne orp) $00 Cash Ia Cash 20/7, hock ‘t a / ms ('gor.) (For) wp pao M* = curren} fo J fam. ep | ao ape lone na be Goh | ¢ Bt cheb yo” Fem : Fed Resewe capes? | pho bp x determied by fel a banks mmetor bose 7 _ decky C= Bem currency muh per | D- 6 Ba ‘clipe! : 1 -er| & - er) ev4| xi D5 | Keep mo excess fesere Then Guppose 1 banks lend as much a tey Con onel He btel demondl deposit voted in He system equals tel . Bry sojeckecl ait ra (00 = [0/070 feseme 0 jatio