Financial markets have evolved over the years and now there is an array of products that is widely used by the market players, known as the Financial Derivatives which includes swaps, futures, forwards, option, etc. A derivative is nothing but a financial instrument that derives its value from an underlying asset or assets. Prior to the financial crisis in 2008, the use of derivatives came under scrutiny because several well known companies made huge derivative related losses – Procter & Gamble lost $150 million in 1994, Barings Bank lost $1.3 billion in 2005, Long Term Capital Management Company lost $3.5 billion in 1998, the Hedge Fund Amarnath lost $6 billion in 2006,Socieite General lost euro 5 billion in 2008. With the use of derivatives,
Since, swaps durations are shorter than many fixed- rated investments, usage of swaps improves liquidty of firms meaning campanies would raise cash easily when they need it using swaps because of the short- term structure of them. The other advantage of the swaps is that they are off-balance- sheet transactions meaning they aren’t appear any financial statements either asset or liability just swaps entered spesified as note et the end of the any financial statements which improves the profitability of the firms as well as capital ratios such as return on equity, return on assets which are the main ratios measure firms’ financial performance in income statements. Furthermore, swaps reduce the capital needed to meet requlatory
In banking business, profits are in part the reward for successful risk taking and effective management of such risk. Failure of practicing effective risk management system is one of the main causes of financial crisis in general and banking failure in particular. The success and survival of commercial banks is mainly dependent on the effectiveness of their risk management practices. Risk management is a continuous process that depends directly on changes in the internal and external environment of banks. These changes in the environment require continuous attention for identification of risk and risk control (Al-Tamimi and Al-Mazrooei,
Banks are highly geared financial risk-takers. They are encountering various risks every day. For example, i) borrowers fail to repay their loan; ii) depositors demand the withdrawals at a faster rate than the banks has reserved for; iii) market interest rate affect the value of loan; and iv) bank securities lose its values. When things go awry the results can be spectacular. Therefore, risk
Since, these relationships involve money (and may also affect continuity of business), that’s why customers maybe conservative to switch to new banks due to high foreclosure / pay offs to close the existing liabilities with other banks. Chapter 9.4. Bargaining Power of Suppliers (Medium) Banks are dependent on capital and post the crisis, the regulators have made strict regulations for banks to ensure they maintain a decent Capital Adequacy Ratio. With these new criteria in place, banks must maintain some cash reserves for any contingency purpose. Banks depend on the capital that in turn depends on: 1.
Along with bills, you can pay for your rent in case you are short for any reason or behind in it, you can use this to help you and it can help you build your credit. There are benefits to having a credit card but always must look out for the small things that can mess up your credit. Credit cards can be tricky if not used the right way. They have their perks to owning but is safe to own only one to begin. Try
There have a lots of advantage and disadvantage use credit card. First advantage of credit card is convenience. Credit card can assist to save your time, easy to bring and also avoid you from trouble. That means you cannot find out an Automated Teller Machine (ATM) or keeping a lots cash in hand because it more dangerous to keeping cash and crime can happened anytime. Secondly credit card also become as instant cash.
Some of the advantages and disadvantages as researched of the sources of capital. The first should be the bank loans. The advantages of getting a bank loan is the flexibility. With bank loans, the only thing to be worried about is the regular installment payments on time. The best part is that banks don’t monitor how you use the loan as long as you make your payments on time, which means that you can invest it however you want.
Therefore, commercial banks not only need to be profitable, but also efficient. The reduction in spreading between lending and deposit rates is the basic benefit of enhancing the efficiency. Through the banking system, it will stimulate both greater loan demand for investment and greater recruitment of financial savings (Izah, 2009). The measurement of banking efficiency helps banks to remain competitive, profitable and viable, in an otherwise highly regulated in the banking industry. Das, Nag and Ray (2005) indicate that measurement of banking efficiency serves two important purposes.