BEO2000 Lecture Notes - Lecture 11: Tier 2 Capital, Retained Earnings, Financial Institution
31 Jul 2021
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Learning outcomes: discuss the reasons that banks are regulated; Lecture 11: regulation of financial institutions: beo2000 financial institutions & monetary theory, primary sources, backiciol et al. Basel ii: apra, 2017, supervisory oversight and response system, apra, 2018, probability and impact rating system, with respect to learning outcomes, you should be able to, b. The two most common types of failure are: Illiquidity: asset/liability mismatch, regulation, broad regulatory responses: Emphasise adequate capitalisation: minimum capital standards in terms of risk-weighted assets. Illiquidity: regulators proactively monitor funding practices, regulators can arrange for emergency funding, reasons for regulation. Regulation subjects financial institutions to certain requirements, restrictions and guidelines. The power to allocate credit is a significant and valuable social and economic power. Financial institutions operate in an asymmetric information environment. (i. e. ,) difficult to expertly gauge a financial institution"s safety or soundness: regulatory issue: too big to fail. Financial regulators are reluctant to allow a big institution to fail.
