PHY202H1 Lecture Notes - Lecture 9: Fire Sale, Moral Hazard, Accounting
Document Summary
Chapter 10, late to class, previous class skipped. Requirements to adhere to standard accounting principles and to disclose wide range of information. The basel 2 accord and provincial securities commissions put a particular emphasis on disclosure requirements. Makes sense to use market prices to value the balance sheet during normal times. But in a crisis, there is little trading except at firesale prices, so m2m can exacerbate the crisis. Requires lenders to provide information to consumers on the costs of borrowing ( truth in lending ) Must provide information to consumers about the cost of borrowing, as a standardized apr. Requires provision of information on the method of assessing finance charges. Requires that billing complaints be handled quickly. Declining profitability from increase competition could tip the incentives of financial institutions toward assuming great risk in an effort to maintain profit levels.
