RSM230H1 Lecture Notes - Lecture 6: Basel Iii, Landing Vehicle Tracked, Canadian Tire

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31 Dec 2016
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Bank requires charter because it is unique for its. Some of depositors" cash is invested in liquid safe securities like t-bills. Reserves (cash held in the bank"s account at the central bank to enable to meet unexpected withdrawals with liquid assets) Us requirement: 10% of demand and notice deposits. Holding cash --> expensive as minimal interest is earned. Deposits at boc earn deposit rate (tor - 0. 25%) > at us fed. Short-term liquid securities = 100% of past 30 days cash outflows. Demand - no right to notice of withdrawal (chequing & savings accounts) Guaranteed investment certificates (gics) / certificates of deposits (cds) Deposits federally guaranteed upto cdn ,000 by cdic. Repos (repurchase agreement): borrow cash using financial security as collateral; repay cash at specified date to receive collateral back. *8% of risk-weighted assets* as required by bank for international settlements (bis) for chartered banks. Equity is limited & expensive (banks cannot easily issue new shares)

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