Banks obtain funds by borrowing and by issuing other liabilities such as deposits, and banking is conducted to earn the highest profits possible.

Simple strategies for managing bank capital

Michael K. 2018-05-12 17:09:18 Bank capital, capital management, bank assets, bank stocks

Because of the high costs of holding capital for the reasons just described, bank managers often want to hold less bank capital relative to assets than is required by the regulatory authorities.

What problems does asymmetric information cause and how to mitigate them?

Sherry W. 2018-05-10 20:27:11 Asymmetric information, economic transaction, adverse selection, borrowers, banking, financial system

Asymmetric information occurs when one party knows more about an economic transaction or asset than the other party does, and adverse selection occurs before a transaction takes place. If unmitigated, lenders and insurers will attract the worst risks.

Are bankers and other financiers innately good?

Sarah K. 2018-05-10 18:25:08 Bankers, financiers, banking, borrowings, financial systems

Bankers and financiers are not innately good or bad but rather, like other people, can be either, or can even be both simultaneously.

Fundamentals of the bank balance sheet

Jacob K. 2018-05-10 17:15:48 Balance sheet, liabilities, loans, transaction deposits, banking, borrowings, assets

A bank acquires funds by issuing (selling) liabilities, which are consequently also referred to as sources of funds. The funds obtained from issuing liabilities are used to purchase income-earning assets.