Banking Competition, Regulation, and Risk Management
Classified in Economy
Written on in 
English with a size of 2.66 KB
Competitors of Banks
- Savings and loan associations
- Savings banks
- Credit unions
- Money market funds
- Mutual funds
- Hedge funds
- Securities brokers and dealers
- Finance companies
- Casualty insurance companies
- Financial holding companies
Key Bank Regulators
- Comptroller of the Currency
- Federal Reserve System
- Federal Deposit Insurance Corporation
- Central Banking System
- European Central Bank (ECB)
Financial Services Offered
- Granting consumer loans
- Financial advising
- Managing cash
- Offering equipment leasing
- Making venture capital loans
- Selling insurance services
- Selling retirement plans
- Security brokerage services
- Security underwriting services
- Offering mutual funds and annuities
- Merchant banks and services
Objectives of Financial Regulation
- To protect the safety of the public’s savings.
- To control the supply of money and credit in order to achieve a nation's broad economic goals.
- To ensure equal opportunity and fairness in the public access to credit and other vital financial systems.
- To avoid concentrations of financial power in the hands of a few individuals and institutions.
- To provide the government with credit, tax revenues, and other services.
- To help sectors of the economy that have special credit needs.
- Involvement with transferring funds from savers to borrowers and in paying for goods and services.
- Acting as financial intermediaries.
- Acting as general finance service providers.
- Involvement in checking accounts and savings plans.
Understanding Interest Rate Risk (IRR)
When interest rates change in the marketplace, the interest income on loans and securities, as well as the interest caused on deposits and borrowing, change. It also changes the market value of assets and liabilities, affecting interest expended and received. Managers cannot control market interest rates; instead, they must learn how to react.
Interest Sensitive Gap Management
This is the most popular method where commercial banks deal only with interest rates. In this way, all assets and liabilities may be divided into those items that are interest rate sensitive.
Duration Gap Management
This management tool focuses on protecting the financial institution's net worth. In this way, banks and competitors learn how to avoid the duration or gap of financial institution asset portfolios compared to portfolio liabilities.