Banking

Banking

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Managing interest rate risk is more crutial at savings associations than banks because savings ass. Have larger % gaps than banks
Origins of the thrift and banking problems in recent past are due to mismanagement of interest rate, credit risks, deposits insurance, legislative and political causes.
Before 89? savings institutions were primarily regulated by the Federal Home Loan Bank Board
A repurchase agreement is a Liability and a reverse repurchase agreement is an asset
Long maturity investments for a bank are Us T bonds, agency securities, Mortgage backed securities
Municipal bonds is paying .06 annual coupon, an equivalent risk bond is paying .07, investors in a tax bracket of (.07(1-x)=.06, 14.28%
AU- measures the banks ability to generate income from assets, control assets
Equity to assets ratio— 15% of equity to asset ration, can lend out. Ex. 15%*10%equity ratio
Financial services Modernization act led to interstate banking in the US
Deposit insurance reduces bank runs, helped cause the insolvency of the FSLIC, induced moral hazard at DIs
Term life insurance policy does not have a savings feature, Whole life, Variable life, and universal life do
Interest on annuities is not taxed until the investor receives the payments
The tax status of annuity withdraws is affected by the investors income level
Annuity

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