This ratio is calculated by dividing a bank's high-quality liquid assets, or HQLA, into its total net cash over a 30-day period. This ratio must be 100% or higher for banks to be compliant with the regulation. Diving into the details of the LCR, HQLA, and a bank's net cash A ...
Simple interest refers to the interest earned only on the initial deposit in a savings account. So, if your initial deposit was $500, the simple interest would be calculated based on that amount. Compound interest refers to the interest earned on both the initial deposit in a savings account...
Since interest is calculated on a daily basis, you'll need to convert the APR to a daily rate. Do that by dividing by 365. Some banks divide by 360; for our purposes, the difference isn't worth worrying about, as it changes the outcome by only a hair. The result is called the per...
This paper studies cross-sectional differences in banks interest rates. It adds to the literature in two ways. First, it analyzes systematically the micro and macroeconomic factors that influence the price-setting behaviour of banks. Second, by using banks’ prices (rather than quantities) it provi...
Simply stabilizing the net-interest margin will not sufficiently drive significant and sustainable income growth. Banks need to take a strategic approach to manage real growth. Treasurers can facilitate that strategy by taking calculated steps in the following areas: Expand off-bala...
Duration can be calculated for both individual bonds and a whole portfolio of them. If a manager is worried about rising interest rates, he or she might decide that a portfolio’s overall duration needs to be shorter. Consequently, the manager might sell some of the longer-dated and low-cou...
Interest rates are calculated in two ways. Simple interest is tallied as a percentage of the principal over time, but compound interest (also called compounding interest) includes accrued interest along with the principal. Most loans and savings deposits use compound interest. Compounding: Interest o...
Banks look to maximize their NIM by determining the steepness in yield curves. Theyield curvegraphically depicts the difference between short-term and long-term interest rates. Generally, a bank looks to pay short-term rates to depositors, and lend at the longer-term rates. If a bank can do...
Interest-rate risk is the number of losses that a financial institution can face when the interest rates have changed. Moreover, these risks have a high chance of negatively affecting normal business operations and the economy because banks control the supply of money within a business environment...
In addition to the federal funds rate, the Federal Reserve sets thediscount rate. That is the interest rate the Fed itself charges to banks that borrow from it directly. This rate tends to be higher than the target federal funds rate.2 ...