What is the role of banking institutions in international trade besides financing? What other institutions are available to facilitate trade? Explain some of the programs each of these institutions offer in order to facilitate trade. What are some of the arguments for and against each of these organizations?

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Reid WolffLv2

28 Sep 2019

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Position A: Financial Institutions' role as specialists in risk measurement and management is reduced.

Position B: Financial Institutions' role as specialists in risk measurement and management is increased.

Required:

Read the âbackgroundâ below. After reading, select the position you agree with and write a position paragraph supporting either Position A or Position B.

Background: A major event that changed and reshaped the financial services industry was the financial crisis of the late 2000s. As Financial Institutions adjusted to regulatory changes brought about in the 1980s and 1990s, one result was a dramatic increase in systemic risk of the financial system, caused in large part by a shift in the banking model from that of âoriginate and holdâ to âoriginate to distribute.â In the traditional model, banks take short-term deposits and other sources of funds and use them to fund longer term loans to businesses and consumers. Banks typically hold these loans to maturity, and thus have an incentive to screen and monitor borrower activities even after a loan is made. However, the traditional banking model exposes the institution to potential liquidity, interest rate, and credit risk. In attempts to avoid these risk exposures and generate improved return-risk trade-offs, banks shifted to an underwriting model in which they originated or warehoused loans, and then quickly sold them. Indeed, most large banks organized as financial services holding companies to facilitate these new activities. More recently activities of shadow banks, nonfinancial service firms that perform banking services, have facilitated the change from the originate-and-hold model of commercial banking to the originate-and-distribute banking model. In the shadow banking system, savers place their funds with money market mutuals and similar funds, which invest these funds in the liabilities of other shadow banks. Like the traditional banking system, the shadow banking system intermediates the flow of funds between net savers and borrowers. However, instead of the bank serving as the middleman, it is the non-bank financial service firm, or shadow bank, that intermediates. Further, unlike the traditional banking system where the complete credit intermediation is performed by a single bank, in the shadow banking system, it is performed through a series of steps involving many non-bank financial service firms. These innovations remove risk from the balance sheet of financial institutions and shift risk off the balance sheet and to other parts of the financial system. Thus, the financial institutions, acting as underwriters, are not exposed to the credit, liquidity, and interest rate risks of traditional banking.

In your own words, explain what is meant by business and financial risk. Suppose Firm A has greater business risk than Firm B. Is it true that Firm A also has a higher cost of equity capital? Why or Why not? Explain.

1. Evaluate what banking services are most important to you with a score of "10" for the most important and "1" for the least. You must score a commercial bank, savings institution, credit union, and two other institutions from 1-10 on what is important. Then with the five institutions with respect to the services offered, rate the institutions from "5" as the best for that service to "1" as the worst. Two parts: Rate the services from 1=10 and rate the institutions from 1-5 with the services that are offered. The template will calculate scores for each institution. Banking Services Scorecard COMMERCIAL BANK SAVINGS INSTITUTION CREDIT UNION INSTITUTION 4 INSTITUTION 5 SERVICES OFFERED PRIORITY RANK SCORE RANK SCORE RANK SCORE RANK SCORE RANK SCORE 1. Hours of operations - evenings, Saturdays 2. Locations - proximity to work and home 3. Fees/Minimum balance for checking accounts 4. Fees for ATM usage 5. Interest rate on savings accounts 6. Interest rate on checking accounts 7. VISA/MasterCard available and annual fee 8. Interest rate on home loans 9. Interest rate on car loans 10. Safety deposit boxes and rental rates TOTAL SCORE FOR EACH INSTITUTION Decisions 1. Describe the services and characteristics that are of prime importance to you in a financial institution. 2. Which of the financial institutions you evaluated is most optimal for your needs? Why?

I wanted to use PNC Bank, Metropolitan Savings Bank, any credit union, Charles Swaab for an institution and any other kind for the fifth institution. Have to rate the 5 from 1=10 with the 10 services listed and Then with the five institutions with respect to the services offered, rate the institutions from "5" as the best for that service to "1" as the worst Please answer these questions Describe the services and characteristics that are of prime importance to you in a financial institution. 2. Which of the financial institutions you evaluated is most optimal for your needs? Why?

As a financial manager of a large firm, you plan to borrow $70 million over the next year. Several options are available to your firm, all of which must be carefully considered. In your role as the financial manager, create a short paper that lists the best alternatives for your firm to borrow the $70 million and describe the advantages and disadvantages of each option. Also, consider the following:

Assuming you decide to issue debt securities, describe the types of financial institutions that may purchase these securities.

How do individuals indirectly provide the financing for your firm when they maintain deposits at depository institutions, invest in mutual funds, purchase insurance policies, or invest in pensions?

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