CPI: https://www.investopedia.com/terms/c/consumerpriceindex.asp
What is the ‘Consumer Price Index – CPI’
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living; the CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.
CPI = (Cost of Market Basket in Given Year / Cost of Market Basket in Base Year) X 100
NIM: https://www.investopedia.com/terms/n/netinterestmargin.asp
Net interest margin is a ratio that measures how successful a firm is at investing its funds in comparison to its expenses on the same investments. A negative value denotes that the firm has not made an optimal investment decision because interest expenses exceed the amount of returns generated by investments.
Net interest margin is calculated as:
Interest Expenses =
Net Interest Margin and Retail Banking
Net interest margin is well explained by illustrating how a retail bank earns interest from customers’ deposits. Most banks offer interest on customer deposits, generally in the range of 1% annually. The retail bank, at that point, turns around and lends an aggregate of multiple clients’ deposits as a loan to small business clients at an annual interest rate of 5%. The margin between these two amounts is considered the net interest spread. In this case it works out to an even 4% spread between the cost of borrowing the funds from bank customers and the value of interest earned by loaning it out to other clients.
Net interest margin adds another dimension to the net interest spread by basing the ratio over its entire asset base. If the bank has $1 million in deposits with a 1% annual interest to depositors, and it loans out $900,000 at an interest of 5% with earning assets of $1.2 million, the net interest margin is 2.92% [(interest revenue — interest expenses) / average earning assets].
Earning Assets usually include any assets that are directly generating income, such as interest-generating investments or income-generating rentals, but in some cases, they include other forms of assets that directly contribute to income, such as machinery, computers, or anything that is directly involved in producing goods and services that will be sold to customers. Example:
Provisions for Financial Institutions
Because of international standards, banks and other lending institutions are required to carry enough capital to offset risks. The standard may be met by indicating on the balance sheet either an allowance for bad debts or a general provision. The reserve funds provide backup capital for risky loans that may default.
Bad Debt increase -> Increase Provision -> Low Net Income
From <https://www.investopedia.com/terms/g/generalprovisions.asp>
Credit Growth Ratio:
CGR = (Total_Loan_Bal_2018 – Total_Loan_Bal_2017) / Total_Loan_Bal_2017
SBV regulation: CGR of 2018 is 15%
Capital Adequacy Ratio (CAR) a.k.a Tỉ lệ an toàn vốn tối thiểu
CAR = (Tier 1 capital + Tier 2 Capital) / Risk Weighted Assets
Liquidity Coverage Ratio (LCR)
For short term resilience of a bank’s liquidity risk profile
Net Stable Funding Ratio (NSFR)
Resilience over a longer term than LCR
Leverage Ratio
To prevent the excessive buildup of exposures during expansion period.
Delinquent vs. Default
In a financial sense, delinquency occurs as soon as a borrower misses a payment. This differs from a loan default, which occurs when a borrower fails to repay the loan as specified in the original contract. Most creditors allow a loan to remain delinquent for a period of time before considering it as default; the duration depends on the creditor and loan type.
DPD – day past due
Nonperforming Loan – NPL
A nonperforming loan is in default or close to default. Once a loan is nonperforming, the odds the debtor will repay it in full are substantially lower. If the debtor makes payments again on an NPL, it becomes a reperforming loan, even if the debtor has not caught up on all the missed payments. In banking, commercial loans are considered nonperforming if the debtor has mad zero payments, interest or principal within 90 days, or is 90 days past due. In consumer loans, 180 days past due are considered NPLs.
Correlation and trend between Loan and Deposit, when to increase/decrese Depo and Loan and how it impact to ratio when need Depo and when not, if asset & mature loan is enough to lend out within credit grow ratio of SBV
Charge-Off
The term “charge-off” is financial jargon describing when a credit card account becomes 180 days past due.
At the charge-off point, a credit card company is required to reclassify the account for accounting purposes from a “performing” asset to a “non-performing” asset for the bank.
They also list your account as “charged off” on your credit report.
What’s important to understand is after a credit card account gets reclassified as a charged off account, the credit card company still reserves the right to pursue collection of the outstanding balance.
Many people make the mistake of believing their credit card debt is forgiven when their account is charged off. Unfortunately it’s not quite that easy. You’re still responsible for the outstanding balance.
After an account is charged off, credit card companies handle things differently from one to the other:
- Some credit card companies continue with their own in-house collection efforts on that charged off account.
- Some outsource the charged off account to a collection agency, but the credit card company still retains ownership of the account.
- Some credit card companies cut their losses and sell the charged off account to a debt purchaser.
Write-Off
A “write-off” on the other hand is when a creditor forgives a portion of the balance that is legitimately owed.
For example, if you have a credit card balance of $20,000 and the creditor agrees to accept $8,000 to settle the account in full, that means they write off the remaining $12,000 balance and call it even.
Capital Ratio aka Capital Adequacy Ratio (CAR)
CAR = (Tier 1 capital + Tier 2 capital) / Risk-Weighted-Assets
* Tỉ lệ an toàn vốn tối thiểu
Tier 1 Capital, Tier 2 Capital, Tier 3 Capital
Tier 1 capital is a bank’s core capital, which consists of shareholders’ equity and retained earnings; while Tier 2 capital includes revaluation reserves, hybrid capital instruments, and subordinated term debt. In addition Tier 2 capital incorporates general loan-loss reserves and undisclosed reserves. Tier 1 capital is intended to measure a bank’s financial health; a bank uses Tier 1 capital to absorb losses without ceasing business operations. Tier 2 capital is supplementary (e.g., less reliable than tier 1 capital.)
A bank’s total capital is calculated as a sum of its tier 1 and tier 2 capital. Regulators use the capital ratio to determine and rank a bank’s capital adequacy.
Tier 3 capital consists of Tier 2 capital plus short-term subordinated loans.
Liquidity Coverage Ratio (LCR)
Net Stable Funding Ratio (NSFR)
Leverage Ratio
Example: Bank equity: 3.35
CAR: 10% (according to Basel 3) -> Max of risk-weighted-asset = 3.35/10% = 33.5
Leverage Ratio: 3% -> Max size of balance sheet = 3.35/3% = 111.7
*** DSR/MUE/DTI Sample
Customer Info:
(1) Income: 8,711,000
(2) PL at Other banks (CIC info):
(2.1) Outstanding: 7,000,000
(2.2) EMI: 291,474 (Equated Monthly Installment)
(3) Card at SC (to be approved)
(3.1) Limit for CC: 34,000,000 [Policy: Income*4=(1)*4]
(3.2) EMI suggested for CC=(3.1)/100: 340,000
(4) Total EMI after approved: (2.2)+(3.1)=631,474
(5) Total outstanding after approved: (2.1)+(3.1)=41,000,000
(6) Assumed Util%=20% -> Monthly outstanding for CC: (3.1)*20%=6,800,000
DSR = (4)/(1) = 7.2% (Debt Service Ratio)
MUE (on us) = (3.1)/(1) = 3.9 (Maximum Unsecured Exposure)
DTI = [(2.1)+(6)]/(1) = 1.58 (Debt To Income)
* Note for secured: no DTI because OS is too high vs income + banks hold collateral.
Credit Card Features:
