{"id":1101,"date":"2021-12-16T08:47:22","date_gmt":"2021-12-16T08:47:22","guid":{"rendered":"https:\/\/mintea.blog\/?p=1101"},"modified":"2021-12-16T09:02:15","modified_gmt":"2021-12-16T09:02:15","slug":"1101","status":"publish","type":"post","link":"https:\/\/mintea.blog\/?p=1101","title":{"rendered":"Banking General Notes"},"content":{"rendered":"

CPI<\/strong>: https:\/\/www.investopedia.com\/terms\/c\/consumerpriceindex.asp<\/a><\/p>\n

What is the ‘Consumer Price Index – CPI’<\/p>\n

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.<\/p>\n

CPI = (Cost of Market Basket in Given Year \/ Cost of Market Basket in Base Year) X 100<\/p>\n

NIM<\/strong>: https:\/\/www.investopedia.com\/terms\/n\/netinterestmargin.asp<\/a><\/p>\n

Net interest\u00a0margin<\/a>\u00a0is 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\u00a0not made an optimal investment decision\u00a0because interest\u00a0expenses<\/a>\u00a0exceed\u00a0the amount of returns generated by investments.<\/p>\n

Net interest margin is calculated as:<\/p>\n

<\/p>\n

Interest Expenses =<\/p>\n

Net Interest Margin and Retail Banking<\/p>\n

Net interest margin is well explained\u00a0by illustrating how a retail bank earns interest from customers’\u00a0deposits. 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\u2019 deposits as a loan to small business clients at an annual interest rate of 5%. The margin between these two amounts is considered the\u00a0net interest spread<\/strong><\/a>. 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.<\/p>\n

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 \u2014 interest expenses) \/ average earning assets].<\/p>\n

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:<\/p>\n

\"Chart<\/p>\n

Provisions for Financial Institutions<\/strong><\/p>\n

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.<\/p>\n

Bad Debt increase -> Increase Provision -> Low Net Income<\/p>\n

From <<\/em>https:\/\/www.investopedia.com\/terms\/g\/generalprovisions.asp<\/em><\/a>> <\/em><\/p>\n

Credit Growth Ratio:<\/p>\n

CGR = (Total_Loan_Bal_2018 – Total_Loan_Bal_2017) \/ Total_Loan_Bal_2017<\/p>\n

SBV regulation: CGR of 2018 is 15%<\/p>\n

Capital Adequacy Ratio (CAR) a.k.a T\u1ec9 l\u1ec7 an to\u00e0n v\u1ed1n t\u1ed1i thi\u1ec3u<\/p>\n

CAR = (Tier 1 capital + Tier 2 Capital) \/ Risk Weighted Assets<\/p>\n

Liquidity Coverage Ratio (LCR)<\/p>\n

For short term resilience of a bank’s liquidity risk profile<\/p>\n

Net Stable Funding Ratio (NSFR)<\/p>\n

Resilience over a longer term than LCR<\/p>\n

Leverage Ratio<\/p>\n

To prevent the excessive buildup of exposures during expansion period.<\/p>\n

Delinquent vs. Default<\/strong><\/p>\n

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.<\/p>\n

DPD – day past due<\/strong><\/p>\n

Nonperforming Loan – NPL<\/strong><\/p>\n

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.<\/p>\n

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<\/p>\n

Charge-Off<\/strong><\/p>\n

The term \u201ccharge-off\u201d is financial jargon describing when a credit card account becomes 180 days past due.<\/p>\n

At the charge-off point, a credit card company is required to\u00a0reclassify<\/strong>\u00a0the account for accounting purposes from a \u201cperforming\u201d asset to a \u201cnon-performing\u201d asset for the bank.<\/p>\n

They also list your account as \u201ccharged off\u201d on your credit report.<\/p>\n

What\u2019s important to understand is after a credit card account gets reclassified as a charged off account, the credit card company\u00a0still reserves the right to pursue collection of the outstanding balance<\/strong>.<\/p>\n

Many people make the mistake of believing their credit card debt is forgiven when their account is charged off. Unfortunately it\u2019s not quite that easy. You\u2019re still responsible for the outstanding balance.<\/p>\n

After an account is charged off, credit card companies handle things differently from one to the other:<\/p>\n