capital adequacy加拿大著名咨询公司在建设银行的讲座9.pptVIP

Capital Adequacy Capital Adequacy Session 9 Capital Adequacy Why must the bank manager be concerned about managing the capital account? Important (but most expensive) source of funding Adequate capital necessary to maintain confidence in the bank Regulatory constraints Moral: Too little capital will incur the wrath of the regulator; too much capital will incur the wrath of the shareholder The Cost of Capital Why is equity the most expensive form of funding? Common stock is the residual security - it is entitled to whatever is left after the more senior claimants have been satisfied. Because the returns to the common are not specified, they are the most volatile. In finance, volatility equates to risk! The higher the risk, the higher the expected return! Capital Adequacy:Measuring Shareholder Returns Capital is the most expensive form of funding available to the bank. How do we measure the required return to the shareholder Use the Gordon Growth Model of Stock Valuation If P = Div1 r - g Then r = Div1 + g P Use the CAPM Rstock = Rfree + Betastock(RMarket - Rfree) Regulatory Capital AdequacyIn Canada OSFI establishes minimum capital guidelines for banks in its publication “Guidelines for Banks” Federally regulated Financial Institutions must pass two capital adequacy tests Assets-to-capital multiple Risk-based capital adequacy Regulatory Capital Adequacy:Assets-to-Capital Multiple Calculation: Assets-to-capital multiple = Total Assets Capital Where: Capital is Tier One plus Tier Two capital Total Assets all on-BS assets plus off-BS credit substitutes Must maintain an assets to capital multiple less than twenty Problems as a measure of capital adequacy: Based on book values, not market values Ignores the different credit, interest and market risks embedded in the total assets figure Ignores off-Balance Sheet activities which are not credit substitutes (i.e... most derivatives) Risk-Based Capital A