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Raising bonds, not enough

Reflect on group work quote
Australian review
Presentation in week 10 and 11
Get a picture done
Great financial crisis, liquidity issues.
Financial system - exchange goods and services (flow of
funds)
Stability and reliability
Interim and final has different conclusions.
Bank operations and regulations
Basel 3: new banking regulations
Why they propose that and is it effective
What we missed and what do we achieve
Why is the financial system the heart of free market
economics?
It facilitates the movement of money from the spenders
and savers.
Fair treatment does not involve shielding consumers from responsibility for their
financial decisions, including for losses and gains from market movements. Some
investor losses are an inevitable feature of a well-functioning market economy,
which allows risk-taking in search of a return.
However, the Inquiry is concerned that consumers are taking risks they might not
have taken if they were well informed or better advised.

What happened in the crisis?

Confidence and trust in the system are essential ingredients in building

an efficient, resilient and fair financial system that facilitates economic
growth and meets the financial needs of Australians.
Firms guaranteeing the instruments faced disappearing net worths
Banks caught in the mess needed additional equity capital to meet
regulations

Who in the financial system were involved in the crisis and

what were instruments
Sub prime loans packaged into collateralized debt obligations
Synthetic cdo were created to remove these assets from the balance
sheet and are derivatives of that pool of assets.
Credit default swaps were created to protect buyers from credit default
but they were traded on secondary markets and this led to the
creation of a multitude of credit default swaps involving counter party
obligations leading to a complex web of interactions.

Week 2
Not in equities and bond market but cdo market selling
SPV special purpose vehicle
Special purpose vehicle has different ratings
Houses price drop
People couldnt pay back, P&L statement write down, equities hit
Credit default swap is like insurance
Credit assessment issue should be about 50%
Need to consider the leverage part
Matching issue of short term bonds to long term bonds
Credit rating issue
Risk management
Transparency issue
Regulation:
Issues
-Endorsement
-Framework-Basel 3 countries
-Understand the commercial banks
-Importance for off balance sheet accounts
-liquidity transformation
-underwriting listing of IPO
-capital base strong enough to take care of off balance exposure
-tier 1 solid capital in assets ensure that money not taken out of
this tier

Need to read the terms of the book and the terms of the chapters.
Need to demonstrate practical abilities for the exam.
Proprietary trading- use bank funds to bet on current monetary
conditions.-banks can lose money
Private equity- KKR one of the largest fund management from us
-GE money put them up for sale.
Hedge fund gather peoples funds and with a certain mandate like
long short funds use computer systematic trading with inputs to
trade.
Why HSBC goes into commercial banking
PROFITABLE
Off balance sheet (capital)
Less regulatory
Capital adequacy
Commercial bank
Revenue less than investment bank
Multiple avenues for getting funds
Australian government
GFC
Insurance companies-life insurance policies
Credit union act as a bank (self-insure) lend to members and get
returns tier 1 capital higher than the big banks.
Cki-cheung kung infrastructure
DB-advisory company
DAf der aus fund
Pss-public sector superannuation
Css-commonwealth super scheme

Sas-state super