Administracin de Pasivos Diferentes a Depsitos

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Key Topics
Liability Management Customer Relationship Doctrine Alternative Nondeposit Funds Sources Measuring the Funds Gap Choosing among Different Funds Sources Determining the Overall Cost of Funds

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Introduction
The traditional source of funds for most depository institutions is the deposit account But what does management do to find new money when deposit volume is inadequate to support all loans and investments these institutions would like to make? In this chapter we explore yet another important nondeposit source of funding selling IOUs in the money and capital markets for periods of time that may stretch from overnight to several years

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Liability Management and the Customer Relationship Doctrine

The Customer Relationship Doctrine
The first priority of a lending institution is to make loans to all those customers from whom the lender expects to receive positive net earnings

Thus, lending decisions often precede funding decisions

All loans and investments whose returns exceed their cost and whose quality meets the lending institutions credit standards should be made

If enough deposits are not immediately available to cover these loans and investments, then management should seek out the lowest-cost source of borrowed funds available to meet its customers credit needs During the collapse of the subprime mortgage market in the 2007-2009 business recession, regulators found that many mortgage lenders went overboard in approving loans, falling well below normal industry standards with little or no documentation
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Liability Management and the Customer Relationship Doctrine (continued)

Liability Management During the 1960s and 1970s, the customer relationship doctrine spawned the liquidity management strategy known as liability management The bank buys funds in order to satisfy loan requests and reserve requirements It is an interest-sensitive approach to raising bank funds It is flexible The bank can decide exactly how much they need and for how long The control mechanism to regulate incoming funds is the price of funds

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TABLE 131 Sample Use of Nondeposit Funds Sources to Supplement Deposits and Make Loans

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Alternative Nondeposit Sources of Funds

Federal Funds Market Repurchase Agreements Borrowing from Federal Reserve Banks Advances from the Federal Home Loan Bank Negotiable CDs Eurocurrency Deposit Market Commercial Paper Long-Term Nondeposit Funds Sources

The usage of nondeposit sources of funds has risen Larger institutions rely on the nondeposit funds market as a key source of short-term money to meet loan demand and unexpected cash emergencies
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TABLE 132 Recent Growth in Nondeposit Sources of Borrowed Funds at FDIC-Insured Banks and Thrifts

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TABLE 133 The Relationship between the Size of Banks and Their Use of Nondeposit Borrowings (2007 figures for FDICinsured banks)

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Alternative Nondeposit Sources of Funds (continued)

Federal Funds Market
Borrowing from Federal Reserve Banks
Immediately available reserves are traded between financial institutions and usually returned within 24 hours Deposits with correspondent banks and demand deposit balances of security dealers and governments can be used for loans to institutions

Types of Fed Funds Loan Agreements

Overnight Loans
Negotiated via wire or telephone, returned the next day Normally not secured by specific collateral

Term Loans
Longer term Fed funds contracts (several days, weeks, or months)

Continuing Contracts
Automatically renewed each day Normally between smaller respondent institutions and their larger correspondents
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Alternative Nondeposit Sources of Funds (continued)

Repurchase Agreements (RPs) as a Source of Funds
Less popular than Fed funds and more complex Viewed as collateralized Fed funds transactions With RPs, the purchaser of Fed funds provides collateral in the form of marketable securities, reducing the credit risk Most domestic RPs are transacted across the Fed Wire system An RP transaction is often for overnight funds
It may be extended for days, weeks, or even months

Major innovation in the RP market was the invention of General Collateral Finance (GCF) RPs

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Alternative Nondeposit Sources of Funds (continued)

Borrowing from Federal Reserve Banks
The Fed will make the loan through its discount window by crediting the borrowing institutions reserve account Each loan made by the Federal Reserve banks must be backed by collateral acceptable to the Fed Several types of loans are available from the Feds discount window
Primary Credit
This loan is available for short terms and to institutions in sound financial condition Rate is slightly higher than the federal funds rate

Secondary Credit
These loans are available at a higher interest rate to institutions not qualifying for primary credit

Seasonal Credit
These loans cover longer periods than primary credit for small and medium institutions experiencing seasonal swings in deposits and loans
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Alternative Nondeposit Sources of Funds (continued)

Advances from Federal Home Loan Banks
Allows institutions (home mortgage lenders) to use home mortgages as collateral for advances A way to improve the liquidity of home mortgages and encourage more lenders to provide credit Number of loans has increased dramatically in recent years Maturities range from overnight to more than 20 years Federal Home Loan Bank (FHLB) System has 12 regional banks Has federal charter and can borrow cheaply and pass savings on to institutions

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Alternative Nondeposit Sources of Funds (continued)

Development and Sale of Large Negotiable CDs
An interest-bearing receipt evidencing the deposit of funds in the bank for a specified period of time for a specified interest rate It is considered a hybrid account since it is legally a deposit Types of Negotiable CDs
Domestic CDs. Euro CDs Yankee CDs Thrift CDs Fixed-rate CDs Variable-rate CDs

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Alternative Nondeposit Sources of Funds (continued)

Development and Sale of Large Negotiable CDs
Interest rates on fixed-rate CDs are quoted on an interestbearing basis and the rate is computed assuming a 360-day year Represent the majority of all large negotiable CDs issued Example
Suppose a depository institution promises an 8 percent annual interest rate to the buyer of a $100,000 six-month (180-day) CD The depositor will have the following at the end of six months

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Alternative Nondeposit Sources of Funds (continued)

The Eurocurrency Deposit Market
Eurocurrency deposits were developed originally in Western Europe to provide liquid funds that could be swapped among multinational banks or loaned to the banks largest customers Eurodollars are dollar-denominated deposits placed in bank offices outside the United States
Because they are denominated on the receiving banks books in dollars rather than in the currency of the home country and consist of accounting entries in the form of time deposits, they are not spendable on the street like currency

Most Eurodollar deposits are fixed-rate time deposits

Floating-rate CDs (FRCDs) and floating-rate notes (FRNs) were introduced in an effort to protect banks and their Eurodepositors from the risk of fluctuating interest rates

The Eurocurrency market is the largest unregulated financial marketplace in the world
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Alternative Nondeposit Sources of Funds (continued)

Commercial Paper Market
Commercial paper consists of short-term notes, with maturities normally ranging from three or four days to nine months, issued by well-known companies to raise working capital Industrial Paper purchase inventories Finance Paper Issued by finance companies and financial holding companies The notes are generally sold at a discount from face value through security dealers or through direct contact with the issuing company This funds source tends to be high in volume and moderate in cost but also volatile in available capacity and subject to credit risk Recently foreign banks have accelerated their mining of both European and American paper markets despite the pressures of the Great Recession
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Alternative Nondeposit Sources of Funds (continued)

Long-Term Nondeposit Funds Sources
The nondeposit sources of funds discussed to this point are mainly short-term borrowings However, many financial firms also tap longer-term nondeposit funds stretching well beyond one year Examples include mortgages issued to fund the construction of buildings and capital notes and debentures These longer-term nondeposit funds sources have remained relatively modest over the years due to regulatory restrictions and the augmented risks associated with long-term borrowing Also, because most assets and liabilities held by depository institutions are short- to medium-term, issuing long-term indebtedness creates a significant maturity mismatch
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Choosing among Alternative Nondeposit Sources

The demand for nondeposit funds is determined basically by the size of the gap between the institutions total credit demands and its deposits and other available monies Gap is based on:
Current and projected demand and investments the bank desires to make Current and expected deposit inflows and other available funds

Size of this gap determines the need for nondeposit funds

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Choosing among Alternative Nondeposit Sources (continued)

Nondeposit Funding Sources: Factors to Consider
1. The relative costs of raising funds from each source 2. The risk (volatility and dependability) of each funding source 3. The length of time (maturity or term) for which funds are needed 4. The size of the institution that requires more funds 5. Regulations limiting the use of alternative funds sources

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Choosing among Alternative Nondeposit Sources (continued)

A good formula for doing cost comparisons among alternative sources of funds

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OPERACIONES BANCARIAS PASIVAS

2
TTULOS HIPOTECARIOS
Llamados originalmente cdulas hipotecarias Se emiten con respaldo de garanta de crditos hipotecarios de primer grado previamente constituida a favor de los bancos hipotecarios La garanta no son los inmuebles, sino los crditos hipotecarios de los cuales el banco es el acreedor Instrumento de largo plazo Financia el sector de la construccin y de la vivienda Pueden ser de dos clases: Con garanta global: garantizados con todos los crditos hipotecarios que posee el banco Con garanta especifica: cuando el banco designa previamente cuales son los crditos hipotecarios que garantizan la emisin

EMISIN DE PAPELES COMERCIALES

Papeles Comerciales: Plazo de vencimiento entre 15 y 360 das Generalmente colocados a descuento por lo tanto generan intereses implcitos No gozan de la garanta

EMISIN DE OBLIGACIONES QUIROGRAFARIAS

Obligaciones Quirografarias: Plazos de vencimiento superiores al ao Intereses explcitos a tasas variable No gozan de la garanta

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OPERACIONES BANCARIAS PASIVAS

Venta de Participaciones al Pblico El BCV El Reporto (como Reportado) Descuento Pasivo Redescuento Pasivo Anticipo Pasivo
Las Operaciones Interbancarias comprenden todas aquellas operaciones que pacten y realicen Es un conjunto de mecanismos, prcticas exclusivamente las instituciones financieras entre e instrumentos, mediante los cuales las instituciones bancarias se otorgan s, activas y pasivas, como el otorgamiento de crditos con cargo a la cuenta de depsito en el prstamos entre ellas. Los bancos hacen uso de las reservas Banco Central, la contratacin de garantas, bancarias excedentes que tiene en el BC. cartas de crdito, aceptaciones comerciales, La finalidad de estos prstamos es operaciones de confianza y fideicomiso y resolver problemas puntuales de liquidez cualesquiera otras operaciones propias de las El plazo usual es de 1 a 2 das instituciones financieras, de conformidad con la La tasa de inters es voltil ley. Las operaciones aqu indicadas deben tener, Participan bancos comerciales y en todo caso, un legtimo carcter comercial o universales McGraw-Hill/Irwin financiero. 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. La Cmara de Compensacin Bank Management and Financial Services, 7/e

El Mercado Interbancario

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Quick Quiz
What is liability management? What advantages and risks does the pursuit of liability management bring to a borrowing institution? What is the customer relationship doctrine, and what are its implications for fund-raising by lending institutions? What are the principal advantages to the borrower of funds under an RP agreement? What are the advantages of borrowing from the Federal Reserve banks or other central bank? Are there any disadvantages? How is a discount window loan from the Federal Reserve secured? Is collateral really necessary for these kinds of loans? Why were negotiable CDs developed? What is the available funds gap? What factors must the manager of a financial institution weigh in choosing among the various nondeposit sources of funding available today?

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