Basic Principles of Banking
Banking
Lecture 2 - Basic Principles of
Banking
Michal Mejstřík, Petr Teplý
Institute of Economic Studies, Faculty of Social Science,
Charles University in Prague, Czech Republic
10 October 2012
Global political governance
Slide 2
Who will pay this game/cost of crises? Source: Petr Teplý (2011)
Slide 3
The current financial world is “simple“ and can be described by 3 terms:
1) Planet Ponzi
2) Zombie banks
3) Uroboros
Source: Petr Teplý (2012)
Slide 4
Ponzi scheme
1)
2)
3)
4)
4)
5)
6)
7)
Exponentially increasing liabilities (rapidly mounting debt)
Crappy, nonexistent or inadequate assets
Deceitful or nonexistent accounting Feeble, inert or toothless regulators A get-rich-quick culture, fro preference salted with a whole array of inappropriate incentives
Stupid, ignorant, lazy investors
(the greedier, the better)
An astonishng capacity for selfdelusion
Source: Feierstein (2012): Planet Ponzi, Glacier USA LLC
Slide 5
Example 1 of Planet Ponzi: Spanish PM:
“We don´t need any external support!“
Source: Petr Teplý + Open Europe (2012)
Slide 6
Example 2 of Planet Ponzi:
Banking Financial Stability Indicators
Source: IMF (2012): Global Stability Report, 10 October 2012
Slide 7
Content
1.
2.
3.
4.
Bank definition
Banking sector
Traditional operations of banks
Banking risks, efficiency and profitability of the bank
5. Approaches to bank valuation
6. Bank heterogeneity
7. Competing institutions
Slide 8
Definition of a bank
General definition - a financial provider or a deposit institution collecting free money and offering loans to different subjects as well as services (Půlpán a kol.
(1998)).
„EU“ definition - EU Directive 2006/48/EC defines a credit institution (which a bank is), as a) an undertaking whose business it is to receive deposits and other repayable funds from the public and to grant credits for its own account, or b) an electronic
Lecture 2 - Basic Principles of
Banking
Michal Mejstřík, Petr Teplý
Institute of Economic Studies, Faculty of Social Science,
Charles University in Prague, Czech Republic
10 October 2012
Global political governance
Slide 2
Who will pay this game/cost of crises? Source: Petr Teplý (2011)
Slide 3
The current financial world is “simple“ and can be described by 3 terms:
1) Planet Ponzi
2) Zombie banks
3) Uroboros
Source: Petr Teplý (2012)
Slide 4
Ponzi scheme
1)
2)
3)
4)
4)
5)
6)
7)
Exponentially increasing liabilities (rapidly mounting debt)
Crappy, nonexistent or inadequate assets
Deceitful or nonexistent accounting Feeble, inert or toothless regulators A get-rich-quick culture, fro preference salted with a whole array of inappropriate incentives
Stupid, ignorant, lazy investors
(the greedier, the better)
An astonishng capacity for selfdelusion
Source: Feierstein (2012): Planet Ponzi, Glacier USA LLC
Slide 5
Example 1 of Planet Ponzi: Spanish PM:
“We don´t need any external support!“
Source: Petr Teplý + Open Europe (2012)
Slide 6
Example 2 of Planet Ponzi:
Banking Financial Stability Indicators
Source: IMF (2012): Global Stability Report, 10 October 2012
Slide 7
Content
1.
2.
3.
4.
Bank definition
Banking sector
Traditional operations of banks
Banking risks, efficiency and profitability of the bank
5. Approaches to bank valuation
6. Bank heterogeneity
7. Competing institutions
Slide 8
Definition of a bank
General definition - a financial provider or a deposit institution collecting free money and offering loans to different subjects as well as services (Půlpán a kol.
(1998)).
„EU“ definition - EU Directive 2006/48/EC defines a credit institution (which a bank is), as a) an undertaking whose business it is to receive deposits and other repayable funds from the public and to grant credits for its own account, or b) an electronic