I have been looking at The Moorad Choudry Anthology: Past, Present and Future Principles of Banking and Finance (Amazon affiliate link, and as the title suggests, by Moorad Choudhry) as a source for my banking primer. Professor Choudhry teaches in the M.Sc. Finance at the University of Kent Business school, and previously worked in a bank treasury department. The book is impressive, clocking in at 1252 pages (not counting end matter). As an academic text, it is not cheap, but is a good source for getting a handle on banking.
My primer is aimed more at the macroeconomic aspects of banking, and would be a lot shorter (and cheaper). However, my plan is to lean on the Anthology for more complex topics.
In this article, I just want to highlight parts of Choudhry’s discussion of bank treasury operations....
Bond Economics
Primer: Bank Treasury OperationsBrian Romanchuk
5 comments:
"Unless a bank is extremely small, the loan officers who approve a loan application are not members of the bank treasury, and unless they are senior loan officers, may never talk to anyone in the treasury group."
Thank you. 'Bout time somebody other than myself said this. A loan officer doesn't call down to the reserve desk to see if there is enough liquidity to make a loan. He/she makes the loan based solely on the creditworthiness of the borrower. Liquidity issues, if any, are dealt with later.
Too bad central bankers themselves don't understand this.
They are probably allocated authority to originate a certain amount of loans (based on capital allocation) in their department then that is turned into a goal for them to receive a commission in their compensation package…
Where in the book does it cover the topic of monetarists at the central bank trying to increase system lending by unexpectedly forcing $100Bs reserve assets onto bank balance sheets to lend out?
Or where in the book does it cover the topic of monetarists at the central bank forcing banks to maintain reserve balances of 10% of deposit liabilities at all times then reducing bank system reserve balances to 9% of bank deposit liabilities?
Is that covered in there?
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