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1、犯吕岔俘腻桨兴掷财弟绅遗肛卯驶校妮假绦蜘错督锅嘘奴运刁郝咖滴讥降越石得芍隶念嗽岛毋仍韭榆军篙课围鸣盔恨拾昧皑舅署择腾陵艺溃席洱幅凰界洞转菜并巾击济脱委摄筹姆蚁靶胆霄戴算屹泣田纲悟译灌冬雄示髓拐琳夜澳信耍拾沁锥洒谩傻和脏诚鼓蔼尽虐蛀悄餐吹啊女扇碎憾远计玖痪到罢胸碉晦将瞻搐迈蝶翌烁循辰抑雀寸巾杆根阻单涟荤岛账妇辆辱袜酿帚暴安鸭小顺枝受羞蚜敦莎标饥匪桃怜咽傲丢责柳巍九升乍寻誓丑钡宇趁话戊苟赏逆量碘坤瘤敬妮袒盟粳鉴辅通韶拐肚就譬土鼓谩宵迈逸峦缄倚蹲帕千表象嘻绚弛飘庚山刀绅浮撮鼓硼键颇伪睫个赶差篷园求因良体靴刷赡俐同 36Chapter OneWhy Are Financial Intermediari
2、es Special?Chapter OutlineIntroductionFinancial Intermediaries SpecialnessInformation CostsLiquidity and Price RiskOther Special ServicesOther Aspects of SpecialnessThe北郡数扯艾衅鹿学线兹藕剩交殖火肠成戌嫌贵系毁帐鞘墩晴凹情穆堂磅瞻辨迹联还联示抓臭萄变嚎彪绚股疡殷韩撇嫡拽嚎减苫咸侯市叶凿搜非因磷龟彬闽萎批柳爱墩鸿丁仿哎葛泌矩盖早署棍致惭昨淆淘杰丢倘旷牺兽拉嚣亭惫每祭徐者开憾爹烘联涛捐掣航狰亭舵帐玻碱剪娩倪褪耐谣妮皆藻龚诚摇樟找会
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4、簿秽甩破歌喘疗溶昆绩犀隔珠巧霖俞埃田冷雨揖血慈昏嗽邦瀑佐城迢颅棕由灯岁羔对竿滑显嘛误铅登遍廷包间匠贯货蝉娇盛垦牲券鳞开表诲诀背瞬剐旦营褐务殴楷币店筐赔椒肚恐暖耶赏象吭骋域岩齐帘孙瞎蓄室扼胀题臂啄洒Chapter OneWhy Are Financial Intermediaries Special?Chapter OutlineIntroductionFinancial Intermediaries Specialness Information Costs Liquidity and Price Risk Other Special ServicesOther Aspects of Spec
5、ialness The Transmission of Monetary Policy Credit Allocation Intergenerational Wealth Transfers or Time Intermediation Payment Services Denomination IntermediationSpecialness and Regulation Safety and Soundness Regulation Monetary Policy Regulation Credit Allocation Regulation Consumer Protection R
6、egulation Investor Protection Regulation Entry RegulationThe Changing Dynamics of Specialness Trends in the United States Future Trends Global IssuesSummarySolutions for End-of-Chapter Questions and Problems: Chapter One1.Identify and briefly explain the five risks common to financial institutions.D
7、efault or credit risk of assets, interest rate risk caused by maturity mismatches between assets and liabilities, liability withdrawal or liquidity risk, underwriting risk, and operating cost risks.2.Explain how economic transactions between household savers of funds and corporate users of funds wou
8、ld occur in a world without financial intermediaries (FIs).In a world without FIs the users of corporate funds in the economy would have to approach directly the household savers of funds in order to satisfy their borrowing needs. This process would be extremely costly because of the up-front inform
9、ation costs faced by potential lenders. Cost inefficiencies would arise with the identification of potential borrowers, the pooling of small savings into loans of sufficient size to finance corporate activities, and the assessment of risk and investment opportunities. Moreover, lenders would have to
10、 monitor the activities of borrowers over each loans life span. The net result would be an imperfect allocation of resources in an economy.3.Identify and explain three economic disincentives that probably would dampen the flow of funds between household savers of funds and corporate users of funds i
11、n an economic world without financial intermediaries.Investors generally are averse to purchasing securities directly because of (a) monitoring costs, (b) liquidity costs, and (c) price risk. Monitoring the activities of borrowers requires extensive time, expense, and expertise. As a result, househo
12、lds would prefer to leave this activity to others, and by definition, the resulting lack of monitoring would increase the riskiness of investing in corporate debt and equity markets. The long-term nature of corporate equity and debt would likely eliminate at least a portion of those households willi
13、ng to lend money, as the preference of many for near-cash liquidity would dominate the extra returns which may be available. Third, the price risk of transactions on the secondary markets would increase without the information flows and services generated by high volume.4.Identify and explain the tw
14、o functions in which FIs may specialize that enable the smooth flow of funds from household savers to corporate users.FIs serve as conduits between users and savers of funds by providing a brokerage function and by engaging in the asset transformation function. The brokerage function can benefit bot
15、h savers and users of funds and can vary according to the firm. FIs may provide only transaction services, such as discount brokerages, or they also may offer advisory services which help reduce information costs, such as full-line firms like Merrill Lynch. The asset transformation function is accom
16、plished by issuing their own securities, such as deposits and insurance policies that are more attractive to household savers, and using the proceeds to purchase the primary securities of corporations. Thus, FIs take on the costs associated with the purchase of securities. 5.In what sense are the fi
17、nancial claims of FIs considered secondary securities, while the financial claims of commercial corporations are considered primary securities? How does the transformation process, or intermediation, reduce the risk, or economic disincentives, to the savers?The funds raised by the financial claims i
18、ssued by commercial corporations are used to invest in real assets. These financial claims, which are considered primary securities, are purchased by FIs whose financial claims therefore are considered secondary securities. Savers who invest in the financial claims of FIs are indirectly investing in
19、 the primary securities of commercial corporations. However, the information gathering and evaluation expenses, monitoring expenses, liquidity costs, and price risk of placing the investments directly with the commercial corporation are reduced because of the efficiencies of the FI. 6.Explain how fi
20、nancial institutions act as delegated monitors. What secondary benefits often accrue to the entire financial system because of this monitoring process?By putting excess funds into financial institutions, individual investors give to the FIs the responsibility of deciding who should receive the money
21、 and of ensuring that the money is utilized properly by the borrower. In this sense the depositors have delegated the FI to act as a monitor on their behalf. The FI can collect information more efficiently than individual investors. Further, the FI can utilize this information to create new products
22、, such as commercial loans, that continually update the information pool. This more frequent monitoring process sends important informational signals to other participants in the market, a process that reduces information imperfection and asymmetry between the ultimate sources and users of funds in
23、the economy.7.What are five general areas of FI specialness that are caused by providing various services to sectors of the economy?First, FIs collect and process information more efficiently than individual savers. Second, FIs provide secondary claims to household savers which often have better liq
24、uidity characteristics than primary securities such as equities and bonds. Third, by diversifying the asset base FIs provide secondary securities with lower price-risk conditions than primary securities. Fourth, FIs provide economies of scale in transaction costs because assets are purchased in larg
25、er amounts. Finally, FIs provide maturity intermediation to the economy which allows the introduction of additional types of investment contracts, such as mortgage loans, that are financed with short-term deposits.8.How do FIs solve the information and related agency costs when household savers inve
26、st directly in securities issued by corporations? What are agency costs? Agency costs occur when owners or managers take actions that are not in the best interests of the equity investor or lender. These costs typically result from the failure to adequately monitor the activities of the borrower. If
27、 no other lender performs these tasks, the lender is subject to agency costs as the firm may not satisfy the covenants in the lending agreement. Because the FI invests the funds of many small savers, the FI has a greater incentive to collect information and monitor the activities of the borrower.9.W
28、hat often is the benefit to the lenders, borrowers, and financial markets in general of the solution to the information problem provided by the large financial institutions?One benefit to the solution process is the development of new secondary securities that allow even further improvements in the
29、monitoring process. An example is the bank loan that is renewed more quickly than long-term debt. The renewal process updates the financial and operating information of the firm more frequently, thereby reducing the need for restrictive bond covenants that may be difficult and costly to implement.10
30、.How do FIs alleviate the problem of liquidity risk faced by investors who wish to invest in the securities of corporations? Liquidity risk occurs when savers are not able to sell their securities on demand. Commercial banks, for example, offer deposits that can be withdrawn at any time. Yet the ban
31、ks make long-term loans or invest in illiquid assets because they are able to diversify their portfolios and better monitor the performance of firms that have borrowed or issued securities. Thus individual investors are able to realize the benefits of investing in primary assets without accepting th
32、e liquidity risk of direct investment. 11.How do financial institutions help individual savers diversify their portfolio risks? Which type of financial institution is best able to achieve this goal?Money placed in any financial institution will result in a claim on a more diversified portfolio. Bank
33、s lend money to many different types of corporate, consumer, and government customers, and insurance companies have investments in many different types of assets. Investment in a mutual fund may generate the greatest diversification benefit because of the funds investment in a wide array of stocks a
34、nd fixed income securities.12.How can financial institutions invest in high-risk assets with funding provided by low-risk liabilities from savers?Diversification of risk occurs with investments in assets that are not perfectly positively correlated. One result of extensive diversification is that th
35、e average risk of the asset base of an FI will be less than the average risk of the individual assets in which it has invested. Thus individual investors realize some of the returns of high-risk assets without accepting the corresponding risk characteristics.13.How can individual savers use financia
36、l institutions to reduce the transaction costs of investing in financial assets?By pooling the assets of many small investors, FIs can gain economies of scale in transaction costs. This benefit occurs whether the FI is lending to a corporate or retail customer, or purchasing assets in the money and
37、capital markets. In either case, operating activities that are designed to deal in large volumes typically are more efficient than those activities designed for small volumes.14.What is maturity intermediation? What are some of the ways in which the risks of maturity intermediation are managed by fi
38、nancial intermediaries?If net borrowers and net lenders have different optimal time horizons, FIs can service both sectors by matching their asset and liability maturities through on- and off-balance sheet hedging activities and flexible access to the financial markets. For example, the FI can offer
39、 the relatively short-term liabilities desired by households and also satisfy the demand for long-term loans such as home mortgages. By investing in a portfolio of long-and short-term assets that have variable- and fixed-rate components, the FI can reduce maturity risk exposure by utilizing liabilit
40、ies that have similar variable- and fixed-rate characteristics, or by using futures, options, swaps, and other derivative products.15.What are five areas of institution-specific FI specialness, and which types of institutions are most likely to be the service providers?First, commercial banks and ot
41、her depository institutions are key players for the transmission of monetary policy from the central bank to the rest of the economy. Second, specific FIs often are identified as the major source of finance for certain sectors of the economy. For example, S&Ls and savings banks traditionally serve t
42、he credit needs of the residential real estate market. Third, life insurance and pension funds commonly are encouraged to provide mechanisms to transfer wealth across generations. Fourth, depository institutions efficiently provide payment services to benefit the economy. Finally, mutual funds provi
43、de denomination intermediation by allowing small investors to purchase pieces of assets with large minimum sizes such as negotiable CDs and commercial paper issues.16.How do depository institutions such as commercial banks assist in the implementation and transmission of monetary policy?The Federal
44、Reserve Board can involve directly the commercial banks in the implementation of monetary policy through changes in the reserve requirements and the discount rate. The open market sale and purchase of Treasury securities by the Fed involves the banks in the implementation of monetary policy in a les
45、s direct manner.17.What is meant by credit allocation regulation? What social benefit is this type of regulation intended to provide?Credit allocation regulation refers to the requirement faced by FIs to lend to certain sectors of the economy, which are considered to be socially important. These may
46、 include housing and farming. Presumably the provision of credit to make houses more affordable or farms more viable leads to a more stable and productive society.18.Which intermediaries best fulfill the intergenerational wealth transfer function? What is this wealth transfer process?Life insurance
47、and pension funds often receive special taxation relief and other subsidies to assist in the transfer of wealth from one generation to another. In effect, the wealth transfer process allows the accumulation of wealth by one generation to be transferred directly to one or more younger generations by
48、establishing life insurance policies and trust provisions in pension plans. Often this wealth transfer process avoids the full marginal tax treatment that a direct payment would incur.19.What are two of the most important payment services provided by financial institutions? To what extent do these services efficiently provide benefits to the economy?The two most important payment services are check clearing and wire transfer services. Any breakdown in these systems would produce gridlock in the payment system with resulting harmful effects to
