http://ozrisk.net/2007/10/09/bank-liquidity-management/ Risk Management in Australia Wed, 23 Jul 2008 19:45:43 +0000 http://wordpress.org/?v=MU http://ozrisk.net/2007/10/09/bank-liquidity-management/#comment-24398 Andrew Tue, 09 Oct 2007 22:50:44 +0000 http://ozrisk.wordpress.com/2007/10/09/bank-liquidity-management/#comment-24398 David, IN practice, "call" funds are a relatively stable funding base except in the event of name crisis - they are also relatively cheap and do not expect day-to-day variability in the interest paid. To value them accurately depends on modelling their behaviour. You need to include in that valuation the risks of name crisis or any other panic event and also mitigating strategies. Even with these risks, they are quite valuable. This is why the branch networks are extending again after years of decline. David,
IN practice, “call” funds are a relatively stable funding base except in the event of name crisis - they are also relatively cheap and do not expect day-to-day variability in the interest paid. To value them accurately depends on modelling their behaviour. You need to include in that valuation the risks of name crisis or any other panic event and also mitigating strategies.
Even with these risks, they are quite valuable. This is why the branch networks are extending again after years of decline.

]]> http://ozrisk.net/2007/10/09/bank-liquidity-management/#comment-24395 David Jacobson Tue, 09 Oct 2007 20:27:30 +0000 http://ozrisk.wordpress.com/2007/10/09/bank-liquidity-management/#comment-24395 If deposits come with stringent liquidity management obligations, then how do you "value" deposits, especially at call funds? Is it the difference betweeen the cost of managing the funds and interest paid on the one hand and the cost of having to borrow funds to on-lend and what happens when the cost of borrowing dramatically changes as occurred recently? If deposits come with stringent liquidity management obligations, then how do you “value” deposits, especially at call funds? Is it the difference betweeen the cost of managing the funds and interest paid on the one hand and the cost of having to borrow funds to on-lend and what happens when the cost of borrowing dramatically changes as occurred recently?

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