Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Laporan Keuangan
Use of Fund
BANK as Financial Intermediary
Source of Fund
Cash BI current account Earning Assets: Bank’s Deposit Securities Placement
Demand Deposit Saving Deposit Time Deposit
LOAN
Fixed Asset
Equity
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Use of Fund Interest ? Matched ? Maturity ? Liquidity Cost of Fund
Sources of Fund
Asset and Liability Management
the set of actions and procedures designed to control the bank’s risks and financial position
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Estimating liquidity needs
• Sources and Uses of Funds Method:
– Calculate future changes over time in loans and deposits from past experience and future expectations. – Example of estimation:
Estimated Loans 1000 1200 1600 1500 Estimated Change Deposits Loans 1200 1000 1200 1600 ----200 400 (100) Estimated Change Liquidity Deposits Needs ----(200) 200 400 ----400 200 (500)
Month Dec Jan Feb March
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Estimating liquidity needs
• Structure-of-Deposits Method:
– Example of estimation:
Probability of Amount Held Withdrawal in Expected (in millions) Next 3 Months Withdrawals
Short-term (unstable): Demand deposits Other transactions accounts Medium-term: Small time and savings deposits Long-term (stable): Large time deposits Expected deposit withdrawals
$2 $10
.90 .60
$ 1.8 $ 6.0
$50
.30
$15.0
$10
.20
$ 2.0 $24.8
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Estimating liquidity needs
• Funding and market liquidity needs
– Funding-liquidity risk refers to maintaining sufficient cash to meet investment needs. – Market-liquidity risk is related to market disruptions that can temporarily widen bid-ask spreads and make it difficult to close out open positions in derivatives, securities, etc. without sustaining losses.
• General definition of liquidity: Amount of liquidity needed relative to ability to meet liquidity demands.
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Asset liquidity
• Role of asset liquidity
– Liquid assets are an alternative source of funds. – A reserve to protect the bank from financial market loss of confidence that could threaten safety and soundness.
Primary reserves -- vault cash and cash held on deposit at the Federal Reserve district bank.
Secondary reserves -- money market instruments held by the bank under no formal regulatory requirements.
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Asset liquidity
• Primary reserves
– Lagged reserve requirements
Calculate daily average balances of transactions deposits during a 14-day period (computation period). Calculate average daily vault cash in the next 14-day period. Skip 3 days. Maintain reserve balances at the Federal Reserve during a subsequent 14-day period (maintenance period). Thus, 17 days between end of computation period and beginning of maintenance period. LRR lowers management costs and improves the quality of information on required balances.
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Asset liquidity
• Managing the money position (minimize cash holdings which generally means to meet reserve requirements).
CALCULATING RESERVE REQUIREMENTS FOR COMMERCIAL BANKS Average Dollar Amount (in millions) in Computation Period Average Dollar Percentage Reserves Required Reserve (in millions) in a Requirement Maintenance Period
a
Type of Deposit and Deposit Interval
Net transactions accounts a $0 - $45.6 million Over $46.5 million Nonpersonal time deposits Eurocurrency liabilities Total reserves required Less vault cash Federal Reserve District Bank
a
$46.5 20.2 25.0 5.0
3% 10% 0% 0%
$1.248 2.020 0 0 $3.268 (0.418) $2.850
The first $4.9 million of transactions accounts are exempt from reserve requirements. This cutoff and the 3% reserve requirement cutoff are amended by the Federal Reserve System from time to time. For an update, see http://www.frbchi.org/banker/regulatory_update/
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Asset management
• Secondary reserves
– T-bills, Federal agency securities, repurchase agreements (RPs or Repos), bankers’ acceptances, negotiable certificates of deposit (CDs), federal funds, and commercial paper. – Aggressive liquidity approach
Yield curve relationships can be used to buy longer-term or short-term securities (e.g., 30-day 2-year securities).
– Securitization of loans (asset-backed financing)
Loans are converted to securities with greater liquidity. Credit risk is reduced.
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Asset/Liability management
Asset/liability committee (ALCO) In general, a short-run management tool: Construct a sources and uses of funds statement. NIMs are controlled by this management: Example: $100 million 5-year fixed-rate loans at 8% = $8 million interest $90 million 30-day time deposits at 4% = $3.6 million interest $10 million equity Net interest income = $4.4 million Net interest margin (NIM) = ($8 - $3.6)/$100 = 4.4% If interest rates rise 2%, deposit costs will rise in next year but not loan interest. Now, NIM = ($8 - $5.4)/$100 = 2.6%. Thus, NIM depends on interest rates, the dollar amount of funds, and the earning mix (rate x dollar amount)
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Liability management
• Purchase the funds needed to meet loan demands and deposit withdrawals.
– Correspondent balances of smaller banks with larger banks. – Risks
Interest rate increases reduce interest rate margins. Capital losses on securities and other assets can occur as interest rates increase. Loss of public confidence would prevent the bank from rolling over purchased funds. Increased borrowing causes financial risk to increase (i.e., variability of earnings per share). Capital market risk can occur when interest rates are low and investors shift funds from deposits to higher earning capital assets in the financial marketplace.
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Funds management of liquidity
• Compare the total liquidity needs to total liquidity sources.
– Liquidity ratios
Loans/deposits Loans/nondeposit liabilities U.S. government securities/nondeposit liabilities U.S. government securities/large denomination time deposits Liquid assets and liabilities in period t/estimated liquidity needs in period t (i.e., liquidity relative to needs)
– Optimum bank liquidity
Balance risks and returns … high enough liquidity to meet unexpected needs but not so high to incur high opportunity costs of near-cash assets. Uncertainty in forecasted needs and sources affects optimum also.
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Funds management of liquidity
• Regulatory view of bank liquidity
– Adequacy of bank liquidity (not least cost or optimum liquidity strategy).
The availability of assets readily convertible into cash The structure and volatility of deposits The reliance on interest-sensitive funds The ability to sustain any level of borrowings over the business cycle The bank’s formal and informal commitments for future lending The ability to adjust rates on loans when rates on interestsensitive sources of funds fluctuate The examiner-analyst
Manajemen Dana Bank
Intro. Estimat. liquidity Asset liquidity A/L management Funds mgt. of liq. Gap Analysis Assign.
Dollar gap
– RSA($) - RSL($) (or dollars of rate sensitive assets minus dollars of rate sensitive liabilities -- normally, less than one-year maturity). – To compare 2 or more banks, or make track a bank over time, use the:
Relative gap ratio = Gap$/Total Assets or Interest rate sensitivity ratio = RSA$/$RSL$.
– Positive dollar gap occurs when RSA$>RSL$. If interest rates rise (fall), bank NIMs or profit will rise (fall). The reverse happens in the case of a negative dollar gap where RSA$