Dear SAP Banking Community members,
Weeks ago we talked about the main activities for efficient Capital Management.
This is going to be a very critical activity as the new Basel III regulation and the huge level of assets hold by the international Banking System is generating increasing tensions on the system as many banks are coping with poor capitalization or they’re simply undercapitalized.
On that sense, let me recommend you reading the following article on the Financial Times.
Top US banks face $100bn Basel shortfall
http://www.ft.com/cms/s/42d42de2-f593-11df-99d6-00144feab49a,dwp_uuid=f5d27f8a-a517-11dd-b4f5-000077b07658,print=yes.html
You will see that the article warns the risk of higher lending costs as the Banks can face difficulties for increasing their Capital Levels. Unfortunately it does not say anything about what the efficient determination of that price should be.
Most of Banks determine the prices of Lending (in the retail market) according to the price of the competitors, lacking of a systemic approach for calculating the lending price.
In my opinion, lending price determination (which is one of the most critical activities in Capital Management) must be determined according to a systemic model which has to take into account.
1) Funding Costs of the Loan according to its Currency and Maturity (Yield Curve). Main reference of the price of the Loan as the influence of the bank on determining that price is very limited.
2) Capital Consumption of the Loan and Free Capital of the Bank which represents the main limitation of the Bank for offering assets to the market, and consequently the main restriction for planning assets trade.
3) Market behavior.
I'd like to know the community members opinion.
What do you think?
Kindest Regards.
Ferran.
Weeks ago we talked about the main activities for efficient Capital Management.
This is going to be a very critical activity as the new Basel III regulation and the huge level of assets hold by the international Banking System is generating increasing tensions on the system as many banks are coping with poor capitalization or they’re simply undercapitalized.
On that sense, let me recommend you reading the following article on the Financial Times.
Top US banks face $100bn Basel shortfall
http://www.ft.com/cms/s/42d42de2-f593-11df-99d6-00144feab49a,dwp_uuid=f5d27f8a-a517-11dd-b4f5-000077b07658,print=yes.html
You will see that the article warns the risk of higher lending costs as the Banks can face difficulties for increasing their Capital Levels. Unfortunately it does not say anything about what the efficient determination of that price should be.
Most of Banks determine the prices of Lending (in the retail market) according to the price of the competitors, lacking of a systemic approach for calculating the lending price.
In my opinion, lending price determination (which is one of the most critical activities in Capital Management) must be determined according to a systemic model which has to take into account.
1) Funding Costs of the Loan according to its Currency and Maturity (Yield Curve). Main reference of the price of the Loan as the influence of the bank on determining that price is very limited.
2) Capital Consumption of the Loan and Free Capital of the Bank which represents the main limitation of the Bank for offering assets to the market, and consequently the main restriction for planning assets trade.
3) Market behavior.
I'd like to know the community members opinion.
What do you think?
Kindest Regards.
Ferran.
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