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30 votes
Accepted

Did Citigroup really fail three times in the last 40 years?

(I worked there for 23 years.) Simon Johnson is correct. Citi (or its predecessors) was insolvent on those 3 occasions, and would have gone into liquidation without the bailouts by U.S. taxpayers.
21 votes

How do firms make money from "flow trading"?

Flow trading is in spirit very similar to market making - such firms make a profit by earning a spread. There are 3 common ways this is done. Suppose a client wants to buy 100k shares of XYZ, which ...
  • 5,081
18 votes
Accepted

Why do banks have capital requirements on deposits?

When someone deposits money at the bank, it immediately appears on the balance sheet as both, an Asset and a Liability: on the liability side, it will sit as something along the lines of "deposit ...
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12 votes
Accepted

Dec 16: FED rate hike?

Fed funds futures settle into the average daily Fed Funds effective rates over the month. The December 2015 futures contract therefore covers the current Fed funds target rate (0-25bp) for 16 days, ...
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9 votes
Accepted

Forecasting non-maturity deposits with machine learning

This boils down to timeseries forecasting which is particularly challenging for financial data because finance exhibits all the things that makes forecasting hard: non stationary, low signal to noise, ...
  • 5,375
9 votes

Why do banks have capital requirements on deposits?

This is an answer from European perspective. As @JanStuller has explained a retail cash deposit results in two balance sheet entries. In the simplest form: (Liability) Customer Demand Deposit, e.g. €...
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6 votes
Accepted

CNY Devaluation: Why EUR up, USD down?

Today (1 day after the fact) the following headline appeared in the Financial Times: "September Fed rate lift-off put in doubt, Fallout from China’s currency move turns market mood". If true, this ...
  • 9,647
6 votes
Accepted

Why somebody buy the defaulted loans?

(1) Often there is some collateral behind the loan (a building, etc.) which with enough effort and time can be sold to recover at least SOME of the value of the loan. However this is not necessarily ...
  • 9,647
6 votes

Delta One Trading business

Delta one trading desks provide synthetic exposure to their clients. OK, so what does that mean? Delta One desks give their clients exposure to a product (stock index, ETF, or even a single stock) ...
  • 2,458
5 votes

Currency devaluation and banks' solvency

Simply put, Russian banks (and other institutions) had local assets and hard-currency liabilities. Local assets lost value not only because they were denominated in a currency that unexpectedly ...
5 votes

Why do banks have capital requirements on deposits?

Afaik and as Jan Stuller already mentioned, banks have to meet requirements to the Leverage Ratio, which gets mandatory with CRR II in 2021. For simplicity, most banks will have to meet a minimum of 3%...
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5 votes
Accepted

Requesting for price?

As @noob2 noted, nobody is going to quote you a price unless you're a customer. And when I say "customer", I mean "customer of the desk", not just of the bank. Would require an ...
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4 votes
Accepted

Could we have prevented the World Economic Crisis in 2008?

U.S. Government DID save American International Group (AIG) from bankruptcy, since it was considered too big to fail, actually: a lot of financial institutions were insured by AIG. This Investopedia ...
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4 votes

Profits of US Banks

You might want to check what FDIC has. They have a lot of quarterly data for bank balance sheets. Unfortunately, I don't think they have data for all US banks, only the ones they insure.
4 votes

Why does the UK government sell RBS shares?

The U.K. Government is not in the business of owning banks. The investment was never supposed to make money - it was to rescue RBS during the financial crisis.
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4 votes
Accepted

Banking. What's the difference between provision and capital adequacy regulations? (purpose-wise)

Sort of. (But I don't really like the way you put it). The purpose of capital adequacy regulations is to protect the depositors (and senior creditors). The capital is a kind of "cushion" that ...
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4 votes

Forecasting non-maturity deposits with machine learning

Responding to the first question and building on Dimitri's comments, it is probably worth your while to do some due-diligence on the some of the standard issues that come up in Financial ML and see to ...
  • 846
4 votes

Why do bank stock returns increase from increased credit risk?

Your “Credit Risk” variable sounds like it should be more accurately described as “Credit Spread”, which proxies the risk of loans. As credit spreads increase, the risk of the loans a finance company’...
4 votes
Accepted

Data sources on derivative book composition for large investment banks

It turns out the webpage from the National Information Center (NIC) has comprehensive data on institutions supervised by the Fed, and stored in easily manageable formats, see ffiec.gov/npw. Among ...
3 votes
Accepted

Withdrawing monthly from a bank for 40 years

This is a annuity calculation. Present Value of Annuity $= \text{Payment} \cdot \frac{1-(1+r)^{-n}}{r}$ Therefore: Payment = Present Value of Annuity $\cdot \frac{r}{1-(1+r)^{-n}}$ Present Value ...
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3 votes

What is the risk-free asset?

Well, I do not think there is a large difference: Given you deposit money at a Bank the value of this deposit changes according to $$\frac{dB_t}{B_t} = r dt$$ which simply means there is no ...
  • 1,436
3 votes

What is a standard credit default swap contract and where can I find spread data? What alternatives exist to judge creditworthiness?

Here is another Credit Default Swap database which is rather extensive, daily spreads of roughly 700 entities starting in 2006.
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3 votes
Accepted

Modeling mortgage loan defaults

You should consider the stages of the default process instead of a binary "default", where there are various points the borrower is able to cure the loan. In a traditional credit model, the general ...
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3 votes

How to model the maturity term of non maturing deposit accounts

I am afraid there is no short answer to that question. However there is some literature you can check. In this paper the author gives an overview over different methods and lists a lot of references. ...
  • 1,386
3 votes

Dupont analysis of banks

You can look at the contents of the CFA institute : https://blogs.cfainstitute.org/insideinvesting/2013/01/23/how-much-does-apple-make-a-dupont-analysis/ . As there are more and more candidates and ...
3 votes

Why do banks have capital requirements on deposits?

Another problem is the bank's GSIB score. There are about 10 components that go into the GSIB score calculation, but one of them is (bank equity)/(balance sheet). Having a poor GSIB score means the ...
  • 2,458
3 votes

Why do banks have capital requirements on deposits?

Apologies if this answer is a bit off the beaten track. The reason capital requirements are imposed on deposits is historical. In the United States they were introduced by Alexander Hamilton (1755-...
  • 9,647
3 votes

Structuring and Customization

This is not an answer but a comment which is way too long for the comments section. What you can trade will be very much restricted by where you live. In Europe, you have Priips, which changes the ...
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3 votes

How does the bank uses the provisioning amount and RWA based capital adequacy

Q1 does not make sense. Bank capital is not "invested" in a specific asset such govt securities. Bank Capital is concerned with the Sources (not the Uses) of the bank's funds and is the ...
  • 9,647
2 votes

Data on banks’ leverage

High level Flow of funds comparative analysis for the U.S., Japan, and Euro Area by the bank of Japan. Country level report from the ECB. It is an 800+ page report so the link may take time to load (...
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