FİNANSAL PİYASALAR VE KURUMLAR

The roots of modern banking date back to the sixth century B.C.

Retail banking mainly covers individuals and includes financial services such as credit cards and consumer loans as well as mortgages. It also covers very small enterprises, such as those of physicians or home services.

The most important assets of a commercial bank can be categorized as follows:

Last but not the least, banks maintain some fixed assets like land and buildings to carry out their operations.

A commercial bank can earn profit if its revenues exceed its expenses. The main sources of revenue in the form of interest revenue, commissions and fees for a commercial bank are as follows: • Granting loans • Investing in marketable securities • Providing credit cards and debit cards • Servicing deposit accounts • Providing financial advice • Providing wealth management services • Carrying out foreign exchange

The most important types of risks, which commercial banks face, can be classified as follows:

A hedge is an investment position intended to offset potential losses that may be incurred by a companion investment.

Liquidity risk is the inability of the bank to meet its financial obligations when they become due

Assets are items of value owned by businesses at a certain point of time. Those assets include notes and coins, balances with the Central Bank, inter-bank loans, advances, investments, premises and computers. The most important assets of a commercial bank can be categorized as follows:

• Loans
• Securities
• Cash Assets
• Fixed Assets

Revolving credits are widely used by businesses to finance their short-term working capital needs. These credits are self-liquidating working capital loans, which can be withdrawn and repaid at different points of time within a certain limit. Hence, the balance of the loan fluctuates over time and interest rate applied to the loan may vary over time due to changing market conditions. Interest accumulates based on the fluctuating balance of the loan and is paid at the end of every quarter (end of March, June, September, December).

Another common type of loan made by commercial banks are spot credits or term loans, which are offered for a specific amount for a specific time charging a fixed interest. Term loans are generally used for a specific purpose like purchase of machinery.

Banks also offer loans in the interbank market. The funds lent are returned with interest at the maturity of the loan. Repurchase agreements (repos) are another way of providing short term loans. Banks purchase Treasury securities to sell them back at a later date by the repo agreement. The bank provides short-term financing to the customers and the securities of the customer provides security for the funds lent by the bank through the repo transaction.

Another category of assets includes investments in securities such as government bonds and Treasury bills. Banks own some assets in cash as a medium of Exchange in daily operations. Banks hold some vault cash at their offices to meet withdrawal demands. They also maintain some reserve deposits with the Central Bank as well as deposits with other commercial banks which are called correspondent balances. Last but not the least, banks maintain some fixed assets like land and buildings to carry out their operations.

Retail banking mainly covers individuals and includes financial services such as credit cards and consumer loans as well as mortgages.

Interest rate risk, which arises from the different maturity structure of the banks’ assets and liabilities.

Liquidity risk, which is the risk that a bank may not be able to meet its cash needs by selling assets or raising funds at a reasonable cost.

Credit risk, which is the risk of changes in the economic value of the bank’s assets due to unexpected changes in the creditworthiness of counterparties.