Wieslaw Thor: We were not aware of all the effects of the credit … – GazetaPrawna.pl

by Marek Tejchman, Damian Furmańczyk 18.04.2015, 16:00; Update: 04.18.2015, 19:09

Are banks may risk?

You have to say it straight: The banking business is a risk buying from someone who does not want to or can not take.

Who they are buying?

Regular submission of the deposit is from this perspective, nothing as exchanging one risk for another. If you have money, then you must do something with them: spend, store, invest or borrow. In other words, or you risk that the cash will wither non-working, or you invest in the hope of gain, or think you money for the product or service, often unnecessary or disappointing. In each of these cases, there is a risk to achieve a result different than expected.

And if not a sock and not an investment, but I decide to entrust money to the bank?

it will protect you from the risks of theft, hasty and unsuccessful projects, and additional capital will increase interest.

What in this situation the customer risk ?

You may get a lower interest rate, because the rate of change of interest rates, or would be forced to break up under duress place mishap. And in the worst case scenario, you may not get the money back because the bank will lose solvency. Although this situation is entering the state, protecting depositors up to a certain amount of law. But please note that the deposit of funds to the bank comes to the next phase of the transfer of risk. The bank must make use of this money, because leaving them in the vault no benefit other than the simple preservation of capital. So the bank lends further measures, investing in real estate or turns on the currency, which then lends. In a word, the bank earns on managing the risks associated with the management of the funds entrusted.

But if the banks they are able to determine which activities are too risky? But someone should look at the hands of bankers?

Definitely themselves such decisions should not take. I do not take. There are at least four reasons for this state of affairs. First of all – the banks are leveraged entities significantly stronger financially than other companies in the economy. Already due to low initial capital injection of the bank has repeatedly ability to raise large sums of deposits. By a bank’s balance sheet is such that the capital is only 5-10 per cent., And the vast majority of the sources of financing are the funds borrowed. We are dealing with a situation in which security is a small buffer in the form of equity for any mistakes in asset management. Imagine that the bank has 8 percent. capital. In a huge simplification – enough to statistically at 13 customer did not pay loans and capital is entirely eaten. If so high is the risk of loss of capital base, it must be subject to special protection and regulations. Second – the banks collect deposits, in particular individuals. We entrust them with their savings, trusting that they are well developed and, most importantly, protected. Thirdly – the importance of banks to the economy is enormous due to the ability of money creation, ie. The duplication of the stream of available resources in relation to the initial resource invested in banks. And fourth – collected funds in banks, especially individuals, are covered in many countries guarantees regulated by the state. In view of the above, it is difficult to imagine the operation of banks without due care control authorities. And here is where the state, which defines the conditions under which the bank can take certain types of risk.

Only the state? And international regulators?

Both of them. Historically, decisions were taken by each country separately, but in the global economy, the Basel Committee identified the best practices in the management of capital, which in time became not only a list of the best recommendations, but also the specific regulations in force in the country.

imagine that regulate the flow of money dams, which make capital poured in a selected channel. Who built the dam? Bank, the state?

Each of the entities – whether the state as a regulator and supervisor, and the banks – has a role in determining the direction of flow of money. Importance in this process, both the right tools, ranging from fiscal policy through monetary policy and detailed regulations themselves – both common and those same banks internal policies governing the financing, take risks, exposure limits, risk assessment tools and finally the structure and serving the construction of the capital stock of the business model, and potentially absorbing risk. His role in this process are also the same businesses and consumers in investment policy, consumption or accumulation of savings.