Assignment on Cost of Capital and Capital Structure of MNCs

Concept of Bank A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank links together customers that have capital deficits and customers with capital surpluses. Due to their influential status within the financial system and upon national economies, banks are highly regulated in most countries. Most nations have institutionalized a system known as fractional reserve banking, in which banks hold only a small reserve of the funds deposited and lend out the rest for profit. They are generally subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords. Banking in its modern sense evolved in the 14th century in the rich cities of Renaissance Italy but in many ways was a continuation of ideas and concepts of credit and lending that had its roots in the ancient world. In the history of banking, a number of banking dynasties have played a central role over many centuries. The oldest existing bank, Monte dei Paschi di Siena, was founded in 1472 in Siena, Italy. Risk in banking Business Banks face a number of risks in order to conduct their business, and how well these risks are managed and understood is a key driver behind profitability, and how much capital a bank is required to hold. Some of the main risks faced by banks include: Credit risk: risk of loss [citation needed] arising from a borrower who does not make payments as promised. Liquidity risk: risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). Market risk: risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. Operational risk: risk arising from execution of a company's business functions. Reputational risk: a type of risk related to the trustworthiness of business.
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Assignment on Cost of Capital and Capital Structure of MNCs

Macroeconomic risk: risks related to the aggregate economy the bank is operating in. Now lets deal with each type of risk in detail Market risk includes: Foreign Exchange Rate Risk Interest Rate Risk Price Risk Reinvestment Risk

Market Risk (Foreign exchange rate risk, Interest rate risk) Credit Risk Liquidity Risk Operational Risk

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