assignment finance and banking

Money and Banking

(7 reviews)

Robert E. Wright, NYU

ISBN 13: 9780982043080

Publisher: Saylor Foundation

Language: English

Formats Available

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Reviewed by Nabila Rahman Biju, Assistant Professor of Economics, Berea College on 11/14/23

I really liked the fact that the first few chapters started with very basic ideas which makes it easier for the beginners to start in this field. And I like the think-boxes. read more

Comprehensiveness rating: 5 see less

I really liked the fact that the first few chapters started with very basic ideas which makes it easier for the beginners to start in this field. And I like the think-boxes.

Content Accuracy rating: 4

The discussion of moral hazard and the so called 'evil practice' is a good way to introduce students about the financial system's drawbacks. They should realize that this current system is not the best we could do so far. Rather, it the accumulation of historical accidents and there is plenty of room for improvements in this current system. So yes, I think the content was pretty unbiased.

Relevance/Longevity rating: 5

With all the detailed examples, I found it to be quite relevant. I am teaching Money and Banking class currently, and I can find most of my important topics in this book as well. So, yes, I will say this book is relevant.

Clarity rating: 5

The language of the book is really reader-friendly and as I mentioned before, I felt a non-Econ or non-Business background student also can easily understand.

Consistency rating: 4

The content and topics of each consequent chapters flow well.

Modularity rating: 5

It's already way too divided into sub-topics at least in my opinion. No need to break it down further.

Organization/Structure/Flow rating: 3

Although it is not an e-book and only a pdf, still, putting in a list of contents could be done. I strongly recommend to have a list of contents with hyperlinks linking to each chapter as it really helps. Especially when a person is re-reading, its really annoying to keep scrolling.

Interface rating: 2

Would be nice to have hyperlinks.

Grammatical Errors rating: 5

Good writing

Cultural Relevance rating: 4

I would expect more discussion of other countries also the ancient times. But it's still very relevant.

I liked it quite a bit. Only adding a list of content is the only thing I would ask for. Thanks!

Reviewed by Ulmaskhon Kalandarova, Instructor, Colorado State University on 1/2/21

Comprehensiveness rating: 3 see less

Although the book covers majority of concepts in money and banking, but unfortunately it seems that all data is outdated and sometime the fundamental legislative laws like Dodd-Frank act not even mentioned. Also, more discussion of bank regulating system is recommended - it is very brief in chapter-11. The revised and more comprehensive version of this book is recommended. For example, this book could compare its' contents with Cecetti's Money and Banking book, which is widely used in teaching this course.

Fundamental concepts seem to be discussed very well, but the demonstration data seems to be a bit loose.

Relevance/Longevity rating: 4

The text is written in clear prose. I did not have any difficulty with its understanding.

Consistency rating: 5

Text is consistent with terminology, however the modern terminology could be also included - like bitcoins, hi tech , mobile banking issues

Modularity rating: 3

Modularity needs to be revised and added more parts for practice, brief summaries, real-life examples.

Structure is outdated - need to include at least some practice problems and explanation of their solutions for some of them in the text. Also, real life examples section would be a plus. Also, brief summary of chapter's main points could improve this book.

Interface rating: 3

I think the book should be revised due to very outdated display features - it seems very old and comparing for example to Cecetti's book in money and banking - I would not choose this book for teaching - because it does not have many different informative, practice, learn sections as other books have.

I didn't find any grammatical errors in the text.

Cultural Relevance rating: 5

I would recommend to add more data from developing nations banking system for informative and comparison/analysis purposes. This could give a brief explanation of different factors that effect developing countries banking systems, and their special characteristics.

Reviewed by Peter Mikek, Associate Professor, Wabash College on 12/22/19

This is a great book for any student that is exposed to questions of money and banking for the first time.The book is certainly comprehensive in covering most of the money and banking topics, reaching a bit into macroeconomics and international finance. The 26 chapters provide overview and numerous examples of standard Money and Banking courses/textbooks and, very likely, include more material than can be thoroughly covered in a semester course. The three chapters devoted totally to banking are complemented with standard coverage of monetary policy and well placed within macroeconomic framework. It is delightful that the focus on banks within financial sector is maintained through most of the text. The text includes a chapter on financial crisis, international finance, and several chapters reviewing and scaffolding a broader context for money and banking. I was puzzled by the fact that I could not locate the chapter of Financial Derivatives. However, I suspect that this was probably some error preparing the online PDF file. While the work is very broad in its scope the text in each sections is super focused and relatively short. While I am a fan of concise textbooks, I found it occasionally too limited (for example there is a chapter with only 6 pages of text that includes several unnecessary excursions into methodology and history).

Overall, I find the book very accurate and unbiased. In some sense the text strikes me as not completely polished but still great text. The remaining typos are not crucial for understanding and can be easily identified.Let me give you some examples: in an example of a balance sheet ,the author claim that liabilities are "things owNed," they place transaction deposits on one T account among bank's assets, in a scheme of a transmission mechanism they have an arrow turned the wrong way (EMP, net worth down), "nominal rates on risky securities had in fact soared in 1930-1933" should actually talk about the real rates, etc. Again, these are small remaining errors and a reader will be able to fix them easily as they go. I am convinced that the next iteration of the text will get rid of the remaining typos.

This is definitely one of the very strong attributes of this interesting text. The examples are definitely up-to-date as it includes examples from the recent financial crises and developments in international finance. But not only that, the author uses rich historical background artfully to place the more recent examples in historical context. This contributes to richer text and better understanding of several provided examples. I believe that the text will need relatively little in terms of updating it.

Clarity rating: 4

This is a fantastically clear presentation of ideas and concepts. The authors use Stop and Think boxes to expand upon the basic ideas with examples, Key Takeaways boxes to reiterate the most important points, Exercise boxes to provide hands-on opportunities. Each section starts with clearly spelled learning objectives. Super concise text leaves the reader with clear message. But maybe the most enjoyable feature of the text is vivacious, playful, and rich language. I am REALLY impressed with the rich vocabulary and engaging, occasionally truly erudite, nicely varied language ("if not insane, at least inane,” “Asymmetric information (that horrible three-headed hound from Hades),” “if you wrap your car around a tree,” etc.). The authors try to engage the average reader also with a number of colloquial expressions that are less to my taste ("those smakers," "kinda funny that," "darn high") but I guess that is just my taste.

The authors are consistent across the chapters, they use standard field specific vocabulary. I think they score high on this point.

This is another strong quality of the text. While some parts are absolutely essential in every Money and Banking text, such as time value of money or chapter on banking and one on monetary policy, there are parts that can easily be added or dropped based on preferences of the instructor. Chapters devoted to exchange rates or international monetary arrangements can easily be postponed to later courses. Similarly, students that already had a decent intermediate macroeconomics will not need chapters focused on macro. So, the text both allows for various arrangements of the building blocks in a variety of ways.

Organization/Structure/Flow rating: 5

The textbook follows a standard order in presentation of the material. Not only the sequencing but also parsing the material into logical units was done with the due care. This is actually essential for good learning success and they did if perfectly. Additionally, I already mentioned that each section has clearly spelled learning objective and Key Takeaways that contribute to transparent structure of the text. Finally, progression from one topic to the next is seamless and easy to follow.

Interface rating: 5

Navigation is easy and clear, the figures, excercises, Stop And Think boxes are clearly marked. The text consistently uses several different colors to indicate parts of the text or to emphasize this or that (such as tables). The interface is not only easy to use, it is also nicely appealing for the reader.

I found no issues with the grammar. Furthermore, I wish to emphasize again that the use charming and vivacious language.

I found the book to follow the usual standards regarding the cultural sensitivity and non-offensive language. Despite the fact that the book is devoted to functioning of a financial system in developed capitalist economy the text includes ample examples from across the globe - in particular in chapters on international finance. German reunification, Chinese high foreign reserves and exchange rate system, Argentine currency crises are just three of numerous examples that cross the cultural and geographical borders with ease and clarity.

This is an absolutely delightful text that uses fresh, clear, and playful language in the field that can be perceived as rather dry. The book will be best suited for beginners with first encounters with money and banking. For others, a skillful instructor can easy point out on what they should focus (and where are few remaining typos). The text is comprehensive and set in a way that will serve broad set of instructor's preferences; from those that wish to focus on international finance to those that wish to include some review of macroeconomics. One of the best attributes of the book is the fact that the author never loses its focus on banks and/or monetary policy. Overall, I find the text great.

Reviewed by Partha Gangopadhyay, Professor, St. Cloud State University on 6/10/19

The text provides a comprehensive coverage of Money and Banking topics. If anything, there is too much material in the book's 26 chapters for one course. Most colleges do not have more than one Money and Banking course. The book has enough... read more

Content Accuracy rating: 5

I have not detected any error in the text. I checked out some of the hyperlinks to outside resources. The links seem to work just fine. I would like to see the sources of the tables and figures listed below the tables/figures in the book.

Relevance/Longevity rating: 2

The text needs to be revised and updated. The tables and figures in the book provide information up to 2007-2008. This applies to many of the tables/figures in chapters 9, 10, 11, 15, 16, 18, 19, 20, and 21. There is a brief discussion of banking regulation in chapter 11. However, I did not see even a mention of the Gramm-Leach-Bliley Act of 1999, or the Dodd-Frank Act of 2010, or the Basle 111 capital requirements. The discussion in the books seems to end with the Riegle-Neal Act of 1995, and the Basle 11 requirements. Also, the suggested readings at the end of the chapters need to include more current articles and other resources. The fundamental concepts of money and banking have not materially changed over time. The book does a good job of explaining these concepts. However, the banking laws and data and statistics have changed over time. These need to be updated. The book was written in 2012. It is time for a newer edition. The updates can be easily implemented.

The book is written in clear and concise language. Beginning students should not have any difficulty in reading and understanding the concepts. Students will also be able to personally relate to many of the examples and anecdotes that are spread throughout the book.

The writing style is consistent throughout the book. I also like the consistent layout of the chapters. Each chapter and section begin with a set of learning objectives, and ends with 'Key Takeaways', and a list of suggested readings. I also like the 'Stop and Think' boxes in each chapter.

I may be able to cover 10 or 11 chapters from the book in a sixteen-week semester. As I mentioned elsewhere, there is enough material in the book for at least two 'Money and Banking' courses. It will be easy to pick 10-12 chapters from the book to cover in a 'Money and Banking' class. The text is not overly self-referential, and most chapters can stand on their own. The text can be easily divided into smaller sub-units that can be incorporated in different courses.

The text and the individual chapters are logically organized. The order of the chapters is clear, and the concepts are presented in a coherent and logical manner.

Interface rating: 4

I did not detect any issues with interface. I suggest numbering the equations in chapters 4-7, 9, 14, 15, 17, 18, 20, and 21. Also, the sources of the various tables/figures should be listed below the tables or figures. Several exercises are included in chapters 4-7, 9, 15, 17, 18, and 21. I am assuming that the solutions to these exercises will be made available to the instructors in supplementary materials in the book's website. However, I suggest that the answers to at least some of these exercises should be provided in an Appendix at the end of the book. It will also be helpful if a section of conceptual questions and/or numerical exercises is added at the end of each chapter. I also suggest adding a section in chapter 4 (and in other chapters) showing how to calculate the time value of money (and bond prices) using a financial calculator.

I have not seen any grammatical errors in the book.

I did not notice any cultural insensitivity in the book.

The book is comprehensive in the coverage of Money and Banking topics. However, the book is very outdated. A new edition of the book with up-to-date discussion of the banking regulatory framework, and well as current data and statistics is needed at this point. The concepts are easy to understand, and the book is well-written.

Reviewed by Laura Carolevschi, Assistant Professor, Winona State University on 6/20/17

In its 26 chapters, the textbook covers a wide array of money and banking topics, as well as macroeconomics topics with monetary policy applications. The treatment of the subjects is clear, easy to follow and relevant with applied examples. No... read more

The content is accurate, error-free and unbiased, at least in the sections I chose to review.

The theories discussed in the textbook are up-to-date, and will stand the test of time for a while. However, some of the data will need to be updated. I'm reviewing this book in 2017, and many of the graphs have data until 2007-2008.

The author uses a story-telling format that is easy to read and accessible to both beginners and advanced learners. The book has many examples that students might be able to relate to due to personal experience.

All chapters are using the same format. The terminology and concepts are used consistently throughout the text.

While the textbook covers a variety of topics, it is easily divisible into smaller sections. Each chapter is divided into several topics, and each sub-chapter is clearly organized around a single topic, while still easily integrating within the larger subject matter of each chapter. During a regular semester I am usually unable to cover an entire textbook, and I select some chapters to cover first, with a couple of chapters as "maybe", if we still have time at the end of the semester. This textbook can be easily organized in such a way.

The topics in the text are presented in a logical and clear fashion. The organization/structure/flow are consistent throughout the text. All chapters are organized in the same format, making the text easy to read and follow.

The text is free of any interface issues. Most images/tables/graphs were clear and easy to read. However, I encountered a couple of images that were unclear - on page 258, I could only read the names of the countries, but not the text in each box even after zooming in; the table on page 304 seems to not be visible in its entirety. Another thing that would make the book easier to navigate would be a table of contents with hyperlinks to each chapter. The .pdf version that I'm reviewing does not have it.

I could not find any grammar errors. (However, I found some typos - in a few instances, it seems that the space between the words is missing, likethis.)

The treatments of topics in this textbook is respectful of different cultures.

The book provides a comprehensive yet approachable coverage of several monetary policy issues. The format of the book make it versatile to several uses - as a standalone text in money and banking classes, or as supplementary reading in introductory or intermediary macroeconomics classes.

Reviewed by Wendy Usrey, Faculty Instructor, Colorado State University on 12/5/16

This book is fantastic in terms of the breadth of finance, money and banking topics. I have found that most money and banking texts have some of the topics I want to cover in my classes, but I have seen very few that contain all of the material I am looking for in one, easily digestible textbook. With 26 chapters covering everything from how money and banking applies to our everyday lives, to the theory of rational expectations and its implications for monetary policy, this book is so comprehensive I can easily see myself using it in several different finance classes as well as in various economics courses.

I have not seen any errors in terms of content or examples/problems in the text. However, some of the hyperlinks to outside resources are no longer working.

1. I was very excited to see all of the hyperlinks to external content (new stories, other texts, etc), but as mentioned above, quite a few of the hyperlinks are no longer working. Depending on the link this could be a relatively easy fix, but some of these sources may no longer exist and may need to be removed. While not particularly difficult, if the text refers to the content referenced by the link, portions of the text will need to be rewritten if the links are removed. I also noted a few places where the text is already in need of some updating, for example, the book does a good job of explaining the 2007-2008 Financial Crisis, along with concepts such as the “Lender of Last Resort” and monetary policy, but does not contain any discussion on quantitative easing. This was a very critical and important (as well as controversial) component of the Federal Reserve's response the Financial Crisis, so it should have been included in the text or added in an update.

Overall the text is written in a very accessible manner without sacrificing academic rigor. Concepts are explained fully but in such a way that students from a variety of backgrounds should be able to understand the content. As another reviewer mentioned, a glossary or index at the end of the text would be very useful for helping to navigate the text and find definitions of key terms quickly.

Terminology, writing style and framework remain consistent throughout the text.

Despite the amount of material, this text is very well organized. The content is broken up into manageable chunks with very clear learning objectives stated at the beginning and key takeaways at the end of each section. This format makes a big difference in terms of helping the reader stay oriented so they do not get lost in the world of financial jargon and concepts. I particularly liked how each chapter was organized with so many additional resources and references. I particularly like the clear chapter objectives, followed by learning objectives for each sub-section. The "suggested reading" at the end of each chapter, as well as the "stop and think" boxes make the text very approachable for students and give the instructor a lot of great ideas for incorporating outside content and examples into the class.

The order in which the topics are presented is also very good with progression between concepts fluid and intuitive, but hyperlinks referring to other parts of the text make it very easy for an instructor to teach the topics in an order that suits their individual class structure without the worry of having students end up "lost in the text."

The interface of the book is very easy to navigate. Content displays as expected and does not seem to be affected by the format (I reviewed both the web interface as well as the downloaded PDF version). One thing that would make navigation easier would be to add hyperlinks from the table of contents to the chapters in the downloadable PDF version. This feature is available when viewing on the web, but did not appear as an option once I downloaded the PDF.

No grammar or spelling errors were found during my review.

As expected from an academic text, there are no insensitive or offensive references in the text. Additionally, the information is easy to understand regardless of cultural background and can easily be used in diverse classes with little to no adaptation.

Overall I think this is a solid, well written text that contains a lot of relevant and useful information. The world of finance can be intimidating and the author does a wonderful job of helping make the subject matter approachable and interesting, particularly with the use of humor and clever chapter titles. I intend to use this text in several of my own classes that range from introductory up to intermediate level classes.

Reviewed by Mahmoud Al-Odeh, Assistant Professor, Bemidji State University on 6/10/15

This is a good textbook that covers a wide range of topics in the economic analysis theory and application. The book consists of 24 chapters that cover current topics related such as Interest Rates, Inflation, Rate of Return, Future and Current Value of Money, Money Supply Process, Monetary Policy Tools and Foreign Exchange. The book also disscussed Balance Sheet and a T-account and provided strategies for Bank Management. The chapters include a good examples to be used in the classroom to explain the topic. The exercises at the end of each topic are extremely helpful and can be used as homework assignments.

I have reviewed several examples given in the book and I found that the book is accurate and contains no errors.

The content and the topics in the book is very good for introductory and intermediate economy classes. The examples provided are current and up-to-date. As any textbook, it is recommended changing and updating the content at least once every five years to include more relevant examples and case studies.

The book is written in a way that students can easily understand the content without difficulties. I also like the funny style (e.g. “grandma, bless her soul,” examples) and the creativity in writing the exercises. This creativity in writing will keep students more engaged with the book content. The examples are clear and short to the point.

The textbook is consistent in terminology and framework. The terms use in each chapter are consistent across the chapters. It is recommended to include a section (e.g. appendix) for key terms & definitions.

The chapters are organized and divided into subsections/subtopics with objectives that support the overall chapters’ objectives. These objectives that are listed at the beginning of each topic are very helpful to assess students’ knowledge. The examples provided in each chapter can be used by instructors to explain the topic in each chapter and to measure the achievements of specific objectives. Some of the features that I like in this textbook are: “key takeaways” sections summarize important points in the topic/chapter; “Suggested Reading” sections provide resources and links to be used for more information; “Stop and Think Box” sections provide discussion topics that make students think about the big picture of the chapter; and “exercises” sections can be used to assess students’ knowledge regarding specific chapter/topic objectives.

Excellent. The logical organization of the chapters made the topics presented more appealing and interesting to students. The book organized using components such as: topics objectives, explanations, examples, key takeaways, Stop and Think Box, and exercises. All these components made the structure of the book easy to follow.

Very good. I found no issues. For future improvements, it would be helpful if special techniques or applications used for writing equations. For example, the equation on page 63 “FV = PV(1 + i) n” it should be PV = FV/(1 + i) ^ n as it is summarized in “key takeaways” on page 66. Also, it is recommended separating the examples giving from the discussion or the explanation. It could be the explanation and discussion first and then section with “example X.X” heading to show an example.

No grammar issues found.

The text is not culturally insensitive or offensive in any way. The examples and topics provided are applicable in any country and for any cultural environment.

This is a good textbook that covers theory and application of the economic analysis. The book structure and the writing style made the topics easy to understand by students. It is highly recommended to be used for introductory and intermediate economy classes. The examples and exercises provided are excellent to be used as in-class activities and homework assignments.

Chapter 1: Money, Banking, and Your World
Chapter 2: The Financial System
Chapter 3: Money
Chapter 4: Interest Rates
Chapter 5: The Economics of Interest-Rate Fluctuations
Chapter 6: The Economics of Interest-Rate Spreads and Yield Curves
Chapter 7: Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities
Chapter 8: Financial Structure, Transaction Costs, and Asymmetric Information
Chapter 9: Bank Management
Chapter 10: Innovation and Structure in Banking and Finance
Chapter 11: The Economics of Financial Regulation
Chapter 12: Financial Derivatives
Chapter 13: Financial Crises: Causes and Consequences
Chapter 14: Central Bank Form and Function
Chapter 15: The Money Supply Process and the Money Multipliers
Chapter 16: Monetary Policy Tools
Chapter 17: Monetary Policy Targets and Goals
Chapter 18: Foreign Exchange
Chapter 19: International Monetary Regimes
Chapter 20: Money Demand
Chapter 21: IS-LM
Chapter 22: IS-LM in Action
Chapter 23: Aggregate Supply and Demand and the Growth Diamond
Chapter 24: Monetary Policy Transmission Mechanisms
Chapter 25: Inflation and Money
Chapter 26: Rational Expectations Redux: Monetary Policy Implications

Ancillary Material

About the book.

The financial crisis of 2007-8 has already revolutionized institutions, markets, and regulation. Wright's Money and Banking V 2.0 captures those revolutionary changes and packages them in a way that engages undergraduates enrolled in Money and Banking and Financial Institutions and Markets courses.

Minimal mathematics, accessible language, and a student-oriented tone ease readers into complex subjects like money, interest rates, banking, asymmetric information, financial crises and regulation, monetary policy, monetary theory, and other standard topics. Numerous short cases, called "Stop and Think" boxes, promote internalization over memorization. Exercise drills ensure basic skills competency where appropriate. Short, snappy sections that begin with a framing question enhance readability and encourage assignment completion.

The 2.0 version of this text boasts substantive revisions (additions, deletions, rearrangements) of almost every chapter based on the suggestions of many Money and Banking instructors.

Some specific highlights are: Chapter 11 now contains enhanced descriptions of recent regulatory changes, including Dodd-Frank, Chapter 12 is an entirely new chapter on derivatives covering forwards, futures, options, and swaps that also including comprehensive treatment of the causes and consequences of financial crises, and Chapter 14 has updated discussions of the Federal Reserve's monetary policy tools, including paying interest on reserves, and the structure and leadership of the European Central Bank.

Recent financial turmoil has increased student interest in the financial system but simultaneously threatens to create false impressions and negative attitudes. This up-to-date text by a dynamic, young author encourages students to critique the financial system without rejecting its many positive attributes. Peruse the book online now to see for yourself if this book fits the needs of your course and students.

This textbook has been used in classes at: Augustana College, Central Michigan University, Florida State University, Lyndon State College, Princeton University, Rutgers University, University of Southern Maine, Western Oregon University., Westminster College.

About the Contributors

Robert E. Wright was born in 1969 in Rochester, New York, to two self-proclaimed factory rats.

"I recall little of my earliest days except the Great Inflation and oil embargo, which stretched the family budget past the breaking point. The recession in the early 1980s also injured my family’s material welfare and was seared into my brain. My only vivid, noneconomic memories are of the Planet of the Apes films (all five of them!) and the 1972 Olympics massacre in Munich; my very young mind conflated the two because of the aural similarity of the words gorilla and guerilla.

After taking degrees in history from Buffalo State College (B.A., 1990) and the University of Buffalo (M.A., 1994; Ph.D., 1997), I began teaching a variety of courses in business, economics, evolutionary psychology, finance, history, and sociology at Temple University, the University of Virginia, sundry liberal arts colleges, New York University’s Stern School of Business, and, since 2009, Augustana College (the one in South Dakota, not the one in Illinois), where I am additionally the director of the Thomas Willing Institute for the Study of Financial Markets, Institutions, and Regulations. I’ve also been an active researcher, editing, authoring, and coauthoring books about the development of the U.S. financial system (Origins of Commercial Banking, Hamilton Unbound, Wealth of Nations Rediscovered, The First Wall Street, Financial Founding Fathers, One Nation Under Debt), construction economics (Broken Buildings, Busted Budgets), life insurance (Mutually Beneficial), publishing (Knowledge for Generations), bailouts (Bailouts), public policy (Fubarnomics), and investments (The Wall Street Journal Guide to the 50 Economics Indicators That Really Matter). Due to my unique historical perspective on public policies and the financial system, I’ve also become something of a media maven, showing up on NPR and other talk radio stations, as well as various television programs, and getting quoted in major newspapers like the Wall Street Journal, New York Times, Chicago Tribune, and the Los Angeles Times. I publish op-eds and make regular public speaking appearances nationally and, increasingly, internationally. I am also active in the Museum of American Finance and sit on the editorial board of its magazine, Financial History.

I wrote this textbook because I strongly believe in the merits of financial literacy for all. Our financial system struggles sometimes in part because so many people remain feckless financially. My hope is that people who read this book carefully, dutifully complete the exercises, and attend class regularly will be able to follow the financial news and even critique it when necessary. I also hope they will make informed choices in their own financial lives."

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Introduction to Money and Banking

Chapter objectives.

In this chapter, you will learn about:

Defining Money by Its Functions
Measuring Money: Currency, M1, and M2
The Role of Banks
How Banks Create Money

Bring It Home

The many disguises of money: from cowries to crypto.

Here is a trivia question: In the history of the world, what item did people use for money over the broadest geographic area and for the longest period of time? The answer is not gold, silver, or any precious metal. It is the cowrie, a mollusk shell found mainly off the Maldives Islands in the Indian Ocean. Cowries served as money as early as 700 B.C. in China. By the 1500s, they were in widespread use across India and Africa. For several centuries after that, cowries were the means for exchange in markets including southern Europe, western Africa, India, and China: everything from buying lunch or a ferry ride to paying for a shipload of silk or rice. Cowries were still acceptable as a way of paying taxes in certain African nations in the early twentieth century.

What made cowries work so well as money? First, they are extremely durable—lasting a century or more. As the late economic historian Karl Polyani put it, they can be “poured, sacked, shoveled, hoarded in heaps” while remaining “clean, dainty, stainless, polished, and milk-white.” Second, parties could use cowries either by counting shells of a certain size, or—for large purchases—by measuring the weight or volume of the total shells they would exchange. Third, it was impossible to counterfeit a cowrie shell, but dishonest people could counterfeit gold or silver coins by making copies with cheaper metals. Finally, in the heyday of cowrie money, from the 1500s into the 1800s, governments, first the Portuguese, then the Dutch and English, tightly controlled collecting cowries. As a result, the supply of cowries grew quickly enough to serve the needs of commerce, but not so quickly that they were no longer scarce. Money throughout the ages has taken many different forms and continues to evolve even today with the advent of cryptocurrency. What do you think money is?

The discussion of money and banking is a central component in studying macroeconomics. At this point, you should have firmly in mind the main goals of macroeconomics from Welcome to Economics! : economic growth , low unemployment , and low inflation . We have yet to discuss money and its role in helping to achieve our macroeconomic goals.

You should also understand Keynesian and neoclassical frameworks for macroeconomic analysis and how we can embody these frameworks in the aggregate demand/aggregate supply (AD/AS) model. With the goals and frameworks for macroeconomic analysis in mind, the final step is to discuss the two main categories of macroeconomic policy: monetary policy, which focuses on money, banking and interest rates; and fiscal policy, which focuses on government spending, taxes, and borrowing. This chapter discusses what economists mean by money, and how money is closely interrelated with the banking system. Monetary Policy and Bank Regulation furthers this discussion.

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There are 13 modules in this course

The last three or four decades have seen a remarkable evolution in the institutions that comprise the modern monetary system. The financial crisis of 2007-2009 is a wakeup call that we need a similar evolution in the analytical apparatus and theories that we use to understand that system. Produced and sponsored by the Institute for New Economic Thinking, this course is an attempt to begin the process of new economic thinking by reviving and updating some forgotten traditions in monetary thought that have become newly relevant.

Three features of the new system are central. Most important, the intertwining of previously separate capital markets and money markets has produced a system with new dynamics as well as new vulnerabilities. The financial crisis revealed those vulnerabilities for all to see. The result was two years of desperate innovation by central banking authorities as they tried first this, and then that, in an effort to stem the collapse. Second, the global character of the crisis has revealed the global character of the system, which is something new in postwar history but not at all new from a longer time perspective. Central bank cooperation was key to stemming the collapse, and the details of that cooperation hint at the outlines of an emerging new international monetary order. Third, absolutely central to the crisis was the operation of key derivative contracts, most importantly credit default swaps and foreign exchange swaps. Modern money cannot be understood separately from modern finance, nor can modern monetary theory be constructed separately from modern financial theory. That's the reason this course places dealers, in both capital markets and money markets, at the very center of the picture, as profit-seeking suppliers of market liquidity to the new system of market-based credit.

Introduction

The first two lectures paint a picture of the monetary system as the essential infrastructure of a decentralized market economy. The second lecture, "The Natural Hierarchy of Money", is a kind of high-level overview of the entire course, so don't expect to fully understand it until you look back after completing the rest of the course. Nevertheless it provides essential orientation for what comes after. Lectures notes for these and subsequent lectures may be found in the very first segment of this module.

What's included

12 videos 2 readings

12 videos • Total 123 minutes

The Big Picture • 19 minutes • Preview module
Prerequisites? • 7 minutes
What is a Bank, a Shadow Bank, a Central Bank? • 12 minutes
Central Themes • 13 minutes
Reading: Allyn Young • 3 minutes
FT: The Eurocrisis, Liquidity vs. Solvency • 10 minutes
Hierarchy of Financial Instruments • 9 minutes
Hierarchy of Financial Institutions • 6 minutes
Dynamics of the Hierarchy • 6 minutes
Discipline and Elasticity, Currency Principle and Banking Principle • 8 minutes
Hierarchy of Market Makers • 9 minutes
Managing the Hierarchy • 18 minutes

2 readings • Total 20 minutes

Lecture Notes (for download) • 10 minutes
Allyn Young • 10 minutes

Introduction, continued

The next two lectures are meant to introduce a key analytical tool, the balance sheet approach to monetary economics, that we will be using repeatedly throughout the course. As inspiration, first I provide a concrete example of how the approach works by "translating" the Allyn Young reading into the balance sheet language. I follow that with a more systematic introduction to this essential tool.

20 videos 1 reading 1 quiz

20 videos • Total 129 minutes

FT: Quantitative Easing and the Fed • 7 minutes • Preview module
Allyn Young: Money and Economic Orthodoxy • 9 minutes
National Banking System Before the Fed • 3 minutes
Civil War Finance, Bonds, and Loans • 8 minutes
Civil War Finance, Legal Tenders • 7 minutes
National Banking System, Origins • 6 minutes
National Banking System, Instability • 5 minutes
Federal Reserve System, Plan • 6 minutes
Federal Reserve System, Actual • 6 minutes
FT: Dealer of Last Resort • 5 minutes
Reading: Hyman Minsky • 3 minutes
Sources and Uses Accounts • 6 minutes
Payments: Money and Credit • 5 minutes
Payments: Discipline and Elasticity • 4 minutes
The Survival Constraint • 3 minutes
Payment Example: Money and Credit • 10 minutes
Flow of Funds Accounts • 10 minutes
The Survival Constraint, Redux • 2 minutes
Liquidity, Long and Short • 9 minutes
Financial Fragility, Flows and Stocks • 6 minutes

1 reading • Total 10 minutes

Hyman Minsky • 10 minutes

1 quiz • Total 30 minutes

Introduction • 30 minutes

Banking as a Clearing System

In the next four lectures, we build intuition by viewing banking as a payments system, in which every participant faces a daily settlement constraint (a survival constraint). From this point of view, the wholesale money market plays a key role by allowing banks to relax the discipline of a binding settlement constraint, delaying final payment by putting settlement off until a later date. The relative importance of the various money markets has changed since the 2008 crisis--Fed Funds is now less important--but the conceptual framework remains valid, indeed not only for dollar money markets but also for non-dollar money markets.

20 videos • Total 125 minutes

FT: Martin Wolf on QE3 • 3 minutes • Preview module
One Big Bank • 8 minutes
Multiple Banks, A Challenge • 3 minutes
Reading: Charles F. Dunbar • 2 minutes
Correspondent Banking, Bilateral Balances • 10 minutes
Correspondent Banking, System Network • 3 minutes
Clearinghouse, Normal Operations • 8 minutes
Clearinghouse, Private Lender of Last Resort • 10 minutes
Central Bank Clearing • 4 minutes
Central Bank Cooperation • 5 minutes
FT: European Bank Deleveraging • 5 minutes
What are Fed Funds? • 5 minutes
Payment Settlement versus Required Reserves • 1 minute
Payment Elasticity/Discipline, Public and Private • 9 minutes
The Function of the Fed Funds Market • 9 minutes
Payment versus Funding: An Example • 11 minutes
Brokers versus Dealers • 2 minutes
Payments Imbalances and the Fed Funds Rate • 7 minutes
Secured versus Unsecured Interbank Credit • 5 minutes
Required Reserves, Redux • 7 minutes
Dunbar • 10 minutes
Banking as a Clearing System • 30 minutes

Banking as a Clearing System, continued

The next two lectures extend the payments system frame to non-banks by bringing in repo markets, and to the international monetary system by bringing in Eurodollar markets. Here, as in the previous two lectures, the emphasis is on settlement, and so implicitly on so-called "funding liquidity". The last three segments of the Eurodollar lecture, on the failure of two seemingly obvious arbitrage conditions, are meant to motivate the shift to market-making and "market liquidity" in the next module.

20 videos • Total 131 minutes

FT: The Impact of QE3 • 2 minutes • Preview module
Money Market Interest Rate Patterns • 3 minutes
What is Repo? • 3 minutes
Repo in Balance Sheets • 7 minutes
Comparison with Fed Funds • 5 minutes
Legal Construction of Repo • 9 minutes
Security Dealers Balance Sheet • 11 minutes
Repo, Modern Finance, and the Fed • 8 minutes
Interest Rate Spreads: Before the Crisis • 5 minutes
Interest Rate Spreads: After the Crisis • 8 minutes
FT: Ring-fencing and the Volcker Rule • 9 minutes
The Eurodollar Market in Crisis • 4 minutes
What are Eurodollars? • 7 minutes
Why is There a Eurodollar Market? • 4 minutes
Eurodollar as Global Funding Market • 11 minutes
Liquidity Challenge of Eurodollar Banks • 10 minutes
FRA as Implicit Swap of IOUs • 4 minutes
Forward Parity, Interest Rates, EH • 3 minutes
Forward Parity, Exchange Rates, UIP • 5 minutes
Forward Rates are NOT Expected Spot Rates • 2 minutes
Bagehot • 10 minutes
Banking as a Clearing System, continued • 30 minutes

Banking as Market Making

"Market liquidity" is supplied by dealers who stand ready to absorb temporary imbalances in supply and demand by taking the imbalance onto their own balance sheets, for a price. From this point of view, banks can be considered a special kind of dealer, since they absorb imbalances in payment flows. The first lecture is meant to build intuition by using our familiar balance sheet method to make sense of how this all worked in a system much simpler than our own. The second lecture introduces a formal model of the economics of the dealer function, which we will be using throughout the rest of the course.

16 videos 1 reading 1 quiz

16 videos • Total 114 minutes

FT: Depreciation of Iran's Currency • 3 minutes • Preview module
Reading: John Hicks • 3 minutes
Bagehot's World, Wholesale Money Market • 7 minutes
Economizing on Notes: Deposits, Acceptances • 8 minutes
Managing Cash Flow: Discount, Rediscount • 7 minutes
Market Rate of Interest • 2 minutes
Central Bank and Bank Rate • 8 minutes
The Bagehot Rule, Origin of Monetary Policy • 4 minutes
Limits on Central Banking: Internal vs. External Drain • 10 minutes
FT: Asymmetric Credit Growth in Europe • 6 minutes
Market Liquidity, Dealers, and Inventories • 7 minutes
Two-Sided Dealer Basics • 6 minutes
Economics of the Dealer Function: the Treynor Model • 11 minutes
Leveraged Dealer Basics • 7 minutes
Real World Dealers • 7 minutes
Arbitrage and the Assumption of Perfect Liquidity • 9 minutes
Hicks • 10 minutes
Banking as Market Making • 30 minutes

Banking as Market Making, continued

Here we adapt the Treynor model to banks, which we conceptualize as dealers in money, specifically term funding. Like Treynor's security dealers, banks supply market liquidity for a price. But sometimes, in a financial crisis, demand for market liquidity overwhelms supply, and that's where the central bank comes in, as dealer of last resort in money markets. And if the crisis is big enough, as 2007-2009, the central bank comes in as dealer of last resort in capital markets as well.

16 videos • Total 125 minutes

FT: Money Market Mutual Funds • 6 minutes • Preview module
Banks as Money Dealers, a Puzzle • 4 minutes
Security Dealers as Money Dealers, Matched and Speculative Book • 11 minutes
Adapting Treynor to Liquidity Risk • 6 minutes
Digression: Evolution of American Banking • 11 minutes
The Fed in the Fed Funds Market • 12 minutes
Return to the Initial Puzzle • 2 minutes
FT: Citibank and the SIVs • 5 minutes
The Art of Central Banking • 3 minutes
Evolution of Monetary Policy: 1951-1987 • 7 minutes
The Taylor Rule: 1987-2007 • 7 minutes
Monetary Transmission Mechanism • 10 minutes
Anatomy of a Normal Crisis • 8 minutes
Anatomy of a Serious Crisis • 4 minutes
Should the Fed Intervene or Not? • 8 minutes
The Fed as Dealer of Last Resort: 2007-2009 • 15 minutes
Treynor • 10 minutes
Banking as Market Making, continued • 30 minutes

Midterm review and exam

The first twelve lectures have introduced all of the main concepts of the course. The midterm exam gives you a chance to test whether you have mastered these concepts before extending them into new areas in the second part of the course. But before you try the exam, first use the review lecture, and the questions from students, to review the main concepts.

10 videos 1 quiz

10 videos • Total 63 minutes

FT: Trade Credit and the Eurocrisis • 5 minutes • Preview module
Inspiration: The Origin of the Fed • 3 minutes
Central Bank Operations, Normal Times • 7 minutes
Central Bank Operations, Crisis Times • 4 minutes
Settlement Risk, Payments, and Market-making • 4 minutes
Q: Standard and Subordinate Coin • 2 minutes
Q: War Finance as Financial Crisis • 4 minutes
Q: Forward Parity • 7 minutes
Q: Payments, CHIPS and Fedwire • 12 minutes
Q: Fed Balance Sheet Operations • 10 minutes
Midterm • 30 minutes

International Money and Banking

The next four lectures extend the "money view" perspective to the larger world of multiple national monies by thinking about the international monetary system as a payment system, and by thinking of banks as market makers in foreign exchange. The first lecture is introductory and conceptual, while the second builds intuition by "translating" Mundell's account of the development of the international monetary system into money view language (similar to what we did at the beginning of the course for Allyn Young's account of the development of the US monetary system).

18 videos 1 reading 1 quiz

18 videos • Total 136 minutes

FT: Autonomy of Bank of Japan • 2 minutes • Preview module
Key Currencies as a Hierarchical System • 8 minutes
What is Money? Chartalism versus Metallism • 8 minutes
Chartalism as a Theory of Money • 2 minutes
Quantity Theory of Money • 4 minutes
Purchasing Power Parity • 3 minutes
Metallism as a theory of money • 5 minutes
A Money View of International Payments, FX Dealers • 11 minutes
Chartallism, Metallism, and the Money View Compared • 4 minutes
Private and Public Money: A Hybrid System • 7 minutes
Hybridity in FX Market-making • 5 minutes
FT: Costs of Japan's Monetary Policy • 2 minutes
Reading: Robert Mundell • 10 minutes
Act 1 (1900-1933): Confrontation of the Fed with the Gold Standard • 11 minutes
Act 2 (1934-1971): Contradiction Between Keynesian National Management and the Bretton Woods Fixed Rate System • 14 minutes
The Dollar System • 7 minutes
Act 3 (1972-1999): Flexible exchange, Learning from Experience • 8 minutes
Act 4: Global Financial Crisis, Limits of Central Bank Cooperation • 17 minutes
Mundell • 10 minutes
International Money and Banking • 30 minutes

International Money and Banking, continued

The next two lectures use the Treynor model to understand how exchange rates are determined in dealer markets. In the second, we confront directly the puzzle we observed earlier in the course, namely why uncovered interest parity (UIP) fails to hold in real world markets.

15 videos 1 reading 1 quiz

15 videos • Total 126 minutes

FT: European Money Market Funds Shifting to Asia and European Core Countries • 2 minutes • Preview module
International Transactions under the Gold Standard • 11 minutes
Dealer Model for Foreign Exchange • 10 minutes
Central Banking, Defense of Domestic Exchange • 8 minutes
Bank of England, Defense Against External Drain • 12 minutes
Toward a Theory of Exchange, Without the Gold Standard • 9 minutes
FT: High Frequency Trading • 4 minutes
Uncovered Interest Parity (UIP) and the Expectations Hypothesis of the Term Structure (EH) • 2 minutes
FX Dealers Under the Gold Standard, Redux • 5 minutes
Private FX Dealing System • 10 minutes
Economics of the Dealer Function, Speculative Dealer • 5 minutes
Economics of the Dealer Function, Matched-book Dealer • 6 minutes
Digression: Why do UIP and EH Fail? • 9 minutes
Central Bank as FX Dealer of Last Resort • 16 minutes
Reading: McCauley on Internationalization of Renminbi • 10 minutes
Kindleberger • 10 minutes
International Money and Banking, continued • 30 minutes

Banking as Advance Clearing

The next four lectures extend the money view to the larger financial world of capital markets, where the price of risk is determined in dealer markets for swaps of various kinds. The first lecture is a kind of conceptual introduction, while the second translates the standard finance account of forwards and futures into money view terms, as key building block for what comes after.

19 videos 1 reading 1 quiz

19 videos • Total 134 minutes

FT: Shadow Banking • 4 minutes • Preview module
Bagehot's World: Separation of Money Markets and Capital Markets • 8 minutes
The New World: Integration of Money Markets and Capital Markets • 10 minutes
Funding Liquidity Versus Market Liquidity • 2 minutes
Digression: Schumpeter on Banking and Economic Development • 4 minutes
Payment Versus Funding • 5 minutes
Reading: Gurley and Shaw • 2 minutes
Financial Evolution: Indirect Finance to Direct Finance • 13 minutes
Banking Evolution: Loan-based Credit to Market-based Credit • 11 minutes
Preview: Central Banking and Shadow Banking • 8 minutes
FT: Argentina in Court to Fight Debt Ruling • 4 minutes
Banking as Advance Clearing • 5 minutes
Forwards versus Futures • 13 minutes
Forward Contracts, Fluctuations in Value and Final Cash Flow • 14 minutes
Futures Contracts, Fluctuations in Value and Daily Cash Flows • 6 minutes
Cash and Carry Arbitrage, Defined • 7 minutes
Cash and Carry Arbitrage, Explained as Liquidity Risk • 5 minutes
Cash and Carry Arbitrage, Explained as Counterparty Risk • 2 minutes
Cash and Carry Arbitrage, as a Natural Banking Business • 3 minutes
Gurley and Shaw • 10 minutes
Banking as Advance Clearing • 30 minutes

Banking as Advance Clearing, continued

In the modern economy, the price of risk is determined in swap markets that distinguish specific forms of risk, most importantly interest rate swaps and credit default swaps. The Treynor model can be adapted to understand how the price of risk is formed in dealer markets.

19 videos • Total 130 minutes

FT: Sovereign Debt Crises • 3 minutes • Preview module
Reading: FOMC Report (1952) • 7 minutes
Treasury-swap Spread, a Puzzle • 11 minutes
What is a Swap? • 2 minutes
Why swap? An Example from Stigum • 10 minutes
Market Making in Swaps • 8 minutes
Money Market Swaps, Example • 5 minutes
Life in Arbitrage Land • 5 minutes
Treasury-swap Spread, Liquidity Risk or Counterparty Risk? • 7 minutes
FT: Internationalization of the Euro • 5 minutes
Credit Indices • 3 minutes
Fischer Black (1970), Risk-free Security • 2 minutes
What is a Credit Default Swap (CDS)? • 6 minutes
Corporate Bonds • 3 minutes
CDS Pricing • 11 minutes
Market Making in CDS • 4 minutes
Example: Negative Basis Trade and Liquidity Risk • 10 minutes
Example: Private backstop of Marketmaking in CDS • 15 minutes
Example: Synthetic CDO as Collateral Prepayment • 6 minutes
FOMC • 10 minutes
Banking as Advance Clearing, continued • 30 minutes

Money in the Real World

In this final module, we bring the entire course together. These two lectures build on everything that came before, and show how all the pieces fit together into a unified whole. Specifically, the first lecture uses the conceptual apparatus of the money view to make sense of shadow banking as the quintessential form of banking for the modern financially globalized world. And the second lecture shows how the conceptual apparatus of the money view fits with standard economics view and finance view, by drawing attention to dimensions of the world from which the standard views abstract.

17 videos 1 reading 1 quiz

17 videos • Total 133 minutes

FT: Regulation of Shadow Banking • 3 minutes • Preview module
Shadow Banking vs Traditional Banking • 6 minutes
Liquidity and Solvency Backstops • 7 minutes
Global Dimension • 5 minutes
Evolution of Modern Finance • 3 minutes
What is Shadow Banking? • 12 minutes
Backstopping the Market Makers • 7 minutes
Regulation of Systemic Risk • 6 minutes
Regulation of Collateral and Payment Flows • 10 minutes
Private Backstop and Public • 8 minutes
FT: Future of Banking • 4 minutes
Three World Views • 15 minutes
Economics View: Commodity Exchange • 8 minutes
Finance View: Risk • 15 minutes
The Education of Fischer Black • 4 minutes
Steps From the Finance View to the Money View • 7 minutes
A Money View of Economics and Finance • 5 minutes
Shadow Banking • 10 minutes
Money in the Real World • 30 minutes

The previous module operated in effect as a review of the entire course, so if you were able to make sense of those lectures, you are ready for the final. But maybe you first want to have a look back at the second lecture, "The Natural Hierarchy of Money", for a high-level summary of the essential concepts of the money view. For almost everybody, the money view is a new and unfamiliar way of thinking about the world, and it takes a while to get used to it. The purpose of this course is to plant the seed, by demonstrating the value of this way of thinking for making sense of real world problems. Once you are done with the final exam, the real work begins, of using the money view to make sense of whatever real world problems confront you in your own daily life.

Final Exam • 30 minutes

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Reviewed on Aug 15, 2017

Probably the best course I've ever taken! The money view approach is very unique in itself. Professor Mehrling's old school way of teaching is very refreshing indeed!

Reviewed on Nov 18, 2017

This course is really useful to me ... I was always interested on monetary and fiscal policies and associate mechanism in Macroeconomics and this course covers the Monetary part in good details.

Reviewed on Jun 27, 2020

Extremely helpful is understanding the money view of banking system. One of the best courses. A small suggestion - it can be interspersed with more examples especially from the emerging markets.

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Loan Participation Vs Assignment

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Sub-participation

Sub-participation is a form of loan participation in which a lender shares its risk with a second party. This type of loan participation does not change the documentation of the loan. This type of loan participation can also include future amounts for loans that have not yet been fully disbursed, such as a revolving credit facility.

The legality of sub-participation is dependent on the conditions of the loan agreement. In general, a loan participant cannot enforce the loan or proceed against the collateral on their own. Furthermore, the borrower may not even be aware that the loan participant is involved. However, the seller of the participation retains the right to enforce or compromise the loan, as well as to amend it without the consent of the participant.

As for drafting sub-participation agreements, there are many ways to do so. But it is important to include at least the following provisions: The term of the agreement, the rate of interest, and the repurchase provisions. These provisions should be included in the sub-participation or assignment agreement.

Assignment and sub-participation are standard terms in inter-bank transactions. We will examine the purposes of the loan participation and assignment agreements, as well as the terms of the transaction. While they are essentially interchangeable, they are fundamentally different.

Loan participation and assignment are both ways to transfer ownership of a loan. Assigning a loan to a third party or sub-assigning it to yourself is a common way to transfer the loan.

The terms “loan participation” and “assignment” are often used in the banking industry. Both terms refer to the transfer of a loan’s rights and payments between two financial institutions. We’ll look at what each term means and how they differ from each other.

Loan participation has long been a common form of loan transfer. Its advantages over other loan transfer methods include the ability to diversify a portfolio and limit risk. It also eliminates the need for loan servicing. However, this option can be problematic when it differs from underlying loans. For this reason, it’s important to structure loan participation carefully.

Whether a loan is a participation or an assignment depends on a variety of factors. The percentage of loan ownership, relationship with the other financial institution, and confidence in the other party are all important considerations. However, the basic difference between participation and assignment is that the former involves the original lender continuing to manage the loan while the latter takes on the responsibility of doing so.

As a rule, loan participation is a good option if the original lender does not want to keep the title of the loan. It allows the borrower to avoid the costs associated with the loan and is more attractive for borrowers. In addition, loan participation arrangements can be more flexible than outright assignments. However, it’s important to make sure that the arrangement you enter into is formal. This will prevent any confusion or conflict down the road.

Syndication

Understanding the differences between loan participation and syndication is important for lenders. Understanding these two options can help them find the best solutions for their lending needs. Syndication is a common type of lending program where lenders pool their loans together to reduce the risks of defaults. Loan participation programs can be more complex and require due diligence to be effective.

Syndicated lending allows lenders to access the expertise and business relationships of their fellow lenders while maximizing their exposure to deal flow. However, lenders who join a syndicated lending arrangement often give up some of their independence and flexibility to take unilateral action. In addition, these arrangements often involve the involvement of legal counsel, which can also be important.

A loan participation arrangement is a group of lenders coming together to fund a large loan. A lead bank underwrites the loan and sells portions of it to other financial institutions. Loan syndication, on the other hand, is an arrangement whereby multiple financial institutions pool their money together and make one large loan. In this type of arrangement, the original lender transfers the rights and obligations to the purchasing financial institution. The risk is then shared among the participating lenders, allowing them to share in the interest and the risks of the loan’s default.

A syndication contract can be structured in as many tranches as necessary to meet the borrowing needs of a customer. The underlying contract will contain a commitment contract that specifies the ratio of participation among the participants. Each tranche will have a borrower, which will be a common participant or may be different. The contract will require that each participant fulfill their commitments before the scheduled due dates.

Loan participation and assignment are standard transactions between banks. They are similar in some respects but have different purposes.

There are many types of loan participation agreements. Some involve a full assignment, while others are a sub-participation. If you are involved in loan participation or assignment, you need to understand which type of agreement applies to your situation. There are several types of loan participation agreements, including sub-participation agreements, undisclosed agencies, and assignments.

Sub-participation agreements are typically used to assign part of the loan amount to a new lender, and the loan documentation remains unchanged. In addition, these types of agreements include future amounts, which may be provided as part of a revolving credit facility or a portion of a loan that hasn’t been fully disbursed.

Loan participation is a popular option for lenders to limit their exposure to borrowers. Lenders may sell a portion of the loan to an investor or sell a portion of their interest to another party. While the transfer of a loan portion does not always require the consent of the transferor, lenders must consider participating interest guidelines and the applicable rules.

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299+ Engaging Banking And Finance Project Topics

Hello! Have you ever wondered how money works in our world? Well, get ready to dive into the depth of interesting banking and finance project topics.

You might think banks are only about saving money or getting loans, but there’s a whole lot more to explore. In this amazing list of project ideas, we’ll uncover cool things like how banks help businesses grow, why saving money is super important, and even how they keep our money safe.

Ever heard of things like ‘investments’ or ‘global connections’? We’ll solve these mysteries together and see how they make our world a more connected and interesting place.

From learning about how banks support big projects in our cities to understanding how our money can actually make more money there’s a whole financial universe waiting for us to discover! Let’s start this journey together and unlock the secrets of banking and finance.

Contribution Of Banking And Finance In A Country’s Economy

Table of Contents

Banking and finance play an important role in how a country’s economy works. They’re like the heart and blood vessels in our bodies, helping money flow through the economy and keeping it healthy. Here are some key contributions they make in a Country’s economy:

Savings and Loans: Banks help people save money and also lend money to others. When we save money in a bank, it’s like putting it in a safe place where it can grow. And when someone needs money for a house, a car, or to start a business, banks can lend it to them.
Business Growth: Finance helps businesses grow. Imagine someone has a fantastic idea for a new company but doesn’t have enough money to start. Banks can provide loans to turn these ideas into real businesses, creating jobs and products we use every day.
Investments: Finance helps people invest. When we invest, we’re using our money to buy things that can grow in value, like stocks or properties. This helps our money grow over time.
Supporting Government: Banks help governments run countries smoothly. They manage money for things like building roads, schools, and hospitals. Without banks, it would be tough for governments to do these big projects.
Stability and Security: Finance helps keep our money safe. Banks use security measures to protect our savings. Imagine if we had to keep all our money at home—there might be a risk of it getting lost or stolen.
Global Connections: Banks help countries work together. They allow people and businesses from different countries to trade and do business with each other easily, which makes the world more connected.
Interest and Savings: When we save money in a bank, they pay us interest. That means they give us a little bit more money over time. It’s like a reward for letting them keep our money safe.
Economic Growth: All these things together—saving, lending, investing, and more—help the economy grow. When the economy grows, it means there are more opportunities for everyone to have jobs and better lives.

So, banking and finance are really important because they help us manage our money, make it grow, and make sure our economy stays strong and healthy.

299+ Banking And Finance Project Topics

Top 15 project topics on risk management in banking.

Credit Risk Assessment Models in Banking
Market Risk Management Strategies and Techniques
Operational Risk Frameworks: Implementation and Analysis
Liquidity Risk Management in Financial Institutions
Stress Testing: Methods and Applications in Banking
Basel III Regulations: Impact and Compliance in Risk Management
Cybersecurity Threats and Risk Mitigation in Banking
Fraud Detection and Prevention Mechanisms in Financial Institutions
Risk Management in Investment Banking: Challenges and Best Practices
Derivatives and Risk Hedging Strategies in Banking
Systemic Risk Analysis in the Banking Sector
Risk Governance and Frameworks in Financial Institutions
Model Risk Management in Banking
Non-Performing Loans: Assessment and Risk Mitigation Strategies
Technology and Innovation in Risk Management for Banks

Step by Step Guide on The Best Way to Finance Car

The Best Way on How to Get Fund For Business to Grow it Efficiently

Principles of Finance 1 -BUS 2203: Learning Materials

Get ready for your college courses.

To best prepare for your future studies, please review the below preparation resources. We encourage you to use the time before starting your first term, to get a taste of the topics of your upcoming courses. There’s no better time to start than now! Good luck with your studies!

Learn Principles of Finance 1

Course overview.

Principles of Finance 1 provides a broad understanding of basic principles in the area of finance. The course introduces techniques for effective financial decision-making and helping managers to maximize shareholders’ wealth. The course covers topics related to the operation of financial markets and banking systems and the problems of financing and investment decisions and provides a theoretical background for critical and productive thinking.

Preparation Resources

Wright, R.E. & Quadrini, V. (2009). Money and Banking . Saylor Foundation.Licensed under Creative Commons Attribution-NonCommercial-ShareAlike CC BY-NC-SA0 license. Available at: https://www.saylor.org/site/textbooks/Money%20and%20Banking.pdf

Principles of Finance 1 -BUS 2203 -Course Schedule and Topics:

This course will cover the following topics in eight learning sessions, with one Unit per week. The Final Exam will take place during Week/Unit 9 (UoPeople time).

Unit 1 Week 1 – Financial World and Money

Unit 2 Week 2 – Interest Rates

Unit 3 Week 3- Financial Structure

Unit 4 Week 4- Banking

Unit 5 Week 5 – Financial Crisis and Regulation

Unit 6 Week 6- Monetary Policy Tools

Unit 7 Week 7 – IS-LM Model

Unit 8 Week 8- Advanced Financial Topics

Unit 9 Week 9 – Final Examination

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Assignment of Accounts Receivable: Meaning, Considerations

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

Investopedia / Jiaqi Zhou

What Is Assignment of Accounts Receivable?

Assignment of accounts receivable is a lending agreement whereby the borrower assigns accounts receivable to the lending institution. In exchange for this assignment of accounts receivable, the borrower receives a loan for a percentage, which could be as high as 100%, of the accounts receivable.

The borrower pays interest, a service charge on the loan, and the assigned receivables serve as collateral. If the borrower fails to repay the loan, the agreement allows the lender to collect the assigned receivables.

Key Takeaways

Assignment of accounts receivable is a method of debt financing whereby the lender takes over the borrowing company's receivables.
This form of alternative financing is often seen as less desirable, as it can be quite costly to the borrower, with APRs as high as 100% annualized.
Usually, new and rapidly growing firms or those that cannot find traditional financing elsewhere will seek this method.
Accounts receivable are considered to be liquid assets.
If a borrower doesn't repay their loan, the assignment of accounts agreement protects the lender.

Understanding Assignment of Accounts Receivable

With an assignment of accounts receivable, the borrower retains ownership of the assigned receivables and therefore retains the risk that some accounts receivable will not be repaid. In this case, the lending institution may demand payment directly from the borrower. This arrangement is called an "assignment of accounts receivable with recourse." Assignment of accounts receivable should not be confused with pledging or with accounts receivable financing .

An assignment of accounts receivable has been typically more expensive than other forms of borrowing. Often, companies that use it are unable to obtain less costly options. Sometimes it is used by companies that are growing rapidly or otherwise have too little cash on hand to fund their operations.

New startups in Fintech, like C2FO, are addressing this segment of the supply chain finance by creating marketplaces for account receivables. Liduidx is another Fintech company providing solutions through digitization of this process and connecting funding providers.

Financiers may be willing to structure accounts receivable financing agreements in different ways with various potential provisions.

Special Considerations

Accounts receivable (AR, or simply "receivables") refer to a firm's outstanding balances of invoices billed to customers that haven't been paid yet. Accounts receivables are reported on a company’s balance sheet as an asset, usually a current asset with invoice payments due within one year.

Accounts receivable are considered to be a relatively liquid asset . As such, these funds due are of potential value for lenders and financiers. Some companies may see their accounts receivable as a burden since they are expected to be paid but require collections and cannot be converted to cash immediately. As such, accounts receivable assignment may be attractive to certain firms.

The process of assignment of accounts receivable, along with other forms of financing, is often known as factoring, and the companies that focus on it may be called factoring companies. Factoring companies will usually focus substantially on the business of accounts receivable financing, but factoring, in general, a product of any financier.

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12.17: Assignment- Problem Set — Money and Banking

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The Perils of the Fed’s Vast Bond Holdings

The Federal Reserve is shedding assets at a glacial pace, exposing the financial system to continuing risks, our columnist says.

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In an illustration, the oversize bed of a blue truck on a city street is almost overflowing with green numbers. The front tag on the truck says, “The Fed.”

By Jeff Sommer

Jeff Sommer writes Strategies , a weekly column on markets, finance and the economy.

The Federal Reserve is engaged in a colossal transformation of the financial economy. Yet scarcely anyone is noticing.

What it’s doing is like walking a herd of elephants through Midtown Manhattan without attracting much attention. That used to happen in New York in the wee hours — when the circus came to town and elephants walked over the city’s bridges and through its tunnels to Madison Square Garden.

I’m not talking about the Fed’s decisions on short-term interest rates, which get the headlines when the central bank meets, as it did on Wednesday. The Fed kept those rates steady — and fairly high — at about 5.33 percent, in a frustrating battle to subdue inflation.

I’m talking about a remarkably ambitious and poorly understood Fed project known as quantitative tightening — Q.T. for short. That refers to the Fed’s reduction of the Treasury bonds and mortgage-backed securities on its mammoth balance sheet.

The central bank said on Wednesday that it would start slowing the pace of this asset paring in June, to $60 billion a month from a maximum reduction of $95 billion a month. It’s not selling securities, just quietly eliminating some as they mature, without reinvesting the proceeds.

These may look like big numbers. Yet on a comparative basis, they are piddling.

Consider that the central bank’s assets peaked two years ago at almost $9 trillion. That sum is roughly one-third of all the goods and services — the gross domestic product — produced in the United States in one year. Now, after much careful effort, the Fed has cut that total to about $7.4 trillion.

Yes, it has removed about $1.6 trillion from its coffers. But even after two years of quantitative tightening, the amount of bonds and securities that the Fed still retains is stupendous.

This is mind-boggling stuff, but a basic understanding of quantitative tightening is important for several reasons:

The policy is affecting financial markets now and making living conditions harder for millions of people — putting upward pressure on the Treasury and mortgage markets and a host of related interest rates, effectively supplementing the monetary tightening that the Fed put in place by raising the short-term federal funds rate.

Quantitative tightening is a perilous operation. Earlier attempts — notably, in 2019 — disrupted financial markets. That could happen again if the Fed is too hasty.

If the Fed acts as slowly as current plans project, it will own trillions in securities for years to come. An experiment begun in the 2008 financial crisis is becoming permanent, endowing the Fed — and whoever controls it — with vast expanded powers.

The slow pace of quantitative tightening is partly responsible for the Fed’s inability to contribute to the national budget.

That’s because the Fed has also raised interest rates, which move in the opposite direction of bond prices. With its own policies, the Fed has reduced the value of its asset holdings. And by now it has inflicted more than $133.3 billion of losses on itself.

Unlike Silicon Valley Bank , which became insolvent last year, the Fed can survive paper losses — but it can’t help the U.S. government reduce staggering deficits.

Quantitative Easing

Q.T. is the inverse of an unorthodox approach to monetary policy known as quantitative easing, adopted by the Fed when Ben S. Bernanke was chair. After the collapse of Lehman Brothers in September 2008, the economy and the markets crashed. Trying urgently to give the economy a stimulative jolt, the Fed lowered interest rates to nearly zero, but that wasn’t enough.

Those were desperate times, and the Fed improvised. Expanding on a program that the Bank of Japan started in 2001, the Fed began large-scale buying of Treasury bonds and mortgage-backed securities.

The idea, as Mr. Bernanke said in his book “ 21st Century Monetary Policy ,” was “to influence private-sector decisions, which don’t usually depend directly on Treasury yields.” The Fed, he added, “expected that lower yields in the Treasury market would result in lower yields elsewhere — for example, on residential and commercial mortgages and corporate bonds.”

In addition, Fed policymakers expected that “lower long-term, private-sector interest rates should stimulate business investment and consumer spending on new cars and houses,” Mr. Bernanke said. “Lower long-term interest rates would also increase the prices of other financial assets, such as stocks, and weaken the dollar, easing financial conditions more broadly.”

All of those things happened.

But what started as a temporary expedient evolved into a regular part of the Fed’s toolbox, one that the Fed has used too frequently, some economists say.

“The analogy is a terrible one, but what the Fed has done is engender an addiction,” Raghuram Rajan, a finance professor at the University of Chicago, said in an interview.

Mr. Rajan, who is a former governor of the Reserve Bank of India and chief economist of the International Monetary Fund, said that U.S. banks had become “addicted to the easy liquidity” associated with the Fed’s expansionary policies, and that weaning them off this flood of money had proved excruciatingly difficult.

It’s revealing to look back at early official Fed commentary. In February 2010, in a statement before the House Committee on Financial Services , Mr. Bernanke said, “The Federal Reserve anticipates that it will eventually return to an operating framework with much lower reserve balances than at present.” His statement was labeled “Federal Reserve’s exit strategy.”

But the Fed never exited its quantitative easing strategy. In fact, Fed records show that when Mr. Bernanke testified in 2010 about an eventual end to quantitative easing, the central bank’s balance sheet contained less than $2.3 trillion in assets. Fourteen years later, the Fed holds more than three times that total, even after its most ambitious “tightening” round to date.

Why Tightening Is Tough

Crises happened, the economy faltered and the Fed engaged in multiple rounds of quantitative easing under Mr. Bernanke and his successors, Janet L. Yellen and Jerome H. Powell , the current Fed chair.

All tried quantitative tightening — which, in early Fed planning, appeared to mean a reversal of the Fed’s active intervention in the bond and mortgage markets, a radical reduction in its holdings and a return to pre-crisis operations. In his 2010 testimony, for example, Mr. Bernanke said the Fed could eventually sell the assets it purchased.

But all these years later, it has not done so. When it is not in emergency-response mode and is trying to return to something resembling “normal,” it has allowed maturing bonds and other securities to slowly “run off” or “roll off,” instead of reinvesting the proceeds, which would maintain the size of its asset stash.

It’s moving at an excruciating pace. A report in April by a group within the New York Federal Reserve Bank projected that even with continued quantitative tightening, the assets on the overall Fed balance sheet will fall no lower than $6 trillion in the next few years — and then begin rising again.

In the past, when the Fed even hinted that it might swiftly shed assets, financial markets buckled. In a news conference on Wednesday, Mr. Powell alluded to the 2019 quantitative tightening effort that led to chaos in the money markets — and an about-face by the central bank. The Fed is now slowing the already stately pace of balance sheet roll-off precisely “so that it doesn’t lead to financial turmoil as it did the last time,” he said.

Simply put, the Fed’s balance sheet has assets on one side and liabilities on the other — and they must balance. When it buys assets, it creates bank reserves out of thin air, and it has been paying banks to keep those reserves deposited at the Fed. The reserves are available for emergencies as well as for routine operations. In periods of quantitative tightening, like this one, both the assets and the reserves shrink — and that has periodically caused major dislocations.

So far in this round, the Fed has been managing the process deftly. Scarcely anyone has noticed it drain more than a trillion dollars from the financial system. Yet by concentrating so much financial firepower in its own hands, the Fed may be assuring that the potential for major flare-ups, and even worse, will always loom.

Jeff Sommer writes Strategies , a weekly column on markets, finance and the economy. More about Jeff Sommer

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A+E Networks Promotes David Bank to Chief Financial Officer

By Lexi Carson

Lexi Carson

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A+E Networks has promoted David Bank to chief financial officer for the cable group that includes Lifetime, A&E Network and History Channel.

Bank will replace Art Vomvas who is retiring after nearly three decades as a member of A+E Networks’ finance and business planning team and served as interim CFO for the company for the last year. Bank has spent the past five years as executive VP and chief strategy & development officer.

As CFO, Bank will lead financial functions across all of A+E’s divisions in the U.S. and globally. He will report to Paul Buccieri, president and chairman of A+E Networks Group.

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Buccieri also saluted Vomvas for his long service to the company that is a joint venture of Disney and Hearst.

“I also want to thank Art Vomvas for nearly three decades of dedication to A+E Networks and congratulate him on his extraordinary career. Art has made incredible contributions to our company,” Buccieri said. “We are grateful for his leadership and wish him the best for his retirement.”

Before Bank joined A+E Networks in 2019, he served as executive VP and Head of Investor Relations at CBS. He also spent 16 years as an equity research analyst specializing in media and entertainment at RBC.

“For the past five years, I have been proud to call A+E Networks my home and be part of one of the best content companies in the business,” Bank said. “In taking on the role of CFO, I am thrilled to collaborate further with Paul and the executive team to help the company continue to excel and evolve during this time of transformation in our industry.”

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Westpac announces new buyback, special dividend as profit slumps

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Westpac first-half profit down 16% to A$3.34 bln
Declares dividend of aggregate 90 cents apiece
Raises buyback programme by A$1 bln to A$2.5 bln
Shares up 1.4% in early trade

Reporting by Sameer Manekar and Rajasik Mukherjee in Bengaluru; Editing by Lisa Shumaker and Subhranshu Sahu

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Robinhood Crypto gets Wells notice from US SEC

Retail trading platform Robinhood Markets said on Monday its cryptocurrency trading arm received a Wells notice from the U.S. Securities and Exchange Commission (SEC) on May 4.

New World Bank Report Calls for Strengthening Resilience of Ghana’s Health System in Response to Climate Change

ACCRA, April 30, 2024 – A new World Bank report released today, calls for urgent action to strengthen the resilience of Ghana’s health system against the adverse effects of climate change. The report, titled Climate and Health Vulnerability Assessment (CHVA) for Ghana, identifies gaps and risks to the country’s health sector, while recommending policy actions and providing valuable insights into capacity to adapt to climate related shocks.

According to the report, climate change in Ghana is causing extreme weather events like floods and droughts. It is estimated that about 2 million Ghanaians are vulnerable to food insecurity and that should any natural disaster occur food availability will be greatly affected, particularly in the Northern region and the rural areas of the country. The report notes that Ghana is highly vulnerable, especially to illness like malaria and diarrhea disease. It also points out that health issues related to heat, air pollution, and infectious diseases are on the rise with the elderly, youth, and children being particularly vulnerable.

"The World Bank has changed its mission to Ending extreme poverty and boosting shared prosperity on a livable planet. A healthy population is the cornerstone of prosperity. Therefore, implementing adaptation and mitigation measures is crucial not only to address current challenges but also to prevent further adversities,” said Robert Taliercio World Bank Country Director for Ghana, Liberia, and Sierra Leone. “The Government of Ghana is ahead of the curve in thinking about the potential impacts of climate change on health and we encourage further work across sectors on this important challenge.”

The CHVA for Ghana underscores that Ghana's climate varies in temperature and rainfall, with projections showing decreased rainfall and higher temperatures. Over the past 50 years, the country has experienced 22 major climate events, affecting millions with droughts, floods, wildfires, and storms. The CHVA examines the potential impact on health of increased heat, as well as expanded infectious diseases.

“ The CHVA and research on climate change and health also contributes to the development of climate-resilient health systems. By analyzing vulnerabilities and adaptive capacities, decision-makers can identify areas for improvement and allocate resources effectively,” said Professor Mawuli Dzodzomenyo, lead author of the report and Head of Department, Biological, Environmental and Occupational Health, University of Ghana School of Public Health .

The report makes several policy recommendations over the short- to medium-term to address adaptive capacity gaps in Ghana, including:

Implementing a 10-year plan to make Ghana's health sector resilient to climate change and integrating its objectives and activities into other relevant sectors.
Planning for the health workforce to meet needs across urban and rural areas in climate data collection for adaptation.
Enhancing the coverage of climate-sensitive conditions in health information systems and periodically conducting national and sub-national climate and health vulnerability assessments, expanding coverage of climate-sensitive health conditions in routine systems, and timely promoting of research, analyses, and surveillance data.
Upgrading health facilities with climate-smart codes and ensuring consistent availability of drugs and equipment for climate-sensitive infectious diseases.
Undertaking multi-sectoral actions to improve determinants of health and continue implementing and improving programs to control and build an effective emergency communication system.
Providing sustained and holistic health and climate change financing and monitoring climate related health expenditures in line with policy commitments.

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