FINANCIAL MARKETS AND INSTITUTIONS ASSIMANT

Financial Markets and Institutions Assimant

Financial Markets and Institutions Assignment

For this paper, I chose the second question:

"Management fees and commissions charged by financial intermediaries are completely unfounded.

Introduction

Financial intermediaries do not charge an explicit many of the services they are provide.4 Instead, fees usually with interest on loans and deposits included. Each full measure of bank output should take this into account when assessing how much of the interest rates is a fee for the services and what proportion of the cost of funds.

In this article we argue that management fees and commissions charged by financial intermediaries, are completely unfounded, and we present new estimates of the euro zone, proposed in our methodology. The key point of disagreement in the assessment or allocation is issued, the Bank to identify opportunities for cost of funds. In the current European methodology of national accounts, is inter-bank rate show as the cost of funds for all types of credit and used deposits.6 However, in recent theoretical work (Hofmann, Mizzen, 2004, 99) that income maximizing banks do not use interest rates as a measure of the opportunity cost of funds. Instead, they use the interest generated by the (systematic) risk of each loan or deposit reflected, so that, given the risk of default and term premium. Recently, Wang et al have been (2008) methodology for the British commercial banks (Gropp, Vesala, 2004, 945) applied. They believe that the current methodology of the British bank imputed output by 45 percent over-estimated, while Britain's GDP by 0.3 percent. The contribution of this work is the application of Wang et al (2008) Methodology for the euro area, to determine whether a large exaggeration common feature between the two countries.

Discussion

It is very important to provide accurate and appropriate measures for the number of transactions that have in the bank. First of all, it's part of the overall return of the banking sector (in addition to fees and commissions), and as far as the banks households, government or external demand, the bank due to the total GDP output. In addition, the interest margin of the price of the bank is spent because the price is measured will affect the total price of producer and consumer prices. Our results are the benchmark that is based identifies the opportunity cost of funds by estimating the pass-through equations in the model error correction. Results imply that the assumed production of bank, over-estimated on average by 24 to 40 percent, and overestimated the euro zone GDP (at current prices) on average € and € 12.6bln 21.4bln or 0.16 to 0.27 percent. Larger numbers are estimated, using the same conceptual approach as (Gropp, Sorensen, Lichtenberger, 2007, 714), we conclude that the euro from the bank to the same extent as the yield on British banks's inflated.

General Precipices

Common practice for many UK is the "reference rate" approach to use for measuring indirect costs of financial services. The base rate represents the net cost of borrowing. This rate, which eliminates the risk premium as much ...