Common wealth bank Essay
Commonwealth Bank of Australia and Macquarie Bank has liquidity different risk in management. Both companies have purchased and stored liquidity assets as required by regulators of financial institutions. They have also liquid assets, which are a necessity for financial institutions in Australia. Both banks are able to access wholesale market through group activities.
In this paper we are going to discuss the liquidity risk management of the two banks and compare their indifferences and similarities. Commonwealth the bank of Australia has in store liquid assets that they need to cover their liabilities in the short run and in the long run. In relation of the liquid assets the company has purchased government bills and bonds as part of the liquid assets. The company as also in stores some short-term investment in terms of company bonds, bills, notes and other papers. They have liquid assets in store being managed by the risk committee to avert operational risks. The return expected from the portfolio is to cover the credit facilities to the customers. From the financial institutions the portfolio return covers the risk.
The company as maturity mismatch of 90 days for her deposits, notes and other saving. The operational which is covered by
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The company as the diversified their risks through keeping some of the liquid assets in other banks while same of the liabilities are insured to avoid scenarios of bankruptcy in cash of technical default. To avoid technical default the company has also offered some of the liabilities options to purchase ordinary stock at some point especially at times of maturity.
The wholesale markets are accessible by the company through marketing using fliers and the cost associated with this is reported in the financial statement that is promotional activities and marketing costs. The company accesses the foreign currency through operating forex exchange and having in contact with international bank associates in the commonwealth countries. They access other market like southern Asia through some branches and this can be seen clearly from the group financial statement. Company is performing so well as the return of the assets is 15% and there is an available inter-group liquid asset, which is transferable with the approval of the regulatory authorities.
On the other hand macquare has purchased and held liquidity assets, which is a requirement from the regulatory of the country. The company has 15% over and above the requirements of the liquid assets. The company purchases short tem liquid assets like; treasury ills. Bonds, notes and other short term. The bank of Macqarie has diversified her risk in terms of liabilities through insurance policies issue of options and deposit with central bank of Australia. The company management have formed a committee that handles foreign markets and from the financial we realize that the bank foreign connections through inter-bank connections. The company has performed very well in the areas of foreign currency exchange. The income accrued from this activity increased by 10% from the previous year. Income accrued from other market that is intra-bank increased by 8%. This shows hat the bank was handled by foreign currency and other countries a well and the idea of going international. The bank is using assets very well as we can see that return on investment or assets was 10%. A return of 10% on assets for a bank is great achievement, which can be seen that it is almost sustainable. The company assets include liquid assets and fixed although liquid assets are in form of stock that is currency. The company as maturity mismatch limit less as compared to that of commonwealth bank of Australia. Intra-bank liquidity transfer is not well defined as in the case of common well bank of Australia since the bank as little foreign connection.
From the annual report of 2007 for both banks they are performing very well but unfortunately they are having great differences. The differences in this two banks can be seen from the purchased and stored liquidity, maturity mismatch method of diversifying liabilities, ways of accessing the market, and transferability of assets between branches and companies. The purchased and stored liquid assets held by commonwealth bank of Australia are higher as compared to macquare bank. The commonwealth bank of Austrlia has also more liquid assets being held has compared to Macquare bank. The company liquid assets are by almost 50% more as compared to this other bank. Macquare bank does not have a large foreign exchange branch as Commonwealth of Australia. The bank has within branches sections dealing with foreign exchanges. The commonwealth has an upper hand because they handle more customers from the commonwealth bank.
The commonwealth bank is a foreign bank of Australia while Macquare bank foreign backing. In the use of resources the banks are doing very well although the commonwealth bank Australia has high return of 15% on assets while the Macquarie bank is producing at 10%. These similarities of the two banks are pronounced well through their origin.