Capital markets are where buyers and sellers trade financial securities like stocks and bonds. They consist of two main parts: the primary market, where new securities are issued, and the secondary market, where existing securities are bought and sold. These markets help companies and governments raise money for projects while allowing investors to buy and sell investments. Capital markets are essential for economic growth, providing liquidity, determining asset values, and helping diversify investment risk.
Core banking refers to the central system that manages a bank’s essential operations, such as account management, deposits, withdrawals, loans, and transactions. It enables banks to offer a wide range of services to their customers, including online banking, mobile banking, and ATMs, by processing and storing all customer-related data in a centralized system. Core banking systems allow different branches of a bank to connect and share information seamlessly, improving efficiency and customer service. It’s the backbone of modern banking, ensuring that all financial transactions are processed securely and accurately.
Treasury refers to the management of a company or bank’s finances, including cash flow, investments, and financial risks. The treasury department ensures there is enough money for daily operations, manages funding, and oversees risks like currency or interest rate changes. It plays a key role in maintaining financial stability and profitability.
Payments refer to the transfer of money or value in exchange for goods, services, or to settle debts. It can be done through various methods, such as cash, checks, bank transfers, credit/debit cards, and digital wallets (e.g., PayPal, Apple Pay). Payments can be made in person or online, and the systems that process these transactions ensure they are secure, fast, and efficient.
Asset Liability Management (ALM) helps banks manage the risk that comes from changes in interest rates. Interest rate risk occurs when changes in rates affect the bank’s profits, like when borrowing costs rise or the value of loans decreases. To manage this, banks use strategies like gap analysis, hedging, and adjusting the timing of when assets and liabilities are repaid. This helps banks stay stable and protect their earnings from interest rate fluctuations.
Fund Transfer Pricing (FTP) is a system used by banks to allocate the cost of funds between different departments. It helps measure the profitability of loans, deposits, and other services, ensuring that each part of the bank reflects the true cost of funds. This helps banks make better decisions about pricing and managing capital.
Market risk refers to the potential for losses due to changes in market conditions, such as fluctuations in interest rates, stock prices, or commodity prices. It affects the value of investments or assets held by a company or financial institution.
Liquidity risk is the risk that a company or bank may not be able to meet its short-term financial obligations due to the inability to quickly convert assets into cash without significant loss in value. It happens when there are not enough liquid assets to cover liabilities.
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