International banking assignment Essay Example | Topics and Well Written Essays - 2000 words

International banking assignment - Essay Example For this reason, they are often regulated through creation of policies and regulations. Most nations have developed fractional banking systems, which are essential in the regulation of the banking industry (Somashekar 2009, 34). Through this system, banks have various liquid assess, which are equal to part of their current liabilities. In addition to different regulations aimed at ensuring liquidity, banks are often subject to the most minimal capital requirements depending on the internationally set standards that are known as Basel Accords. It has often been said that liquidity is something that be recognized easily that being defined; additionally, it is a highly elusive concept. As far as its barest essentials are concerned, is all about having cash at the moment one needs it. In relation to banks, liquidity can be defined as the ability of a bank to provide funding to the increases in assets in order to achieve various obligations as soon as they arise (Hall 2008, 16). This often has to take place without the banks having to incur any unacceptable losses. Management of liquidity risks aims at ensuring that banks can continue performing their most fundamental roles. It is important to note that while outflows are often identified with certainties, risks are often due to need to achieve indecisive obligations about cash flow. In most cases, they depend on the external events as well as the behavior and actions of various agents. The liquidity aspects of a certain bank are ultimately a function of its confidence. This confidence arises from the counterparties and depositors in the banking institution and its presumed capital adequacy or solvency. A liquidity shortfall in a certain individual institution can often have various repercussions in its broad systems. In this case, the withdrawal of one institution has a multiplier effect, having the ability to spread to other systems, which can bring about various