Banks (FRM Part 1 2025 – Book 3 – Financial Markets and Products – Chapter 1)

Build your FRM foundations with this chapter on Banks from FRM Part I (Book 3: Financial Markets & Products). Jim covers the types of banks, the major risks (market, credit, operational & liquidity), regulatory vs. economic capital, Basel/BCBS guidance (LCR & NSFR), deposit insurance & moral hazard, financing arrangements (private placement, IPOs, best-efforts vs firm commitment, Dutch auctions), conflicts of interest & ethical/firewall controls, banking vs trading book, and the originate-to-distribute model & securitization. You’ll learn how to: Identify major bank risks and sources of exposure Distinguish economic vs regulatory capital and capital adequacy Summarize Basel III liquidity ratios (LCR, NSFR) and their motivation Explain deposit insurance, moral hazard, and governance Compare best-efforts vs firm commitment offerings & Dutch auctions Contrast banking book vs trading book treatment Understand originate-to-distribute benefits/drawbacks For FRM (Part I & Part II) video lessons, study notes, question banks, mock exams, and formula sheets covering all chapters of the FRM syllabus, click on the following link: https://analystprep.com/shop/unlimite... AnalystPrep is a GARP-Approved Exam Preparation Provider for FRM Exams After completing this reading, you should be able to: Identify the major risks faced by banks and explain ways in which these risks can arise. Distinguish between economic capital and regulatory capital. Summarize the Basel committee regulations for regulatory capital and their motivations. Explain how deposit insurance gives rise to a moral hazard problem. Describe investment banking financing arrangements, including private placement, public offering, best efforts, firm commitment, and Dutch auction approaches. Describe the potential conflicts of interest among commercial banking, securities services, and investment banking divisions of a bank, and recommend solutions to these conflict of interest problems. Describe the distinctions between the banking book and the trading book of a bank. Explain the originate-to-distribute banking model and discuss its benefits and drawbacks. 0:00 Introduction 2:37 Types of Banks 3:36 Major Risks in Banking 18:39 Regulatory vs. Economic Capital 25:48 BCBS Regulatory Capital Guidelines 28:30 Motivations behind Basel Committee Regulations 29:41 What is Deposit Insurance? 32:38 Deposit Insurance and Moral Hazard 34:10 Banking financing Arrangements 45:49 Conflicts of Interest in Banking 51:21 Banking Book vs. Trading Book 52:48 The Originate-to-Distribute Banking Model #FRM #FRMPart1 #GARP #Banks #BaselIII #RiskManagement #FinancialMarkets #CreditRisk #OperationalRisk #LiquidityRisk #EconomicCapital #RegulatoryCapital #LCR