About 'us gaap accounting standards'|Evolution of US Generally Accepted Accounting Principles - 1930 to 2004

About 'us gaap accounting standards'|Evolution of US Generally Accepted Accounting Principles - 1930 to 2004

Ｉ               ａｍ               ｓｕｒｅ               ｙｏｕ               ｈａｖｅ               ａｌｌ               ｈｅａｒｄ               ｔａｌｅｓ               ｏｆ               ａｃｃｏｕｎｔａｎｔｓ               "ｃｏｏｋｉｎｇ               ｔｈｅ               ｂｏｏｋｓ". Ｙｏｕ'ｖｅ               ａｌｓｏ               ｈｅａｒｄ               ｔａｌｅｓ               ｏｆ               ｍａｎａｇｅｍｅｎｔ,               ａｌｏｎｇ               ｗｉｔｈ               ａｃｃｏｕｎｔａｎｔｓ,               ｐｌａｙｉｎｇ               "ｎｕｍｂｅｒｓ               ｇａｍｅｓ"               ｂｙ               ｒｅｏｒｇａｎｉｚｉｎｇ               ａｃｃｏｕｎｔｉｎｇ               ｒｅｃｏｒｄｓ               ｔｏ               ｓｍｏｏｔｈ               ｅａｒｎｉｎｇｓ. Ｉｎ               ｓｏｍｅ               ｃａｓｅｓ,               ｔｈｅ               ｃｈａｎｇｅｓ               ａｒｅ               ｂｌａｔａｎｔｌｙ               ｉｌｌｅｇａｌ. Ａ               ｇｏｏｄ               ｅｘａｍｐｌｅ               ｏｆ               ｔｈｉｓ               ｉｓ               ｔｈｅ               ＷｏｒｌｄＣｏｍ               ｓｃａｎｄａｌ               ｉｎ               ｗｈｉｃｈ               ｔｈｅ               ｃｏｍｐａｎｙ               ｃａｐｉｔａｌｉｚｅｄ               ｌｉｎｅ               ｅｘｐｅｎｓｅｓ. Ｔｈｉｓ               ｆｒａｕｄｕｌｅｎｔｌｙ               ｂｏｏｓｔｅｄ               ｔｈｅｉｒ               ｂａｌａｎｃｅ               ｓｈｅｅｔ               ｂｙ               ｉｎｃｒｅａｓｉｎｇ               ａｓｓｅｔｓ. Ｉｎ               ａｄｄｉｔｉｏｎ               ｔｈｅ               ｍｏｖｅ               ａｌｓｏ               ｆｒａｕｄｕｌｅｎｔｌｙ               ｂｏｏｓｔｅｄ               ｔｈｅｉｒ               ｉｎｃｏｍｅ               ｓｔａｔｅｍｅｎｔ               ｂｅｃａｕｓｅ               ｔｈｅｒｅ               ｗｅｒｅ               ｌｅｓｓ               ｅｘｐｅｎｓｅｓ               ｒｅｐｏｒｔｅｄ. Ｗｈａｔ               ｉｆ               Ｉ               ｔｏｌｄ               ｙｏｕ               ｔｈａｔ               ｃｏｍｐａｎｉｅｓ               ａｎｄ               ａｃｃｏｕｎｔａｎｔｓ               ｃａｎ               ｐｌａｙ               ｎｕｍｂｅｒｓ               ｇａｍｅｓ               ａｎｄ               ｍａｋｅ               ｃｈａｎｇｅｓ               ｔｈａｔ               ｂｏｏｓｔ               ｐｒｏｆｉｔｓ               ｒｅｇｕｌａｒｌｙ? Ｗｏｕｌｄ               ｙｏｕ               ｂｅ               ｓｕｒｐｒｉｓｅｄ? (Ｐｒｏｂａｂｌｙ               ｎｏｔ.)               Ｗｏｕｌｄ               ｙｏｕ               ａｌｓｏ               ｂｅ               ｓｕｒｐｒｉｓｅｄ               ｉｆ               Ｉ               ｔｏｌｄ               ｙｏｕ               ｔｈｅｒｅ               ａｒｅ               ｗａｙｓ               ｏｆ               ｐｌａｙｉｎｇ               ｔｈｅｓｅ               ｎｕｍｂｅｒ               ｇａｍｅｓ               ｔｈａｔ               ａｒｅ               ｔｏｔａｌｌｙ               ＬＥＧＡＬ? Ｙｅｓ,               ｙｏｕ               ｈｅａｒｄ               ｍｅ               ｒｉｇｈｔ. Ｓｏｍｅｔｉｍｅｓ               ａ               ｃｏｍｐａｎｙ               ｃａｎ               ｊｕｓｔ               ｍａｋｅ               ｓｏｍｅ               ｃｈａｎｇｅｓ               ｉｎ               ｔｈｅｙ               ｗａｙ               ｔｈｅｙ               ｈａｎｄｌｅ               ｔｈｅｉｒ               ｔｒａｎｓａｃｔｉｏｎｓ. Ａｓ               ｌｏｎｇ               ａｓ               ｔｈｅ               ｃｈａｎｇｅｓ               ｔｈｅｙ               ｍａｋｅ               ａｒｅ               ｉｎ               ａｃｃｏｒｄａｎｃｅ               ｗｉｔｈ               ｇｅｎｅｒａｌｌｙ               ａｃｃｅｐｔｅｄ               ａｃｃｏｕｎｔｉｎｇ               ｐｒｉｎｃｉｐｌｅｓ,               ｔｈｅｙ               ａｒｅ               ｃｏｍｐｌｅｔｅｌｙ               ｌｅｇａｌ.                Ｔｈｉｎｋ               ａｂｏｕｔ               ｉｔ:               ｉｆ               ａｃｃｏｕｎｔｉｎｇ               ｗａｓ               ｓｔｒａｉｇｈｔ               ｆｏｒｗａｒｄ               ａｎｄ               ｃｕｔ               ａｎｄ               ｄｒｙ,               ｗｅ               ｗｏｕｌｄ               ｈａｖｅ               ｎｏ               ｎｅｅｄ               ｆｏｒ               ＣＰＡｓ. Ｉ               ｈａｖｅ               ａ               ｖｅｓｔｅｄ               ｉｎｔｅｒｅｓｔ               ｉｎ               ｔｈｅ               ｎｅｅｄ               ｆｏｒ               ＣＰＡｓ,               ｂｅｃａｕｓｅ               Ｉ               ａｍ               ｏｎｅ. Ｔｈｅ               ｔｒｕｔｈ               ｏｆ               ｔｈｅ               ｍａｔｔｅｒ               ｉｓ               ｔｈａｔ               ｍａｎｙ               ｔｒａｎｓａｃｔｉｏｎｓ               ａｒｅ               ｎｏｔ               ｃｕｔ               ａｎｄ               ｄｒｙ. Ｙｏｕ               ａｃｔｕａｌｌｙ               ｎｅｅｄ               ａｌｌ               ｔｈｅｓｅ               ａｃｃｏｕｎｔｉｎｇ               ｒｕｌｅｓ               ａｎｄ               ｄｉｓｃｌｏｓｕｒｅｓ. Ｕｎｉｔｅｄ               Ｓｔａｔｅｓ               ＧＡＡＰ               ｉｓ               ａｌｓｏ               ａｍｏｎｇ               ｏｎｅ               ｏｆ               ｔｈｅ               ｗｏｒｌｄ'ｓ               ｍｏｒｅ               ｃｏｎｓｅｒｖａｔｉｖｅ               ｓｅｔ               ｏｆ               ａｃｃｏｕｎｔｉｎｇ               ｓｔａｎｄａｒｄｓ. Ｔｈｉｓ               ｍｅａｎｓ               ｔｈａｔ               ｔｙｐｉｃａｌｌｙ               ａ               ｃｏｍｐａｎｙ'ｓ               ｐｒｏｆｉｔｓ               ｗｉｌｌ               ｂｅ               ｌｏｗｅｒ               ｗｈｅｎ               ｔｈｅｙ               ｒｅｐｏｒｔ               ｕｎｄｅｒ               ｏｕｒ               ｓｔａｎｄａｒｄｓ               ｔｈａｎ               ｔｈｅｙ               ｗｏｕｌｄ               ｒｅｐｏｒｔｉｎｇ               ｕｎｄｅｒ               ｏｔｈｅｒ               ｓｅｔｓ               ｏｆ               ｓｔａｎｄａｒｄｓ.                Ｔａｋｅ               Ｂａｎｋ               ｏｆ               Ａｍｅｒｉｃａ. Ｌａｓｔ               ｗｅｅｋ,               ｔｈｅ               ＵＳ               Ｇｏｖｅｒｎｍｅｎｔ               ｔｏｌｄ               ｔｈｅｍ               ｔｈａｔ               ｔｈｅｙ               ｎｅｅｄｅｄ               ｔｏ               ｒａｉｓｅ               $34               ＢＩＬＬＩＯＮ               ｉｎ               ｃａｐｉｔａｌ. Ｔｈｉｓ               ｄｉｒｅｃｔｉｖｅ               ｃａｍｅ               ａｆｔｅｒ               ｔｈｅ               ｒｅｓｕｌｔｓ               ｏｆ               ｔｈｅ               Ｂａｎｋ               Ｓｔｒｅｓｓ               Ｔｅｓｔ               ｗｈｉｃｈ               ｔｅｓｔｅｄ               ｈｏｗ               ｂａｎｋｓ               ｗｏｕｌｄ               ｆａｒｅ               ｗｉｔｈ               10%               ｕｎｅｍｐｌｏｙｍｅｎｔ               ａｎｄ               ａ               22%               ｆｕｒｔｈｅｒ               ｄｅｃｌｉｎｅ               ｉｎ               ｈｏｍｅ               ｐｒｉｃｅｓ. Ｈｏｗｅｖｅｒ,               Ｂａｎｋ               ｏｆ               Ａｍｅｒｉｃａ               ｐｏｓｔｅｄ               ａ               $4.2               Ｂｉｌｌｉｏｎ               ｆｉｒｓｔ               ｑｕａｒｔｅｒ               ｐｒｏｆｉｔ. Ｔｈｉｓ               ｍｅａｎｓ               ｔｈａｔ,               ａｔ               ｌｅａｓｔ               ｏｎ               ｐａｐｅｒ,               Ｂａｎｋ               ｏｆ               Ａｍｅｒｉｃａ               ｅａｒｎｅｄ               $4.2               ｂｉｌｌｉｏｎ               ｄｕｒｉｎｇ               ｔｈｅ               ｆｉｒｓｔ               ｔｈｒｅｅ               ｍｏｎｔｈ               ｐｅｒｉｏｄ               ｉｎ               2009. Ｓｅｅｍｓ               ｌｉｋｅ               ｔｈｅｙ               ａｒｅ               ｄｏｉｎｇ               ｐｒｅｔｔｙ               ｇｏｏｄ.                Ａｒｅ               ｔｈｅｙ               ｒｅａｌｌｙ               ｄｏｉｎｇ               ａｓ               ｇｏｏｄ               ａｓ               ｔｈｅｙ               ｓａｙ? Ｐｒｏｂａｂｌｙ               ｎｏｔ. Ａ               ｖａｓｔ               ｍａｊｏｒｉｔｙ               ｏｆ               ｔｈｅｓｅ               ｐｒｏｆｉｔｓ               ａｒｅ               ｄｕｅ               ｔｏ               ａｃｃｏｕｎｔｉｎｇ               ｃｈａｎｇｅｓ. Ｂａｓｉｃａｌｌｙ,               ｔｈｅ               ｐｒｏｆｉｔｓ               ａｒｅ               ｉｌｌｕｓｉｏｎａｒｙ               ｐｒｏｆｉｔｓ. Ｉ               ｌｉｋｅ               ｔｏ               ｅｑｕａｔｅ               ｔｈｉｓ               ｔｏ               ｓｍｏｋｅ               ａｎｄ               ｍｉｒｒｏｒｓ. Ｒｅｕｔｅｒｓ               ｈａｄ               ａ               ｒｅａｌｌｙ               ｇｏｏｄ               ａｒｔｉｃｌｅ               ｔｈｉｓ               ｍｏｒｎｉｎｇ               ｔｈａｔ               ｅｘｐｌａｉｎｅｄ               ｉｎ               ｇｒｅａｔｅｒ               ｄｅｔａｉｌ               ｔｈｅ               ａｃｃｏｕｎｔｉｎｇ               ｃｈａｎｇｅｓ               ｔｈａｔ               ｂａｎｋｓ               ａｒｅ               ｕｓｉｎｇ               ｔｏ               ｂｏｏｓｔ               ｔｈｅｉｒ               ｐｒｏｆｉｔｓ.                Ｂａｓｉｃａｌｌｙ,               ｔｈｅ               ｂａｎｋｓ               ａｒｅ               ｕｓｉｎｇ               "ｃｒｅｄｉｔ               ｖａｌｕｅ"               ａｄｊｕｓｔｍｅｎｔｓ               ｔｏ               ｂｏｏｋ               ｇａｉｎｓ. Ｕｓｉｎｇ               ａｎ               ｅｘａｍｐｌｅ               ｉｎ               ｔｈｅ               Ｒｅｕｔｅｒｓ               ａｒｔｉｃｌｅ,               ａ               ｂａｎｋ               ｃｏｕｌｄ               ｈａｖｅ               ａ               $100               ｄｅｂｔ               ｔｈａｔ               ｃｕｒｒｅｎｔｌｙ               ｔｒａｄｅｓ               ｆｏｒ               $60. Ｔｈｅｙ               ｃａｎ               ｒｅｄｕｃｅ               ｔｈｅ               ｖａｌｕｅ               ｏｆ               ｔｈｅｉｒ               ｄｅｂｔ               ｔｏ               ｔｈｅ               ａｍｏｕｎｔ               ｉｔ               ｃｕｒｒｅｎｔｌｙ               ｔｒａｄｅｓ               ｆｏｒ               -               ａｎｄ               ｂｏｏｋ               ａ               ｇａｉｎ               ａｓ               ａｎ               ｏｆｆｓｅｔ. Ｈｏｗ               ｃａｎ               ｔｈｅｙ               ｄｏ               ｔｈｉｓ?                Ｉｆ               ｙｏｕ               ｈａｖｅ               ｂａｓｉｃ               ａｃｃｏｕｎｔｉｎｇ               ｋｎｏｗｌｅｄｇｅ               ｙｏｕ               ｋｎｏｗ               ｔｈａｔ               ａｔ               ｔｈｅ               ｖｅｒｙ               ｂａｓｉｃ               ｌｅｖｅｌ,               ｅｘｐｅｎｓｅｓ               ａｎｄ               ａｓｓｅｔｓ               ａｒｅ               ｄｅｂｉｔ               ｂａｌａｎｃｅｓ,               ｗｈｉｌｓｔ               ｒｅｖｅｎｕｅｓ               ａｎｄ               ｌｉａｂｉｌｉｔｉｅｓ               ａｒｅ               ｃｒｅｄｉｔ               ｂａｌａｎｃｅｓ. Ｙｏｕ               ａｌｓｏ               ｋｎｏｗ               ｔｈａｔ               ｄｅｂｉｔｓ               =               ｃｒｅｄｉｔｓ. Ｙｏｕｒ               ｂｏｏｋｓ               ｍｕｓｔ               ｂａｌａｎｃｅ. Ｔｏ               ｍａｋｅ               ｔｈｅ               ａｃｃｏｕｎｔｉｎｇ               ｅｎｔｒｙ               ｔｏ               ｒｅｄｕｃｅ               ｔｈｅ               ｖａｌｕｅ               ｏｆ               ｔｈｅ               ｄｅｂｔ               ｆｒｏｍ               $100               ｔｏ               $60,               ｙｏｕ               ｗｏｕｌｄ               ｎｅｅｄ               ｔｏ               ｄｅｂｉｔ               ｔｈｅ               ｌｉａｂｉｌｉｔｙ               (ｄｅｂｔ)               ａｃｃｏｕｎｔ               ｂｙ               $40. Ｙｏｕ               ｗｏｕｌｄ               ａｌｓｏ               ｎｅｅｄ               ｔｏ               ｈａｖｅ               ａ               ｃｒｅｄｉｔ               ｅｎｔｒｙ               ｆｏｒ               $40               ｔｏ               ｍａｋｅ               ｔｈｅ               ｅｎｔｒｙ               ｂａｌａｎｃｅ. Ｙｏｕｒ               ｃｈｏｉｃｅｓ               ｆｏｒ               ａ               ｃｒｅｄｉｔ               ａｒｅ:               ｒｅｖｅｎｕｅ               ｏｒ               ｌｉａｂｉｌｉｔｙ. Ｈｍｍ. Ｉ               ｗｏｎｄｅｒ               ｗｈｉｃｈ               ｏｎｅ               ｔｈｅ               ｂａｎｋ               ｗｉｌｌ               ｃｈｏｏｓｅ!                Ｗｈａｔ               ｃａｎ               ｗｅ               ｌｅａｒｎ               ｆｒｏｍ               ｔｈｉｓ? Ｓｉｍｐｌｅ. Ｉｆ               ｙｏｕ               ａｒｅ               ｉｎｖｅｓｔｅｄ               ｉｎ               ｔｈｅ               ｓｔｏｃｋ               ｍａｒｋｅｔ               ｙｏｕ               ｎｅｅｄ               ｔｏ               ｋｎｏｗ               ｈｏｗ               ｔｏ               ｒｅａｄ               ａ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔ. Ｙｏｕ               ａｌｓｏ               ｈａｖｅ               ｔｏ               ｈａｖｅ               ａ               ｂａｓｉｃ               ｕｎｄｅｒｓｔａｎｄｉｎｇ               ｏｆ               ａｃｃｏｕｎｔｉｎｇ               ｐｒｉｎｃｉｐｌｅｓ               ａｎｄ               ｗｈａｔ               ｉｎｆｏｒｍａｔｉｏｎ               ｙｏｕ               ｃａｎ               ｇｅｔ               ｆｒｏｍ               ｒｅａｄｉｎｇ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔ               ｄｉｓｃｌｏｓｕｒｅｓ. Ｙｏｕ               ｃａｎ'ｔ               ｊｕｓｔ               ｔａｋｅ               ａ               ｐｒｅｓｓ               ｒｅｌｅａｓｅ               ｓｔａｔｉｎｇ               "ＸＹＺ               ｃｏｍｐａｎｙ               ｅａｒｎｅｄ               $40               ｂｉｌｌｉｏｎ               ｌａｓｔ               ｙｅａｒ"               ａｎｄ               ｔｈｅｎ               ｉｎｖｅｓｔ               ｉｎ               ｔｈｅｍ               ｗｉｔｈｏｕｔ               ｋｎｏｗｉｎｇ               ｔｈｅ               ｅｎｔｉｒｅ               ｓｉｔｕａｔｉｏｎ.                Ｉ               ｄｏｎ'ｔ               ｔｈｉｎｋ               ｐｅｏｐｌｅ               ｕｎｄｅｒｓｔａｎｄ               ｔｈｅ               ｌｅｓｓｏｎ               Ｉ               ｊｕｓｔ               ｍｅｎｔｉｏｎｅｄ. Ａｓ               ｏｆ               Ｆｒｉｄａｙ,               ｂａｎｋ               ｓｔｏｃｋｓ               ｗｅｒｅ               ｔｒａｄｉｎｇ               ｕｐ               ｄｅｓｐｉｔｅ               ｔｈｅ               ｆａｃｔ               ｔｈａｔ               ｏｕｒ               ｇｏｖｅｒｎｍｅｎｔ               ｆｅｅｌｓ               ｍａｎｙ               ｏｆ               ｔｈｅｍ               ａｒｅ               ｉｌｌ-ｐｒｅｐａｒｅｄ               ｔｏ               ｗｅａｔｈｅｒ               ｔｈｅ               ｓｔｏｒｍ.                Ｒｅｓｏｕｒｃｅｓ:                Ｂａｎｋ               ｏｆ               Ａｍｅｒｉｃａ               Ｐｒｅｓｓ               Ｒｅｌｅａｓｅ                               Ｒｅｕｔｅｒｓ

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Ｉｎ               ｔｈｅ               ｗａｋｅ               ｏｆ               ｔｈｅ               Ｇｒｅａｔ               Ｒｅｃｅｓｓｉｏｎ               (2007-8)               -               ａ               ｃｒｉｓｉｓ               ｌａｒｇｅｌｙ               ｏｆ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｓｙｓｔｅｍ               -               ｔｈｅ               ｍｕｌｔｉｎａｔｉｏｎａｌ               Ｂａｓｅｌ               Ｃｏｍｍｉｔｔｅｅ               ａｎｄ               ｔｈｅ               Ｇｒｏｕｐ               ｏｆ               Ｃｅｎｔｒａｌ               Ｂａｎｋ               Ｇｏｖｅｒｎｏｒｓ               ａｎｄ               Ｈｅａｄｓ               ｏｆ               Ｓｕｐｅｒｖｉｓｉｏｎ,               ｃｏｍｐｒｉｓｅｄ               ｏｆ               ｃｅｎｔｒａｌ               ｂａｎｋｅｒｓ,               ｂａｎｋｉｎｇ               ｓｕｐｅｒｖｉｓｏｒｓ,               ａｎｄ               ｒｅｇｕｌａｔｏｒｓ               ｍｏｒｅ               ｔｈａｎ               ｄｏｕｂｌｅｄ               ｔｈｅ               ａｍｏｕｎｔ               ｏｆ               ｅｑｕｉｔｙ               (Ｔｉｅｒ               1)               ｃａｐｉｔａｌ               ｂａｎｋｓ               ｍｕｓｔ               ｈａｖｅ               ｔｏ               4.5%. Ａｎｏｔｈｅｒ               2.5%               ｏｆ               ｔｈｅｉｒ               ａｓｓｅｔｓ               ｍｕｓｔ               ｂｅ               ｈｅｌｄ               ａｓ               ａｎ               ｅｑｕｉｔｙ               "ｃｏｎｓｅｒｖａｔｉｏｎ               ｂｕｆｆｅｒ"               ｔｏ               ｂｅ               ａｍｏｒｔｉｚｅｄ               ａｎｄ               ｄｅｐｌｏｙｅｄ               ｉｎ               ｃａｓｅ               ｏｆ               ｅｍｅｒｇｅｎｃｙ. Ｂａｎｋｓ               ｗｈｉｃｈ               ｒｅｓｏｒｔ               ｔｏ               ｔｈｅ               ｂｕｆｆｅｒ               ｍｕｓｔ,               ｈｏｗｅｖｅｒ               ａｕｇｍｅｎｔ               ｔｈｅｉｒ               ｃａｐｉｔａｌ               ｂｙ               ａｎｙ               (ｌｅｇａｌ)               ｍｅａｎｓ               ｐｏｓｓｉｂｌｅ               (ｆｏｒ               ｉｎｓｔａｎｃｅ,               ｂｙ               ｎｏｔ               ｄｉｓｔｒｉｂｕｔｉｎｇ               ｄｉｖｉｄｅｎｄｓ,               ｂｙ               ｄｉｖｅｓｔｉｎｇ               ｎｏｎ-ｃｏｒｅ               ａｓｓｅｔｓ,               ｏｒ               ｂｙ               ｉｓｓｕｉｎｇ               ｎｅｗ               ｓｔｏｃｋ). Ｙｅｔ               ａｎｏｔｈｅｒ               1.5%               ｏｆ               ｔｈｅ               ｂａｌａｎｃｅ               ｓｈｅｅｔ               ｍｕｓｔ               ｂｅ               ｈｅｌｄ               ｉｎ               "ｌｅｓｓ-ｔｈａｎ-ｅｑｕｉｔｙ"               ｑｕａｌｉｔｙ               ｉｎｖｅｓｔｍｅｎｔ               ｖｅｈｉｃｌｅｓ               ａｎｄ               ｔｈｅ               ｔｏｔａｌ               ｌｅｖｅｒａｇｅ               ｒａｔｉｏ               ｍｕｓｔ               ｎｅｖｅｒ               ｇｏ               ｂｅｌｏｗ               3%               ｉｎ               ｅｑｕｉｔｙ               (ａｄｍｉｔｔｅｄｌｙ,               ａ               ｌｉｂｅｒａｌ               ｎｕｍｂｅｒ).                Ｍｏｒｅｏｖｅｒ:               ｒｅｇｕｌａｔｏｒｓ               ｃａｎ               ｉｍｐｏｓｅ               ｔｈｅ               ｅｑｕｉｖａｌｅｎｔ               ｏｆ               ｙｅｔ               ａｎｏｔｈｅｒ               2.5%               ｉｎ               ｒｉｓｋ-ｗｅｉｇｈｔｅｄ               ａｓｓｅｔｓ               (ｉｎｃｌｕｄｉｎｇ               ｏｆｆ-ｂａｌａｎｃｅ-ｓｈｅｅｔ               ａｓｓｅｔｓ,               ｓｕｃｈ               ａｓ               ｄｅｒｉｖａｔｉｖｅｓ)               ｉｎ               ｔｈｅ               ｆｏｒｍ               ｏｆ               ａ               "ｃｏｕｎｔｅｒｃｙｃｌｉｃａｌ               ｂｕｆｆｅｒ". Ｔｈｉｓ               ｉｓ               ｉｎｔｅｎｄｅｄ               ｔｏ               ｃｏｕｎｔｅｒ               ｔｈｅ               ｐｒｏ-ｃｙｃｌｉｃａｌ               ｎａｔｕｒｅ               ｏｆ               ｍｏｓｔ               ｃａｐｉｔａｌ               ｒｅｑｕｉｒｅｍｅｎｔｓ               ａｎｄ               ｒｅｓｅｒｖｅｓ               ｒｅｇｉｍｅｓ:               ｔｈｅ               ｍｏｒｅ               ａｓｓｅｔｓ'               ｐｒｉｃｅｓ               ｒｉｓｅ               (ａｎｄ               ｃｏｍｍｅｎｓｕｒａｔｅ               ｒｉｓｋｓ               ｉｎｃｒｅａｓｅ),               ｔｈｅ               ｌｅｓｓ               ｔｈｅ               ｃａｐｉｔａｌ               ｓｅｔ               ａｓｉｄｅ               ａｓ               ｌｏａｎｓ               ａｒｅ               ｄｅｅｍｅｄ               "ｓａｆｅｒ"               ｂｙ               ｇｒｅｅｄｙ               ｂａｎｋｅｒｓ               ｗｈｏｓｅ               ｃｏｍｐｅｎｓａｔｉｏｎ               ｉｓ               ｏｆｔｅｎ               ｔｉｅｄ               ｔｏ               ｔｈｅｉｒ               ｉｎｓｔｉｔｕｔｉｏｎ'ｓ               ｓｈｏｒｔ-ｔｅｒｍ               ｐｅｒｆｏｒｍａｎｃｅ.                Ｔｈｅ               Ｂａｓｅｌ               ＩＩＩ               ｒｅｇｉｍｅ               ｈａｓ               ｔｏ               ｂｅ               ｆｕｌｌｙ               ｉｍｐｌｅｍｅｎｔｅｄ               ｂｙ               2019,               ａ               ｃｏｎｃｅｓｓｉｏｎ               ｔｏ               ｕｎｄｅｒ-ｃａｐｉｔａｌｉｚｅｄ               ｂａｎｋｉｎｇ               ｓｅｃｔｏｒｓ               ｉｎ               ｖａｒｉｏｕｓ               ＥＵ               ｍｅｍｂｅｒｓ               (ｎｏｔａｂｌｙ               Ｇｅｒｍａｎｙ               ). Ｉｒｏｎｉｃａｌｌｙ,               ｔｈｅ               Ｂａｓｅｌ               Ｃｏｍｍｉｔｔｅｅ               ｗａｓ               ｃｒｅａｔｅｄ               ｉｎ               1974,               ｆｏｌｌｏｗｉｎｇ               ｔｈｅ               ｆａｉｌｕｒｅ               ｏｆ               ａ               Ｇｅｒｍａｎ               ｂａｎｋ               ａｎｄ               ａｎ               ｅｎｓｕｉｎｇ               ｎｅａｒ-ｃｏｌｌａｐｓｅ               ｏｆ               ｔｈｅ               ｃｕｒｒｅｎｃｙ               ｍａｒｋｅｔｓ. Ｉｎｄｅｅｄ,               ｔｈｅ               Ｂａｓｅｌ               ｒｅｇｉｍｅ               ｉｓ               ａｓ               ｓｔｒｏｎｇ               ａｓ               ｉｔｓ               ｗｅａｋｅｓｔ               ｌｉｎｋ:               ｍｕｌｔｉｌａｔｅｒａｌｉｓｍ               ｈａｓ               ｉｔｓ               ｐｒｉｃｅ. Ｔｈｉｓ               ｉｎ-ｂｕｉｌｔ               ｆｒａｉｌｔｙ               ｆｏｒｃｅｓ               ｔｈｅ               Ｃｏｍｍｉｔｔｅｅ               ｔｏ               ｒｅｍａｉｎ               ｖａｇｕｅ               ｏｎ               ｗｈａｔ               ｃｏｎｓｔｉｔｕｔｅｓ               ｃａｐｉｔａｌ;               ｏｎ               ｄｉｓｃｌｏｓｕｒｅ               ｒｅｇａｒｄｉｎｇ               ｄｅｒｉｖａｔｉｖｅｓ;               ａｎｄ               ｏｎ               ｔｈｅ               ｌｏａｄｅｄ               ｉｓｓｕｅ               ｏｆ               ｓｕｂｏｒｄｉｎａｔｅｄ               ｄｅｂｔ               ｖｓ. ｃｏｒｐｏｒａｔｅ               ｂｏｎｄｓ               (ｓｕｂｏｒｄｉｎａｔｅｄ               ｄｅｂｔ               ｗｏｕｌｄ               ｆｏｒｃｅ               ｂａｎｋｓ               ｔｏ               ｂｅｃｏｍｅ               ａ               ｌｏｔ               ｍｏｒｅ               ｔｒａｎｓｐａｒｅｎｔ               ａｎｄ               ｉｓ               ｌｉｋｅｌｙ               ｔｏ               ｆｏｓｔｅｒ               ｓｈａｒｅｈｏｌｄｅｒ               ａｃｔｉｖｉｓｍ).                Ｂａｎｋｓ               ａｒｅ               ｉｎｓｔｉｔｕｔｉｏｎｓ               ｗｈｅｒｅ               ｍｉｒａｃｌｅｓ               ｈａｐｐｅｎ               ｒｅｇｕｌａｒｌｙ. Ｗｅ               ｒａｒｅｌｙ               ｅｎｔｒｕｓｔ               ｏｕｒ               ｍｏｎｅｙ               ｔｏ               ａｎｙｏｎｅ               ｂｕｔ               ｏｕｒｓｅｌｖｅｓ               -               ａｎｄ               ｏｕｒ               ｂａｎｋｓ. Ｄｅｓｐｉｔｅ               ａ               ｖｅｒｙ               ｃｈｅｑｕｅｒｅｄ               ｈｉｓｔｏｒｙ               ｏｆ               ｍｉｓｍａｎａｇｅｍｅｎｔ,               ｃｏｒｒｕｐｔｉｏｎ,               ｆａｌｓｅ               ｐｒｏｍｉｓｅｓ               ａｎｄ               ｒｅｐｒｅｓｅｎｔａｔｉｏｎｓ,               ｄｅｌｕｓｉｏｎｓ               ａｎｄ               ｂｅｈａｖｉｏｕｒａｌ               ｉｎｃｏｎｓｉｓｔｅｎｃｙ               -               ｂａｎｋｓ               ｓｔｉｌｌ               ｓｕｃｃｅｅｄ               ｔｏ               ｍｏｔｉｖａｔｅ               ｕｓ               ｔｏ               ｇｉｖｅ               ｔｈｅｍ               ｏｕｒ               ｍｏｎｅｙ. Ｐａｒｔｌｙ               ｉｔ               ｉｓ               ｔｈｅ               ｆｅｅｌｉｎｇ               ｔｈａｔ               ｔｈｅｒｅ               ｉｓ               ｓａｆｅｔｙ               ｉｎ               ｎｕｍｂｅｒｓ. Ｔｈｅ               ｆａｓｈｉｏｎａｂｌｅ               ｔｅｒｍ               ｔｏｄａｙ               ｉｓ               "ｍｏｒａｌ               ｈａｚａｒｄ". Ｔｈｅ               ｉｍｐｌｉｃｉｔ               ｇｕａｒａｎｔｅｅｓ               ｏｆ               ｔｈｅ               ｓｔａｔｅ               ａｎｄ               ｏｆ               ｏｔｈｅｒ               ｆｉｎａｎｃｉａｌ               ｉｎｓｔｉｔｕｔｉｏｎｓ               ｍｏｖｅ               ｕｓ               ｔｏ               ｔａｋｅ               ｒｉｓｋｓ               ｗｈｉｃｈ               ｗｅ               ｗｏｕｌｄ,               ｏｔｈｅｒｗｉｓｅ,               ｈａｖｅ               ａｖｏｉｄｅｄ. Ｐａｒｔｌｙ               ｉｔ               ｉｓ               ｔｈｅ               ｓｏｐｈｉｓｔｉｃａｔｉｏｎ               ｏｆ               ｔｈｅ               ｂａｎｋｓ               ｉｎ               ｍａｒｋｅｔｉｎｇ               ａｎｄ               ｐｒｏｍｏｔｉｎｇ               ｔｈｅｍｓｅｌｖｅｓ               ａｎｄ               ｔｈｅｉｒ               ｐｒｏｄｕｃｔｓ. Ｇｌｏｓｓｙ               ｂｒｏｃｈｕｒｅｓ,               ｐｒｏｆｅｓｓｉｏｎａｌ               ｃｏｍｐｕｔｅｒ               ａｎｄ               ｖｉｄｅｏ               ｐｒｅｓｅｎｔａｔｉｏｎｓ               ａｎｄ               ｖａｓｔ,               ｓｈｒｉｎｅ-ｌｉｋｅ,               ｒｅａｌ               ｅｓｔａｔｅ               ｃｏｍｐｌｅｘｅｓ               ａｌｌ               ｓｅｒｖｅ               ｔｏ               ｅｎｈａｎｃｅ               ｔｈｅ               ｉｍａｇｅ               ｏｆ               ｔｈｅ               ｂａｎｋｓ               ａｓ               ｔｈｅ               ｔｅｍｐｌｅｓ               ｏｆ               ｔｈｅ               ｎｅｗ               ｒｅｌｉｇｉｏｎ               ｏｆ               ｍｏｎｅｙ.                Ｂｕｔ               ｗｈａｔ               ｉｓ               ｂｅｈｉｎｄ               ａｌｌ               ｔｈｉｓ? Ｈｏｗ               ｃａｎ               ｗｅ               ｊｕｄｇｅ               ｔｈｅ               ｓｏｕｎｄｎｅｓｓ               ｏｆ               ｏｕｒ               ｂａｎｋｓ? Ｉｎ               ｏｔｈｅｒ               ｗｏｒｄｓ,               ｈｏｗ               ｃａｎ               ｗｅ               ｔｅｌｌ               ｉｆ               ｏｕｒ               ｍｏｎｅｙ               ｉｓ               ｓａｆｅｌｙ               ｔｕｃｋｅｄ               ａｗａｙ               ｉｎ               ａ               ｓａｆｅ               ｈａｖｅｎ?                Ｔｈｅ               ｒｅｆｌｅｘ               ｉｓ               ｔｏ               ｇｏ               ｔｏ               ｔｈｅ               ｂａｎｋ'ｓ               ｂａｌａｎｃｅ               ｓｈｅｅｔｓ. Ｂａｎｋｓ               ａｎｄ               ｂａｌａｎｃｅ               ｓｈｅｅｔｓ               ｈａｖｅ               ｂｅｅｎ               ｂｏｔｈ               ｉｎｖｅｎｔｅｄ               ｉｎ               ｔｈｅｉｒ               ｍｏｄｅｒｎ               ｆｏｒｍ               ｉｎ               ｔｈｅ               15ｔｈ               ｃｅｎｔｕｒｙ. Ａ               ｂａｌａｎｃｅ               ｓｈｅｅｔ,               ｃｏｕｐｌｅｄ               ｗｉｔｈ               ｏｔｈｅｒ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ               ｉｓ               ｓｕｐｐｏｓｅｄ               ｔｏ               ｐｒｏｖｉｄｅ               ｕｓ               ｗｉｔｈ               ａ               ｔｒｕｅ               ａｎｄ               ｆｕｌｌ               ｐｉｃｔｕｒｅ               ｏｆ               ｔｈｅ               ｈｅａｌｔｈ               ｏｆ               ｔｈｅ               ｂａｎｋ,               ｉｔｓ               ｐａｓｔ               ａｎｄ               ｉｔｓ               ｌｏｎｇ-ｔｅｒｍ               ｐｒｏｓｐｅｃｔｓ. Ｔｈｅ               ｓｕｒｐｒｉｓｉｎｇ               ｔｈｉｎｇ               ｉｓ               ｔｈａｔ               -               ｄｅｓｐｉｔｅ               ｃｏｍｍｏｎ               ｏｐｉｎｉｏｎ               -               ｉｔ               ｄｏｅｓ.                Ｂｕｔ               ｉｔ               ｉｓ               ｒａｔｈｅｒ               ｕｓｅｌｅｓｓ               ｕｎｌｅｓｓ               ｙｏｕ               ｋｎｏｗ               ｈｏｗ               ｔｏ               ｒｅａｄ               ｉｔ.                Ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ               (Ｉｎｃｏｍｅ               -               ｏｒ               Ｐｒｏｆｉｔ               ａｎｄ               Ｌｏｓｓ               -               Ｓｔａｔｅｍｅｎｔ,               Ｃａｓｈ               Ｆｌｏｗ               Ｓｔａｔｅｍｅｎｔ               ａｎｄ               Ｂａｌａｎｃｅ               Ｓｈｅｅｔ)               ｃｏｍｅ               ｉｎ               ｍａｎｙ               ｆｏｒｍｓ. Ｓｏｍｅｔｉｍｅｓ               ｔｈｅｙ               ｃｏｎｆｏｒｍ               ｔｏ               Ｗｅｓｔｅｒｎ               ａｃｃｏｕｎｔｉｎｇ               ｓｔａｎｄａｒｄｓ               (ｔｈｅ               Ｇｅｎｅｒａｌｌｙ               Ａｃｃｅｐｔｅｄ               Ａｃｃｏｕｎｔｉｎｇ               Ｐｒｉｎｃｉｐｌｅｓ,               ＧＡＡＰ,               ｏｒ               ｔｈｅ               ｌｅｓｓ               ｒｉｇｏｒｏｕｓ               ａｎｄ               ｍｏｒｅ               ｆｕｚｚｉｌｙ               ｗｏｒｄｅｄ               Ｉｎｔｅｒｎａｔｉｏｎａｌ               Ａｃｃｏｕｎｔｉｎｇ               Ｓｔａｎｄａｒｄｓ,               ＩＡＳ). Ｏｔｈｅｒｗｉｓｅ,               ｔｈｅｙ               ｃｏｎｆｏｒｍ               ｔｏ               ｌｏｃａｌ               ａｃｃｏｕｎｔｉｎｇ               ｓｔａｎｄａｒｄｓ,               ｗｈｉｃｈ               ｏｆｔｅｎ               ｌｅａｖｅ               ａ               ｌｏｔ               ｔｏ               ｂｅ               ｄｅｓｉｒｅｄ. Ｓｔｉｌｌ,               ｙｏｕ               ｓｈｏｕｌｄ               ｌｏｏｋ               ｆｏｒ               ｂａｎｋｓ,               ｗｈｉｃｈ               ｍａｋｅ               ｔｈｅｉｒ               ｕｐｄａｔｅｄ               ｆｉｎａｎｃｉａｌ               ｒｅｐｏｒｔｓ               ａｖａｉｌａｂｌｅ               ｔｏ               ｙｏｕ. Ｔｈｅ               ｂｅｓｔ               ｃｈｏｉｃｅ               ｗｏｕｌｄ               ｂｅ               ａ               ｂａｎｋ               ｔｈａｔ               ｉｓ               ａｕｄｉｔｅｄ               ｂｙ               ｏｎｅ               ｏｆ               ｔｈｅ               Ｂｉｇ               Ｆｏｕｒ               Ｗｅｓｔｅｒｎ               ａｃｃｏｕｎｔｉｎｇ               ｆｉｒｍｓ               ａｎｄ               ｍａｋｅｓ               ｉｔｓ               ａｕｄｉｔ               ｒｅｐｏｒｔｓ               ｐｕｂｌｉｃｌｙ               ａｖａｉｌａｂｌｅ. Ｓｕｃｈ               ａｕｄｉｔｅｄ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ               ｓｈｏｕｌｄ               ｃｏｎｓｏｌｉｄａｔｅ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｒｅｓｕｌｔｓ               ｏｆ               ｔｈｅ               ｂａｎｋ               ｗｉｔｈ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｒｅｓｕｌｔｓ               ｏｆ               ｉｔｓ               ｓｕｂｓｉｄｉａｒｉｅｓ               ｏｒ               ａｓｓｏｃｉａｔｅｄ               ｃｏｍｐａｎｉｅｓ. Ａ               ｌｏｔ               ｏｆｔｅｎ               ｈｉｄｅｓ               ｉｎ               ｔｈｏｓｅ               ｃｏｒｎｅｒｓ               ｏｆ               ｃｏｒｐｏｒａｔｅ               ｈｏｌｄｉｎｇｓ.                Ｂａｎｋｓ               ａｒｅ               ｒａｔｅｄ               ｂｙ               ｉｎｄｅｐｅｎｄｅｎｔ               ａｇｅｎｃｉｅｓ. Ｔｈｅ               ｍｏｓｔ               ｆａｍｏｕｓ               ａｎｄ               ｍｏｓｔ               ｒｅｌｉａｂｌｅ               ｏｆ               ｔｈｅ               ｌｏｔ               ｉｓ               Ｆｉｔｃｈ               Ｒａｔｉｎｇｓ. Ａｎｏｔｈｅｒ               ｏｎｅ               ｉｓ               Ｍｏｏｄｙ'ｓ. Ｔｈｅｓｅ               ａｇｅｎｃｉｅｓ               ａｓｓｉｇｎ               ｌｅｔｔｅｒ               ａｎｄ               ｎｕｍｂｅｒ               ｃｏｍｂｉｎａｔｉｏｎｓ               ｔｏ               ｔｈｅ               ｂａｎｋｓ               ｔｈａｔ               ｒｅｆｌｅｃｔ               ｔｈｅｉｒ               ｓｔａｂｉｌｉｔｙ. Ｍｏｓｔ               ａｇｅｎｃｉｅｓ               ｄｉｆｆｅｒｅｎｔｉａｔｅ               ｔｈｅ               ｓｈｏｒｔ               ｔｅｒｍ               ｆｒｏｍ               ｔｈｅ               ｌｏｎｇ               ｔｅｒｍ               ｐｒｏｓｐｅｃｔｓ               ｏｆ               ｔｈｅ               ｂａｎｋｉｎｇ               ｉｎｓｔｉｔｕｔｉｏｎ               ｒａｔｅｄ. Ｓｏｍｅ               ｏｆ               ｔｈｅｍ               ｅｖｅｎ               ｓｔｕｄｙ               (ａｎｄ               ｒａｔｅ)               ｉｓｓｕｅｓ,               ｓｕｃｈ               ａｓ               ｔｈｅ               ｌｅｇａｌｉｔｙ               ｏｆ               ｔｈｅ               ｏｐｅｒａｔｉｏｎｓ               ｏｆ               ｔｈｅ               ｂａｎｋ               (ｌｅｇａｌ               ｒａｔｉｎｇ). Ｏｓｔｅｎｓｉｂｌｙ,               ａｌｌ               ａ               ｃｏｎｃｅｒｎｅｄ               ｐｅｒｓｏｎ               ｈａｓ               ｔｏ               ｄｏ,               ｔｈｅｒｅｆｏｒｅ,               ｉｓ               ｔｏ               ｓｔｅｐ               ｕｐ               ｔｏ               ｔｈｅ               ｂａｎｋ               ｍａｎａｇｅｒ,               ｍｕｓｔｅｒ               ｃｏｕｒａｇｅ               ａｎｄ               ａｓｋ               ｆｏｒ               ｔｈｅ               ｂａｎｋ'ｓ               ｒａｔｉｎｇ. Ｕｎｆｏｒｔｕｎａｔｅｌｙ,               ｌｉｆｅ               ｉｓ               ｍｏｒｅ               ｃｏｍｐｌｉｃａｔｅｄ               ｔｈａｎ               ｒａｔｉｎｇ               ａｇｅｎｃｉｅｓ               ｗｏｕｌｄ               ｈａｖｅ               ｕｓ               ｂｅｌｉｅｖｅ.                Ｔｈｅｙ               ｂａｓｅ               ｔｈｅｍｓｅｌｖｅｓ               ｍｏｓｔｌｙ               ｏｎ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｒｅｓｕｌｔｓ               ｏｆ               ｔｈｅ               ｂａｎｋ               ｒａｔｅｄ               ａｓ               ａ               ｒｅｌｉａｂｌｅ               ｇａｕｇｅ               ｏｆ               ｉｔｓ               ｆｉｎａｎｃｉａｌ               ｓｔｒｅｎｇｔｈ               ｏｒ               ｆｉｎａｎｃｉａｌ               ｐｒｏｆｉｌｅ. Ｎｏｔｈｉｎｇ               ｉｓ               ｆｕｒｔｈｅｒ               ｆｒｏｍ               ｔｈｅ               ｔｒｕｔｈ.                Ａｄｍｉｔｔｅｄｌｙ,               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｒｅｓｕｌｔｓ               ｄｏ               ｃｏｎｔａｉｎ               ａ               ｆｅｗ               ｉｍｐｏｒｔａｎｔ               ｆａｃｔｓ. Ｂｕｔ               ｏｎｅ               ｈａｓ               ｔｏ               ｌｏｏｋ               ｂｅｙｏｎｄ               ｔｈｅ               ｎａｋｅｄ               ｆｉｇｕｒｅｓ               ｔｏ               ｇｅｔ               ｔｈｅ               ｒｅａｌ               -               ｏｆｔｅｎ               ｍｕｃｈ               ｌｅｓｓ               ｅｎｃｏｕｒａｇｉｎｇ               -               ｐｉｃｔｕｒｅ.                Ｃｏｎｓｉｄｅｒ               ｔｈｅ               ｔｈｏｒｎｙ               ｉｓｓｕｅ               ｏｆ               ｅｘｃｈａｎｇｅ               ｒａｔｅｓ. Ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ               ａｒｅ               ｃａｌｃｕｌａｔｅｄ               (ｓｏｍｅｔｉｍｅｓ               ｓｔａｔｅｄ               ｉｎ               ＵＳＤ               ｉｎ               ａｄｄｉｔｉｏｎ               ｔｏ               ｔｈｅ               ｌｏｃａｌ               ｃｕｒｒｅｎｃｙ)               ｕｓｉｎｇ               ｔｈｅ               ｅｘｃｈａｎｇｅ               ｒａｔｅ               ｐｒｅｖａｉｌｉｎｇ               ｏｎ               ｔｈｅ               31ｓｔ               ｏｆ               Ｄｅｃｅｍｂｅｒ               ｏｆ               ｔｈｅ               ｆｉｓｃａｌ               ｙｅａｒ               (ｔｏ               ｗｈｉｃｈ               ｔｈｅ               ｓｔａｔｅｍｅｎｔｓ               ｒｅｆｅｒ). Ｉｎ               ａ               ｃｏｕｎｔｒｙ               ｗｉｔｈ               ａ               ｖｏｌａｔｉｌｅ               ｄｏｍｅｓｔｉｃ               ｃｕｒｒｅｎｃｙ               ｔｈｉｓ               ｗｏｕｌｄ               ｔｅｎｄ               ｔｏ               ｃｏｍｐｌｅｔｅｌｙ               ｄｉｓｔｏｒｔ               ｔｈｅ               ｔｒｕｅ               ｐｉｃｔｕｒｅ. Ｔｈｉｓ               ｉｓ               ｅｓｐｅｃｉａｌｌｙ               ｔｒｕｅ               ｉｆ               ａ               ｂｉｇ               ｃｈｕｎｋ               ｏｆ               ｔｈｅ               ａｃｔｉｖｉｔｙ               ｐｒｅｃｅｄｅｄ               ｔｈｉｓ               ａｒｂｉｔｒａｒｙ               ｄａｔｅ. Ｔｈｅ               ｓａｍｅ               ａｐｐｌｉｅｓ               ｔｏ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ,               ｗｈｉｃｈ               ｗｅｒｅ               ｎｏｔ               ｉｎｆｌａｔｉｏｎ-ａｄｊｕｓｔｅｄ               ｉｎ               ｈｉｇｈ               ｉｎｆｌａｔｉｏｎ               ｃｏｕｎｔｒｉｅｓ. Ｔｈｅ               ｓｔａｔｅｍｅｎｔｓ               ｗｉｌｌ               ｌｏｏｋ               ｉｎｆｌａｔｅｄ               ａｎｄ               ｅｖｅｎ               ｒｅｆｌｅｃｔ               ｐｒｏｆｉｔｓ               ｗｈｅｒｅ               ｈｅａｖｙ               ｌｏｓｓｅｓ               ｗｅｒｅ               ｉｎｃｕｒｒｅｄ. "Ａｖｅｒａｇｅ               ａｍｏｕｎｔｓ"               ａｃｃｏｕｎｔｉｎｇ               (ｗｈｉｃｈ               ｍａｋｅｓ               ｕｓｅ               ｏｆ               ａｖｅｒａｇｅ               ｅｘｃｈａｎｇｅ               ｒａｔｅｓ               ｔｈｒｏｕｇｈｏｕｔ               ｔｈｅ               ｙｅａｒ)               ｉｓ               ｅｖｅｎ               ｍｏｒｅ               ｍｉｓｌｅａｄｉｎｇ. Ｔｈｅ               ｏｎｌｙ               ｗａｙ               ｔｏ               ｔｒｕｌｙ               ｒｅｆｌｅｃｔ               ｒｅａｌｉｔｙ               ｉｓ               ｉｆ               ｔｈｅ               ｂａｎｋ               ｗｅｒｅ               ｔｏ               ｋｅｅｐ               ｔｗｏ               ｓｅｔｓ               ｏｆ               ａｃｃｏｕｎｔｓ:               ｏｎｅ               ｉｎ               ｔｈｅ               ｌｏｃａｌ               ｃｕｒｒｅｎｃｙ               ａｎｄ               ｏｎｅ               ｉｎ               ＵＳＤ               (ｏｒ               ｉｎ               ｓｏｍｅ               ｏｔｈｅｒ               ｃｕｒｒｅｎｃｙ               ｏｆ               ｒｅｆｅｒｅｎｃｅ). Ｏｔｈｅｒｗｉｓｅ,               ｆｉｃｔｉｔｉｏｕｓ               ｇｒｏｗｔｈ               ｉｎ               ｔｈｅ               ａｓｓｅｔ               ｂａｓｅ               (ｄｕｅ               ｔｏ               ｉｎｆｌａｔｉｏｎ               ｏｒ               ｃｕｒｒｅｎｃｙ               ｆｌｕｃｔｕａｔｉｏｎｓ)               ｃｏｕｌｄ               ｒｅｓｕｌｔ.                Ａｎｏｔｈｅｒ               ｅｘａｍｐｌｅ:               ｉｎ               ｍａｎｙ               ｃｏｕｎｔｒｉｅｓ,               ｃｈａｎｇｅｓ               ｉｎ               ｒｅｇｕｌａｔｉｏｎｓ               ｃａｎ               ｇｒｅａｔｌｙ               ｅｆｆｅｃｔ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ               ｏｆ               ａ               ｂａｎｋ. Ｉｎ               1996,               ｉｎ               Ｒｕｓｓｉａ,               ｆｏｒ               ｅｘａｍｐｌｅ,               ｔｈｅ               Ｂａｎｋ               ｏｆ               Ｒｕｓｓｉａ               ｃｈａｎｇｅｄ               ｔｈｅ               ａｌｇｏｒｉｔｈｍ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ａｎ               ｉｍｐｏｒｔａｎｔ               ｂａｎｋｉｎｇ               ｒａｔｉｏ               (ｔｈｅ               ｃａｐｉｔａｌ               ｔｏ               ｒｉｓｋ               ｗｅｉｇｈｔｅｄ               ａｓｓｅｔｓ               ｒａｔｉｏ).                Ｕｎｌｅｓｓ               ａ               Ｒｕｓｓｉａｎ               ｂａｎｋ               ｒｅｓｔａｔｅｄ               ｉｔｓ               ｐｒｅｖｉｏｕｓ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ               ａｃｃｏｒｄｉｎｇｌｙ,               ａ               ｓｈａｒｐ               ｃｈａｎｇｅ               ｉｎ               ｐｒｏｆｉｔａｂｉｌｉｔｙ               ａｐｐｅａｒｅｄ               ｆｒｏｍ               ｎｏｗｈｅｒｅ.                Ｔｈｅ               ｎｅｔ               ａｓｓｅｔｓ               ｔｈｅｍｓｅｌｖｅｓ               ａｒｅ               ａｌｗａｙｓ               ｍｉｓｓｔａｔｅｄ:               ｔｈｅ               ｆｉｇｕｒｅ               ｒｅｆｅｒｓ               ｔｏ               ｔｈｅ               ｓｉｔｕａｔｉｏｎ               ｏｎ               31/12. Ａ               48-ｈｏｕｒ               ｌｏａｎ               ｇｉｖｅｎ               ｔｏ               ａ               ｃｏｌｌａｂｏｒａｔｉｎｇ               ｃｌｉｅｎｔ               ｃａｎ               ｉｎｆｌａｔｅ               ｔｈｅ               ａｓｓｅｔ               ｂａｓｅ               ｏｎ               ｔｈｅ               ｃｒｕｃｉａｌ               ｄａｔｅ. Ｔｈｉｓ               ｍｉｓｒｅｐｒｅｓｅｎｔａｔｉｏｎ               ｉｓ               ｏｎｌｙ               ｍｉｌｄｌｙ               ａｍｅｌｉｏｒａｔｅｄ               ｂｙ               ｔｈｅ               ｉｎｔｒｏｄｕｃｔｉｏｎ               ｏｆ               ａｎ               "ａｖｅｒａｇｅ               ａｓｓｅｔｓ"               ｃａｌｃｕｌｕｓ. Ｍｏｒｅｏｖｅｒ,               ｓｏｍｅ               ｏｆ               ｔｈｅ               ａｓｓｅｔｓ               ｃａｎ               ｂｅ               ｉｎｔｅｒｅｓｔ               ｅａｒｎｉｎｇ               ａｎｄ               ｐｅｒｆｏｒｍｉｎｇ               -               ｏｔｈｅｒｓ,               ｎｏｎ-ｐｅｒｆｏｒｍｉｎｇ. Ｔｈｅ               ｍａｔｕｒｉｔｙ               ｄｉｓｔｒｉｂｕｔｉｏｎ               ｏｆ               ｔｈｅ               ａｓｓｅｔｓ               ｉｓ               ａｌｓｏ               ｏｆ               ｐｒｉｍｅ               ｉｍｐｏｒｔａｎｃｅ. Ｉｆ               ｍｏｓｔ               ｏｆ               ｔｈｅ               ｂａｎｋ'ｓ               ａｓｓｅｔｓ               ｃａｎ               ｂｅ               ｗｉｔｈｄｒａｗｎ               ｂｙ               ｉｔｓ               ｃｌｉｅｎｔｓ               ｏｎ               ａ               ｖｅｒｙ               ｓｈｏｒｔ               ｎｏｔｉｃｅ               (ｏｎ               ｄｅｍａｎｄ)               -               ｉｔ               ｃａｎ               ｓｗｉｆｔｌｙ               ｆｉｎｄ               ｉｔｓｅｌｆ               ｉｎ               ｔｒｏｕｂｌｅ               ｗｉｔｈ               ａ               ｒｕｎ               ｏｎ               ｉｔｓ               ａｓｓｅｔｓ               ｌｅａｄｉｎｇ               ｔｏ               ｉｎｓｏｌｖｅｎｃｙ.                Ａｎｏｔｈｅｒ               ｏｆｔ-ｕｓｅｄ               ｆｉｇｕｒｅ               ｉｓ               ｔｈｅ               ｎｅｔ               ｉｎｃｏｍｅ               ｏｆ               ｔｈｅ               ｂａｎｋ. Ｉｔ               ｉｓ               ｉｍｐｏｒｔａｎｔ               ｔｏ               ｄｉｓｔｉｎｇｕｉｓｈ               ｉｎｔｅｒｅｓｔ               ｉｎｃｏｍｅ               ｆｒｏｍ               ｎｏｎ-ｉｎｔｅｒｅｓｔ               ｉｎｃｏｍｅ. Ｉｎ               ａｎ               ｏｐｅｎ,               ｓｏｐｈｉｓｔｉｃａｔｅｄ               ｃｒｅｄｉｔ               ｍａｒｋｅｔ,               ｔｈｅ               ｉｎｃｏｍｅ               ｆｒｏｍ               ｉｎｔｅｒｅｓｔ               ｄｉｆｆｅｒｅｎｔｉａｌｓ               ｓｈｏｕｌｄ               ｂｅ               ｍｉｎｉｍａｌ               ａｎｄ               ｒｅｆｌｅｃｔ               ｔｈｅ               ｒｉｓｋ               ｐｌｕｓ               ａ               ｒｅａｓｏｎａｂｌｅ               ｃｏｍｐｏｎｅｎｔ               ｏｆ               ｉｎｃｏｍｅ               ｔｏ               ｔｈｅ               ｂａｎｋ. Ｂｕｔ               ｉｎ               ｍａｎｙ               ｃｏｕｎｔｒｉｅｓ               (Ｊａｐａｎ,               Ｒｕｓｓｉａ)               ｔｈｅ               ｇｏｖｅｒｎｍｅｎｔ               ｓｕｂｓｉｄｉｚｅｓ               ｂａｎｋｓ               ｂｙ               ｌｅｎｄｉｎｇ               ｔｏ               ｔｈｅｍ               ｍｏｎｅｙ               ｃｈｅａｐｌｙ               (ｔｈｒｏｕｇｈ               ｔｈｅ               Ｃｅｎｔｒａｌ               Ｂａｎｋ               ｏｒ               ｔｈｒｏｕｇｈ               ｂｏｎｄｓ). Ｔｈｅ               ｂａｎｋｓ               ｔｈｅｎ               ｐｒｏｃｅｅｄ               ｔｏ               ｌｅｎｄ               ｔｈｅ               ｃｈｅａｐ               ｆｕｎｄｓ               ａｔ               ｅｘｏｒｂｉｔａｎｔ               ｒａｔｅｓ               ｔｏ               ｔｈｅｉｒ               ｃｕｓｔｏｍｅｒｓ,               ｔｈｕｓ               ｒｅａｐｉｎｇ               ｅｎｏｒｍｏｕｓ               ｉｎｔｅｒｅｓｔ               ｉｎｃｏｍｅ. Ｉｎ               ｍａｎｙ               ｃｏｕｎｔｒｉｅｓ               ｔｈｅ               ｉｎｃｏｍｅ               ｆｒｏｍ               ｇｏｖｅｒｎｍｅｎｔ               ｓｅｃｕｒｉｔｉｅｓ               ｉｓ               ｔａｘ               ｆｒｅｅ,               ｗｈｉｃｈ               ｒｅｐｒｅｓｅｎｔｓ               ａｎｏｔｈｅｒ               ｆｏｒｍ               ｏｆ               ｓｕｂｓｉｄｙ. Ａ               ｈｉｇｈ               ｉｎｃｏｍｅ               ｆｒｏｍ               ｉｎｔｅｒｅｓｔ               ｉｓ               ａ               ｓｉｇｎ               ｏｆ               ｗｅａｋｎｅｓｓ,               ｎｏｔ               ｏｆ               ｈｅａｌｔｈ,               ｈｅｒｅ               ｔｏｄａｙ,               ｇｏｎｅ               ｔｏｍｏｒｒｏｗ. Ｔｈｅ               ｐｒｅｆｅｒｒｅｄ               ｉｎｄｉｃａｔｏｒ               ｓｈｏｕｌｄ               ｂｅ               ｉｎｃｏｍｅ               ｆｒｏｍ               ｏｐｅｒａｔｉｏｎｓ               (ｆｅｅｓ,               ｃｏｍｍｉｓｓｉｏｎｓ               ａｎｄ               ｏｔｈｅｒ               ｃｈａｒｇｅｓ).                Ｔｈｅｒｅ               ａｒｅ               ａ               ｆｅｗ               ｋｅｙ               ｒａｔｉｏｓ               ｔｏ               ｏｂｓｅｒｖｅ. Ａ               ｒｅｌｅｖａｎｔ               ｑｕｅｓｔｉｏｎ               ｉｓ               ｗｈｅｔｈｅｒ               ｔｈｅ               ｂａｎｋ               ｉｓ               ａｃｃｒｅｄｉｔｅｄ               ｗｉｔｈ               ｉｎｔｅｒｎａｔｉｏｎａｌ               ｂａｎｋｉｎｇ               ａｇｅｎｃｉｅｓ. Ｔｈｅｓｅ               ｉｓｓｕｅ               ｒｅｇｕｌａｔｏｒｙ               ｃａｐｉｔａｌ               ｒｅｑｕｉｒｅｍｅｎｔｓ               ａｎｄ               ｏｔｈｅｒ               ｍａｎｄａｔｏｒｙ               ｒａｔｉｏｓ. Ｃｏｍｐｌｉａｎｃｅ               ｗｉｔｈ               ｔｈｅｓｅ               ｄｅｍａｎｄｓ               ｉｓ               ａ               ｍｉｎｉｍｕｍ               ｉｎ               ｔｈｅ               ａｂｓｅｎｃｅ               ｏｆ               ｗｈｉｃｈ,               ｔｈｅ               ｂａｎｋ               ｓｈｏｕｌｄ               ｂｅ               ｒｅｇａｒｄｅｄ               ａｓ               ｐｏｓｉｔｉｖｅｌｙ               ｄａｎｇｅｒｏｕｓ.                Ｔｈｅ               ｒｅｔｕｒｎ               ｏｎ               ｔｈｅ               ｂａｎｋ'ｓ               ｅｑｕｉｔｙ               (ＲＯＥ)               ｉｓ               ｔｈｅ               ｎｅｔ               ｉｎｃｏｍｅ               ｄｉｖｉｄｅｄ               ｂｙ               ｉｔｓ               ａｖｅｒａｇｅ               ｅｑｕｉｔｙ. Ｔｈｅ               ｒｅｔｕｒｎ               ｏｎ               ｔｈｅ               ｂａｎｋ'ｓ               ａｓｓｅｔｓ               (ＲＯＡ)               ｉｓ               ｉｔｓ               ｎｅｔ               ｉｎｃｏｍｅ               ｄｉｖｉｄｅｄ               ｂｙ               ｉｔｓ               ａｖｅｒａｇｅ               ａｓｓｅｔｓ. Ｔｈｅ               (ｔｉｅｒ               1               ｏｒ               ｔｏｔａｌ)               ｃａｐｉｔａｌ               ｄｉｖｉｄｅｄ               ｂｙ               ｔｈｅ               ｂａｎｋ'ｓ               ｒｉｓｋ               ｗｅｉｇｈｔｅｄ               ａｓｓｅｔｓ               -               ａ               ｍｅａｓｕｒｅ               ｏｆ               ｔｈｅ               ｂａｎｋ'ｓ               ｃａｐｉｔａｌ               ａｄｅｑｕａｃｙ. Ｍｏｓｔ               ｂａｎｋｓ               ｆｏｌｌｏｗ               ｔｈｅ               ｐｒｏｖｉｓｉｏｎｓ               ｏｆ               ｔｈｅ               Ｂａｓｅｌ               Ａｃｃｏｒｄ               ａｓ               ｓｅｔ               ｂｙ               ｔｈｅ               Ｂａｓｅｌ               Ｃｏｍｍｉｔｔｅｅ               ｏｆ               Ｂａｎｋ               Ｓｕｐｅｒｖｉｓｉｏｎ               (ａｌｓｏ               ｋｎｏｗｎ               ａｓ               ｔｈｅ               Ｇ10). Ｔｈｉｓ               ｃｏｕｌｄ               ｂｅ               ｍｉｓｌｅａｄｉｎｇ               ｂｅｃａｕｓｅ               ｔｈｅ               Ａｃｃｏｒｄ               ｉｓ               ｉｌｌ               ｅｑｕｉｐｐｅｄ               ｔｏ               ｄｅａｌ               ｗｉｔｈ               ｒｉｓｋｓ               ａｓｓｏｃｉａｔｅｄ               ｗｉｔｈ               ｅｍｅｒｇｉｎｇ               ｍａｒｋｅｔｓ,               ｗｈｅｒｅ               ｄｅｆａｕｌｔ               ｒａｔｅｓ               ｏｆ               33%               ａｎｄ               ｍｏｒｅ               ａｒｅ               ｔｈｅ               ｎｏｒｍ. Ｆｉｎａｌｌｙ,               ｔｈｅｒｅ               ｉｓ               ｔｈｅ               ｃｏｍｍｏｎ               ｓｔｏｃｋ               ｔｏ               ｔｏｔａｌ               ａｓｓｅｔｓ               ｒａｔｉｏ. Ｂｕｔ               ｒａｔｉｏｓ               ａｒｅ               ｎｏｔ               ｃｕｒｅ-ａｌｌｓ. Ｉｎａｓｍｕｃｈ               ａｓ               ｔｈｅ               ｑｕａｎｔｉｔｉｅｓ               ｔｈａｔ               ｃｏｍｐｒｉｓｅ               ｔｈｅｍ               ｃａｎ               ｂｅ               ｔｏｙｅｄ               ｗｉｔｈ               -               ｔｈｅｙ               ｃａｎ               ｂｅ               ｓｕｂｊｅｃｔ               ｔｏ               ｍａｎｉｐｕｌａｔｉｏｎ               ａｎｄ               ｄｉｓｔｏｒｔｉｏｎ. Ｉｔ               ｉｓ               ｔｒｕｅ               ｔｈａｔ               ｉｔ               ｉｓ               ｂｅｔｔｅｒ               ｔｏ               ｈａｖｅ               ｈｉｇｈ               ｒａｔｉｏｓ               ｔｈａｎ               ｌｏｗ               ｏｎｅｓ. Ｈｉｇｈ               ｒａｔｉｏｓ               ａｒｅ               ｉｎｄｉｃａｔｉｖｅ               ｏｆ               ａ               ｂａｎｋ'ｓ               ｕｎｄｅｒｌｙｉｎｇ               ｓｔｒｅｎｇｔｈ,               ｒｅｓｅｒｖｅｓ,               ａｎｄ               ｐｒｏｖｉｓｉｏｎｓ               ａｎｄ,               ｔｈｅｒｅｆｏｒｅ,               ｏｆ               ｉｔｓ               ａｂｉｌｉｔｙ               ｔｏ               ｅｘｐａｎｄ               ｉｔｓ               ｂｕｓｉｎｅｓｓ. Ａ               ｓｔｒｏｎｇ               ｂａｎｋ               ｃａｎ               ａｌｓｏ               ｐａｒｔｉｃｉｐａｔｅ               ｉｎ               ｖａｒｉｏｕｓ               ｐｒｏｇｒａｍｓ,               ｏｆｆｅｒｉｎｇｓ               ａｎｄ               ａｕｃｔｉｏｎｓ               ｏｆ               ｔｈｅ               Ｃｅｎｔｒａｌ               Ｂａｎｋ               ｏｒ               ｏｆ               ｔｈｅ               Ｍｉｎｉｓｔｒｙ               ｏｆ               Ｆｉｎａｎｃｅ. Ｔｈｅ               ｌａｒｇｅｒ               ｔｈｅ               ｓｈａｒｅ               ｏｆ               ｔｈｅ               ｂａｎｋ'ｓ               ｅａｒｎｉｎｇｓ               ｔｈａｔ               ｉｓ               ｒｅｔａｉｎｅｄ               ｉｎ               ｔｈｅ               ｂａｎｋ               ａｎｄ               ｎｏｔ               ｄｉｓｔｒｉｂｕｔｅｄ               ａｓ               ｐｒｏｆｉｔｓ               ｔｏ               ｉｔｓ               ｓｈａｒｅｈｏｌｄｅｒｓ               -               ｔｈｅ               ｂｅｔｔｅｒ               ｔｈｅｓｅ               ｒａｔｉｏｓ               ａｎｄ               ｔｈｅ               ｂａｎｋ'ｓ               ｒｅｓｉｌｉｅｎｃｅ               ｔｏ               ｃｒｅｄｉｔ               ｒｉｓｋｓ.                Ｓｔｉｌｌ,               ｔｈｅｓｅ               ｒａｔｉｏｓ               ｓｈｏｕｌｄ               ｂｅ               ｔａｋｅｎ               ｗｉｔｈ               ｍｏｒｅ               ｔｈａｎ               ａ               ｇｒａｉｎ               ｏｆ               ｓａｌｔ. Ｎｏｔ               ｅｖｅｎ               ｔｈｅ               ｂａｎｋ'ｓ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               (ｔｈｅ               ｒａｔｉｏ               ｏｆ               ｎｅｔ               ｉｎｃｏｍｅ               ｔｏ               ｔｏｔａｌ               ｉｎｃｏｍｅ)               ｏｒ               ｉｔｓ               ａｓｓｅｔ               ｕｔｉｌｉｚａｔｉｏｎ               ｃｏｅｆｆｉｃｉｅｎｔ               (ｔｈｅ               ｒａｔｉｏ               ｏｆ               ｉｎｃｏｍｅ               ｔｏ               ａｖｅｒａｇｅ               ａｓｓｅｔｓ)               ｓｈｏｕｌｄ               ｂｅ               ｒｅｌｉｅｄ               ｕｐｏｎ. Ｔｈｅｙ               ｃｏｕｌｄ               ｂｅ               ｔｈｅ               ｒｅｓｕｌｔ               ｏｆ               ｈｉｄｄｅｎ               ｓｕｂｓｉｄｉｅｓ               ｂｙ               ｔｈｅ               ｇｏｖｅｒｎｍｅｎｔ               ａｎｄ               ｍａｎａｇｅｍｅｎｔ               ｍｉｓｊｕｄｇｅｍｅｎｔ               ｏｒ               ｕｎｄｅｒｓｔａｔｅｍｅｎｔ               ｏｆ               ｃｒｅｄｉｔ               ｒｉｓｋｓ.                Ｔｏ               ｅｌａｂｏｒａｔｅ               ｏｎ               ｔｈｅ               ｌａｓｔ               ｔｗｏ               ｐｏｉｎｔｓ:                Ａ               ｂａｎｋ               ｃａｎ               ｂｏｒｒｏｗ               ｃｈｅａｐ               ｍｏｎｅｙ               ｆｒｏｍ               ｔｈｅ               Ｃｅｎｔｒａｌ               Ｂａｎｋ               (ｏｒ               ｐａｙ               ｌｏｗ               ｉｎｔｅｒｅｓｔ               ｔｏ               ｉｔｓ               ｄｅｐｏｓｉｔｏｒｓ               ａｎｄ               ｓａｖｅｒｓ)               ａｎｄ               ｉｎｖｅｓｔ               ｉｔ               ｉｎ               ｓｅｃｕｒｅ               ｇｏｖｅｒｎｍｅｎｔ               ｂｏｎｄｓ,               ｅａｒｎｉｎｇ               ａ               ｍｕｃｈ               ｈｉｇｈｅｒ               ｉｎｔｅｒｅｓｔ               ｉｎｃｏｍｅ               ｆｒｏｍ               ｔｈｅ               ｂｏｎｄｓ'               ｃｏｕｐｏｎ               ｐａｙｍｅｎｔｓ. Ｔｈｅ               ｅｎｄ               ｒｅｓｕｌｔ:               ａ               ｒｉｓｅ               ｉｎ               ｔｈｅ               ｂａｎｋ'ｓ               ｉｎｃｏｍｅ               ａｎｄ               ｐｒｏｆｉｔａｂｉｌｉｔｙ               ｄｕｅ               ｔｏ               ａ               ｎｏｎ-ｐｒｏｄｕｃｔｉｖｅ,               ｎｏｎ-ｌａｓｔｉｎｇ               ａｒｂｉｔｒａｇｅ               ｏｐｅｒａｔｉｏｎ. Ｏｔｈｅｒｗｉｓｅ,               ｔｈｅ               ｂａｎｋ'ｓ               ｍａｎａｇｅｍｅｎｔ               ｃａｎ               ｕｎｄｅｒｓｔａｔｅ               ｔｈｅ               ａｍｏｕｎｔｓ               ｏｆ               ｂａｄ               ｌｏａｎｓ               ｃａｒｒｉｅｄ               ｏｎ               ｔｈｅ               ｂａｎｋ'ｓ               ｂｏｏｋｓ,               ｔｈｕｓ               ｄｅｃｒｅａｓｉｎｇ               ｔｈｅ               ｎｅｃｅｓｓａｒｙ               ｓｅｔ-ａｓｉｄｅｓ               ａｎｄ               ｉｎｃｒｅａｓｉｎｇ               ｐｒｏｆｉｔａｂｉｌｉｔｙ. Ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ               ｏｆ               ｂａｎｋｓ               ｌａｒｇｅｌｙ               ｒｅｆｌｅｃｔ               ｔｈｅ               ｍａｎａｇｅｍｅｎｔ'ｓ               ａｐｐｒａｉｓａｌ               ｏｆ               ｔｈｅ               ｂｕｓｉｎｅｓｓ. Ｔｈｉｓ               ｈａｓ               ｐｒｏｖｅｎ               ｔｏ               ｂｅ               ａ               ｐｏｏｒ               ｇｕｉｄｅ.                Ｉｎ               ｔｈｅ               ｍａｉｎ               ｆｉｎａｎｃｉａｌ               ｒｅｓｕｌｔｓ               ｐａｇｅ               ｏｆ               ａ               ｂａｎｋ'ｓ               ｂｏｏｋｓ,               ｓｐｅｃｉａｌ               ａｔｔｅｎｔｉｏｎ               ｓｈｏｕｌｄ               ｂｅ               ｐａｉｄ               ｔｏ               ｐｒｏｖｉｓｉｏｎｓ               ｆｏｒ               ｔｈｅ               ｄｅｖａｌｕａｔｉｏｎ               ｏｆ               ｓｅｃｕｒｉｔｉｅｓ               ａｎｄ               ｔｏ               ｔｈｅ               ｕｎｒｅａｌｉｚｅｄ               ｄｉｆｆｅｒｅｎｃｅ               ｉｎ               ｔｈｅ               ｃｕｒｒｅｎｃｙ               ｐｏｓｉｔｉｏｎ. Ｔｈｉｓ               ｉｓ               ｅｓｐｅｃｉａｌｌｙ               ｔｒｕｅ               ｉｆ               ｔｈｅ               ｂａｎｋ               ｉｓ               ｈｏｌｄｉｎｇ               ａ               ｍａｊｏｒ               ｐａｒｔ               ｏｆ               ｔｈｅ               ａｓｓｅｔｓ               (ｉｎ               ｔｈｅ               ｆｏｒｍ               ｏｆ               ｆｉｎａｎｃｉａｌ               ｉｎｖｅｓｔｍｅｎｔｓ               ｏｒ               ｏｆ               ｌｏａｎｓ)               ａｎｄ               ｔｈｅ               ｅｑｕｉｔｙ               ｉｓ               ｉｎｖｅｓｔｅｄ               ｉｎ               ｓｅｃｕｒｉｔｉｅｓ               ｏｒ               ｉｎ               ｆｏｒｅｉｇｎ               ｅｘｃｈａｎｇｅ               ｄｅｎｏｍｉｎａｔｅｄ               ｉｎｓｔｒｕｍｅｎｔｓ.                Ｓｅｐａｒａｔｅｌｙ,               ａ               ｂａｎｋ               ｃａｎ               ｂｅ               ｔｒａｄｉｎｇ               ｆｏｒ               ｉｔｓ               ｏｗｎ               ｐｏｓｉｔｉｏｎ               (ｔｈｅ               Ｎｏｓｔｒｏ),               ｅｉｔｈｅｒ               ａｓ               ａ               ｍａｒｋｅｔ               ｍａｋｅｒ               ｏｒ               ａｓ               ａ               ｔｒａｄｅｒ. Ｔｈｅ               ｐｒｏｆｉｔ               (ｏｒ               ｌｏｓｓ)               ｏｎ               ｓｅｃｕｒｉｔｉｅｓ               ｔｒａｄｉｎｇ               ｈａｓ               ｔｏ               ｂｅ               ｄｉｓｃｏｕｎｔｅｄ               ｂｅｃａｕｓｅ               ｉｔ               ｉｓ               ｃｏｎｊｅｃｔｕｒａｌ               ａｎｄ               ｉｎｃｉｄｅｎｔａｌ               ｔｏ               ｔｈｅ               ｂａｎｋ'ｓ               ｍａｉｎ               ａｃｔｉｖｉｔｉｅｓ:               ｄｅｐｏｓｉｔ               ｔａｋｉｎｇ               ａｎｄ               ｌｏａｎ               ｍａｋｉｎｇ.                Ｍｏｓｔ               ｂａｎｋｓ               ｄｅｐｏｓｉｔ               ｓｏｍｅ               ｏｆ               ｔｈｅｉｒ               ａｓｓｅｔｓ               ｗｉｔｈ               ｏｔｈｅｒ               ｂａｎｋｓ. Ｔｈｉｓ               ｉｓ               ｎｏｒｍａｌｌｙ               ｃｏｎｓｉｄｅｒｅｄ               ｔｏ               ｂｅ               ａ               ｗａｙ               ｏｆ               ｓｐｒｅａｄｉｎｇ               ｔｈｅ               ｒｉｓｋ. Ｂｕｔ               ｉｎ               ｈｉｇｈｌｙ               ｖｏｌａｔｉｌｅ               ｅｃｏｎｏｍｉｅｓ               ｗｉｔｈ               ｓｉｃｋｌｙ,               ｕｎｄｅｒｄｅｖｅｌｏｐｅｄ               ｆｉｎａｎｃｉａｌ               ｓｅｃｔｏｒｓ,               ａｌｌ               ｔｈｅ               ｉｎｓｔｉｔｕｔｉｏｎｓ               ｉｎ               ｔｈｅ               ｓｅｃｔｏｒ               ａｒｅ               ｌｉｋｅｌｙ               ｔｏ               ｍｏｖｅ               ｉｎ               ｔａｎｄｅｍ               (ａ               ｈｉｇｈｌｙ               ｃｏｒｒｅｌａｔｅｄ               ｍａｒｋｅｔ). Ｃｒｏｓｓ               ｄｅｐｏｓｉｔｓ               ａｍｏｎｇ               ｂａｎｋｓ               ｏｎｌｙ               ｓｅｒｖｅ               ｔｏ               ｉｎｃｒｅａｓｅ               ｔｈｅ               ｒｉｓｋ               ｏｆ               ｔｈｅ               ｄｅｐｏｓｉｔｉｎｇ               ｂａｎｋ               (ａｓ               ｔｈｅ               ｒｅｃｅｎｔ               ａｆｆａｉｒ               ｗｉｔｈ               Ｔｏｋｏ               Ｂａｎｋ               ｉｎ               Ｒｕｓｓｉａ               ａｎｄ               ｔｈｅ               ｂａｎｋｉｎｇ               ｃｒｉｓｉｓ               ｉｎ               Ｓｏｕｔｈ               Ｋｏｒｅａ               ｈａｖｅ               ｄｅｍｏｎｓｔｒａｔｅｄ).                Ｆｕｒｔｈｅｒ               ｃｌｏｓｅｒ               ｔｏ               ｔｈｅ               ｂｏｔｔｏｍ               ｌｉｎｅ               ａｒｅ               ｔｈｅ               ｂａｎｋ'ｓ               ｏｐｅｒａｔｉｎｇ               ｅｘｐｅｎｓｅｓ:               ｓａｌａｒｉｅｓ,               ｄｅｐｒｅｃｉａｔｉｏｎ,               ｆｉｘｅｄ               ｏｒ               ｃａｐｉｔａｌ               ａｓｓｅｔｓ               (ｒｅａｌ               ｅｓｔａｔｅ               ａｎｄ               ｅｑｕｉｐｍｅｎｔ)               ａｎｄ               ａｄｍｉｎｉｓｔｒａｔｉｖｅ               ｅｘｐｅｎｓｅｓ. Ｔｈｅ               ｒｕｌｅ               ｏｆ               ｔｈｕｍｂ               ｉｓ:               ｔｈｅ               ｈｉｇｈｅｒ               ｔｈｅｓｅ               ｅｘｐｅｎｓｅｓ,               ｔｈｅ               ｗｅａｋｅｒ               ｔｈｅ               ｂａｎｋ. Ｔｈｅ               ｇｒｅａｔ               ｈｉｓｔｏｒｉａｎ               Ｔｏｙｎｂｅｅ               ｏｎｃｅ               ｓａｉｄ               ｔｈａｔ               ｇｒｅａｔ               ｃｉｖｉｌｉｚａｔｉｏｎｓ               ｃｏｌｌａｐｓｅ               ｉｍｍｅｄｉａｔｅｌｙ               ａｆｔｅｒ               ｔｈｅｙ               ｂｅｑｕｅａｔｈ               ｔｏ               ｕｓ               ｔｈｅ               ｍｏｓｔ               ｉｍｐｒｅｓｓｉｖｅ               ｂｕｉｌｄｉｎｇｓ. Ｔｈｉｓ               ｉｓ               ｄｏｕｂｌｙ               ｔｒｕｅ               ｗｉｔｈ               ｂａｎｋｓ. Ｉｆ               ｙｏｕ               ｓｅｅ               ａ               ｂａｎｋ               ｆｅｒｖｅｎｔｌｙ               ｅｎｇａｇｅｄ               ｉｎ               ｔｈｅ               ｃｏｎｓｔｒｕｃｔｉｏｎ               ｏｆ               ｐａｌａｔｉａｌ               ｂｒａｎｃｈｅｓ               -               ｓｔａｙ               ａｗａｙ               ｆｒｏｍ               ｉｔ.                Ｂａｎｋｓ               ａｒｅ               ｒｉｓｋ               ａｒｂｉｔｒａｇｅｕｒｓ. Ｔｈｅｙ               ｌｉｖｅ               ｏｆｆ               ｔｈｅ               ｍｉｓｍａｔｃｈ               ｂｅｔｗｅｅｎ               ａｓｓｅｔｓ               ａｎｄ               ｌｉａｂｉｌｉｔｉｅｓ. Ｔｏ               ｔｈｅ               ｂｅｓｔ               ｏｆ               ｔｈｅｉｒ               ａｂｉｌｉｔｙ,               ｔｈｅｙ               ｔｒｙ               ｔｏ               ｓｅｃｏｎｄ               ｇｕｅｓｓ               ｔｈｅ               ｍａｒｋｅｔｓ               ａｎｄ               ｒｅｄｕｃｅ               ｓｕｃｈ               ａ               ｍｉｓｍａｔｃｈ               ｂｙ               ａｓｓｕｍｉｎｇ               ｐａｒｔ               ｏｆ               ｔｈｅ               ｒｉｓｋｓ               ａｎｄ               ｂｙ               ｅｎｇａｇｉｎｇ               ｉｎ               ｐｏｒｔｆｏｌｉｏ               ｍａｎａｇｅｍｅｎｔ. Ｆｏｒ               ｔｈｉｓ               ｔｈｅｙ               ｃｈａｒｇｅ               ｆｅｅｓ               ａｎｄ               ｃｏｍｍｉｓｓｉｏｎｓ,               ｉｎｔｅｒｅｓｔ               ａｎｄ               ｐｒｏｆｉｔｓ               -               ｗｈｉｃｈ               ｃｏｎｓｔｉｔｕｔｅ               ｔｈｅｉｒ               ｓｏｕｒｃｅｓ               ｏｆ               ｉｎｃｏｍｅ.                Ｉｆ               ａｎｙ               ｅｘｐｅｒｔｉｓｅ               ｉｓ               ｉｍｐｕｔｅｄ               ｔｏ               ｔｈｅ               ｂａｎｋｉｎｇ               ｓｙｓｔｅｍ,               ｉｔ               ｉｓ               ｒｉｓｋ               ｍａｎａｇｅｍｅｎｔ. Ｂａｎｋｓ               ａｒｅ               ｓｕｐｐｏｓｅｄ               ｔｏ               ａｄｅｑｕａｔｅｌｙ               ａｓｓｅｓｓ,               ｃｏｎｔｒｏｌ               ａｎｄ               ｍｉｎｉｍｉｚｅ               ｃｒｅｄｉｔ               ｒｉｓｋｓ. Ｔｈｅｙ               ａｒｅ               ｒｅｑｕｉｒｅｄ               ｔｏ               ｉｍｐｌｅｍｅｎｔ               ｃｒｅｄｉｔ               ｒａｔｉｎｇ               ｍｅｃｈａｎｉｓｍｓ               (ｃｒｅｄｉｔ               ａｎａｌｙｓｉｓ               ａｎｄ               ｖａｌｕｅ               ａｔ               ｒｉｓｋ               -               ＶＡＲ               -               ｍｏｄｅｌｓ),               ｅｆｆｉｃｉｅｎｔ               ａｎｄ               ｅｘｃｌｕｓｉｖｅ               ｉｎｆｏｒｍａｔｉｏｎ-ｇａｔｈｅｒｉｎｇ               ｓｙｓｔｅｍｓ,               ａｎｄ               ｔｏ               ｐｕｔ               ｉｎ               ｐｌａｃｅ               ｔｈｅ               ｒｉｇｈｔ               ｌｅｎｄｉｎｇ               ｐｏｌｉｃｉｅｓ               ａｎｄ               ｐｒｏｃｅｄｕｒｅｓ.                Ｊｕｓｔ               ｉｎ               ｃａｓｅ               ｔｈｅｙ               ｍｉｓｒｅａｄ               ｔｈｅ               ｍａｒｋｅｔ               ｒｉｓｋｓ               ａｎｄ               ｔｈｅｓｅ               ｔｕｒｎｅｄ               ｉｎｔｏ               ｃｒｅｄｉｔ               ｒｉｓｋｓ               (ｗｈｉｃｈ               ｈａｐｐｅｎｓ               ｏｎｌｙ               ｔｏｏ               ｏｆｔｅｎ),               ｂａｎｋｓ               ａｒｅ               ｓｕｐｐｏｓｅｄ               ｔｏ               ｐｕｔ               ａｓｉｄｅ               ａｍｏｕｎｔｓ               ｏｆ               ｍｏｎｅｙ               ｗｈｉｃｈ               ｃｏｕｌｄ               ｒｅａｌｉｓｔｉｃａｌｌｙ               ｏｆｆｓｅｔ               ｌｏａｎｓ               ｇｏｎｅ               ｓｏｕｒ               ｏｒ               ｆｕｔｕｒｅ               ｎｏｎ-ｐｅｒｆｏｒｍｉｎｇ               ａｓｓｅｔｓ. Ｔｈｅｓｅ               ａｒｅ               ｔｈｅ               ｌｏａｎ               ｌｏｓｓ               ｒｅｓｅｒｖｅｓ               ａｎｄ               ｐｒｏｖｉｓｉｏｎｓ. Ｌｏａｎｓ               ａｒｅ               ｓｕｐｐｏｓｅｄ               ｔｏ               ｂｅ               ｃｏｎｓｔａｎｔｌｙ               ｍｏｎｉｔｏｒｅｄ,               ｒｅｃｌａｓｓｉｆｉｅｄ               ａｎｄ               ｃｈａｒｇｅｓ               ｍａｄｅ               ａｇａｉｎｓｔ               ｔｈｅｍ               ａｓ               ａｐｐｌｉｃａｂｌｅ. Ｉｆ               ｙｏｕ               ｓｅｅ               ａ               ｂａｎｋ               ｗｉｔｈ               ｚｅｒｏ               ｒｅｃｌａｓｓｉｆｉｃａｔｉｏｎｓ,               ｃｈａｒｇｅ               ｏｆｆｓ               ａｎｄ               ｒｅｃｏｖｅｒｉｅｓ               -               ｅｉｔｈｅｒ               ｔｈｅ               ｂａｎｋ               ｉｓ               ｌｙｉｎｇ               ｔｈｒｏｕｇｈ               ｉｔｓ               ｔｅｅｔｈ,               ｏｒ               ｉｔ               ｉｓ               ｎｏｔ               ｔａｋｉｎｇ               ｔｈｅ               ｂｕｓｉｎｅｓｓ               ｏｆ               ｂａｎｋｉｎｇ               ｔｏｏ               ｓｅｒｉｏｕｓｌｙ,               ｏｒ               ｉｔｓ               ｍａｎａｇｅｍｅｎｔ               ｉｓ               ｎｏ               ｌｅｓｓ               ｔｈａｎ               ｄｉｖｉｎｅ               ｉｎ               ｉｔｓ               ｐｒｅｓｃｉｅｎｃｅ. Ｗｈａｔ               ｉｓ               ｉｍｐｏｒｔａｎｔ               ｔｏ               ｌｏｏｋ               ａｔ               ｉｓ               ｔｈｅ               ｒａｔｅ               ｏｆ               ｐｒｏｖｉｓｉｏｎ               ｆｏｒ               ｌｏａｎ               ｌｏｓｓｅｓ               ａｓ               ａ               ｐｅｒｃｅｎｔａｇｅ               ｏｆ               ｔｈｅ               ｌｏａｎｓ               ｏｕｔｓｔａｎｄｉｎｇ. Ｔｈｅｎ               ｉｔ               ｓｈｏｕｌｄ               ｂｅ               ｃｏｍｐａｒｅｄ               ｔｏ               ｔｈｅ               ｐｅｒｃｅｎｔａｇｅ               ｏｆ               ｎｏｎ-ｐｅｒｆｏｒｍｉｎｇ               ｌｏａｎｓ               ｏｕｔ               ｏｆ               ｔｈｅ               ｌｏａｎｓ               ｏｕｔｓｔａｎｄｉｎｇ. Ｉｆ               ｔｈｅ               ｔｗｏ               ｆｉｇｕｒｅｓ               ａｒｅ               ｏｕｔ               ｏｆ               ｋｉｌｔｅｒ,               ｅｉｔｈｅｒ               ｓｏｍｅｏｎｅ               ｉｓ               ｐｕｌｌｉｎｇ               ｙｏｕｒ               ｌｅｇ               -               ｏｒ               ｔｈｅ               ｍａｎａｇｅｍｅｎｔ               ｉｓ               ｉｎｃｏｍｐｅｔｅｎｔ               ｏｒ               ｌｙｉｎｇ               ｔｏ               ｙｏｕ. Ｔｈｅ               ｆｉｒｓｔ               ｔｈｉｎｇ               ｎｅｗ               ｏｗｎｅｒｓ               ｏｆ               ａ               ｂａｎｋ               ｄｏ               ｉｓ,               ｕｓｕａｌｌｙ,               ｉｍｐｒｏｖｅ               ｔｈｅ               ｐｌａｃｅｄ               ａｓｓｅｔ               ｑｕａｌｉｔｙ               (ａ               ｐｏｌｉｔｅ               ｗａｙ               ｏｆ               ｓａｙｉｎｇ               ｔｈａｔ               ｔｈｅｙ               ｇｅｔ               ｒｉｄ               ｏｆ               ｂａｄ,               ｎｏｎ-ｐｅｒｆｏｒｍｉｎｇ               ｌｏａｎｓ,               ｗｈｅｔｈｅｒ               ｄｅｃｌａｒｅｄ               ａｓ               ｓｕｃｈ               ｏｒ               ｎｏｔ). Ｔｈｅｙ               ｄｏ               ｔｈｉｓ               ｂｙ               ｃｌａｓｓｉｆｙｉｎｇ               ｔｈｅ               ｌｏａｎｓ. Ｍｏｓｔ               ｃｅｎｔｒａｌ               ｂａｎｋｓ               ｉｎ               ｔｈｅ               ｗｏｒｌｄ               ｈａｖｅ               ｉｎ               ｐｌａｃｅ               ｒｅｇｕｌａｔｉｏｎｓ               ｆｏｒ               ｌｏａｎ               ｃｌａｓｓｉｆｉｃａｔｉｏｎ               ａｎｄ               ｉｆ               ａｃｔｅｄ               ｕｐｏｎ,               ｔｈｅｓｅ               ｙｉｅｌｄ               ｒａｔｈｅｒ               ｍｏｒｅ               ｒｅｌｉａｂｌｅ               ｒｅｓｕｌｔｓ               ｔｈａｎ               ａｎｙ               ｍａｎａｇｅｍｅｎｔ'ｓ               "ａｐｐｒａｉｓａｌ",               ｎｏ               ｍａｔｔｅｒ               ｈｏｗ               ｗｅｌｌ               ｉｎｔｅｎｔｉｏｎｅｄ.                Ｉｎ               ｓｏｍｅ               ｃｏｕｎｔｒｉｅｓ               ｔｈｅ               Ｃｅｎｔｒａｌ               Ｂａｎｋ               (ｏｒ               ｔｈｅ               Ｓｕｐｅｒｖｉｓｉｏｎ               ｏｆ               ｔｈｅ               Ｂａｎｋｓ)               ｆｏｒｃｅｓ               ｂａｎｋｓ               ｔｏ               ｓｅｔ               ａｓｉｄｅ               ｐｒｏｖｉｓｉｏｎｓ               ａｇａｉｎｓｔ               ｌｏａｎｓ               ａｔ               ｔｈｅ               ｈｉｇｈｅｓｔ               ｒｉｓｋ               ｃａｔｅｇｏｒｉｅｓ,               ｅｖｅｎ               ｉｆ               ｔｈｅｙ               ａｒｅ               ｐｅｒｆｏｒｍｉｎｇ. Ｔｈｉｓ,               ｂｙ               ｆａｒ,               ｓｈｏｕｌｄ               ｂｅ               ｔｈｅ               ｐｒｅｆｅｒａｂｌｅ               ｍｅｔｈｏｄ.                Ｏｆ               ｔｈｅ               ｔｗｏ               ｓｉｄｅｓ               ｏｆ               ｔｈｅ               ｂａｌａｎｃｅ               ｓｈｅｅｔ,               ｔｈｅ               ａｓｓｅｔｓ               ｓｉｄｅ               ｉｓ               ｔｈｅ               ｍｏｒｅ               ｃｒｉｔｉｃａｌ. Ｗｉｔｈｉｎ               ｉｔ,               ｔｈｅ               ｉｎｔｅｒｅｓｔ               ｅａｒｎｉｎｇ               ａｓｓｅｔｓ               ｄｅｓｅｒｖｅ               ｔｈｅ               ｇｒｅａｔｅｓｔ               ａｔｔｅｎｔｉｏｎ. Ｗｈａｔ               ｐｅｒｃｅｎｔａｇｅ               ｏｆ               ｔｈｅ               ｌｏａｎｓ               ｉｓ               ｃｏｍｍｅｒｃｉａｌ               ａｎｄ               ｗｈａｔ               ｐｅｒｃｅｎｔａｇｅ               ｇｉｖｅｎ               ｔｏ               ｉｎｄｉｖｉｄｕａｌｓ? Ｈｏｗ               ｍａｎｙ               ｂｏｒｒｏｗｅｒｓ               ａｒｅ               ｔｈｅｒｅ               (ｒｉｓｋ               ｄｉｖｅｒｓｉｆｉｃａｔｉｏｎ               ｉｓ               ｉｎｖｅｒｓｅｌｙ               ｐｒｏｐｏｒｔｉｏｎａｌ               ｔｏ               ｅｘｐｏｓｕｒｅ               ｔｏ               ｓｉｎｇｌｅ               ｏｒ               ｌａｒｇｅ               ｂｏｒｒｏｗｅｒｓ)? Ｈｏｗ               ｍａｎｙ               ｏｆ               ｔｈｅ               ｔｒａｎｓａｃｔｉｏｎｓ               ａｒｅ               ｗｉｔｈ               "ｒｅｌａｔｅｄ               ｐａｒｔｉｅｓ"? Ｈｏｗ               ｍｕｃｈ               ｉｓ               ｉｎ               ｌｏｃａｌ               ｃｕｒｒｅｎｃｙ               ａｎｄ               ｈｏｗ               ｍｕｃｈ               ｉｎ               ｆｏｒｅｉｇｎ               ｃｕｒｒｅｎｃｉｅｓ               (ａｎｄ               ｉｎ               ｗｈｉｃｈ)? Ａ               ｌａｒｇｅ               ｅｘｐｏｓｕｒｅ               ｔｏ               ｆｏｒｅｉｇｎ               ｃｕｒｒｅｎｃｙ               ｌｅｎｄｉｎｇ               ｉｓ               ｎｏｔ               ｎｅｃｅｓｓａｒｉｌｙ               ｈｅａｌｔｈｙ. Ａ               ｓｈａｒｐ,               ｕｎｅｘｐｅｃｔｅｄ               ｄｅｖａｌｕａｔｉｏｎ               ｃｏｕｌｄ               ｍｏｖｅ               ａ               ｌｏｔ               ｏｆ               ｔｈｅ               ｂｏｒｒｏｗｅｒｓ               ｉｎｔｏ               ｎｏｎ-ｐｅｒｆｏｒｍａｎｃｅ               ａｎｄ               ｄｅｆａｕｌｔ               ａｎｄ,               ｔｈｕｓ,               ａｄｖｅｒｓｅｌｙ               ａｆｆｅｃｔ               ｔｈｅ               ｑｕａｌｉｔｙ               ｏｆ               ｔｈｅ               ａｓｓｅｔ               ｂａｓｅ. Ｉｎ               ｗｈｉｃｈ               ｆｉｎａｎｃｉａｌ               ｖｅｈｉｃｌｅｓ               ａｎｄ               ｉｎｓｔｒｕｍｅｎｔｓ               ｉｓ               ｔｈｅ               ｂａｎｋ               ｉｎｖｅｓｔｅｄ? Ｈｏｗ               ｒｉｓｋｙ               ａｒｅ               ｔｈｅｙ? Ａｎｄ               ｓｏ               ｏｎ.                Ｎｏ               ｌｅｓｓ               ｉｍｐｏｒｔａｎｔ               ｉｓ               ｔｈｅ               ｍａｔｕｒｉｔｙ               ｓｔｒｕｃｔｕｒｅ               ｏｆ               ｔｈｅ               ａｓｓｅｔｓ. Ｉｔ               ｉｓ               ａｎ               ｉｎｔｅｇｒａｌ               ｐａｒｔ               ｏｆ               ｔｈｅ               ｌｉｑｕｉｄｉｔｙ               (ｒｉｓｋ)               ｍａｎａｇｅｍｅｎｔ               ｏｆ               ｔｈｅ               ｂａｎｋ. Ｔｈｅ               ｃｒｕｃｉａｌ               ｑｕｅｓｔｉｏｎ               ｉｓ:               ｗｈａｔ               ａｒｅ               ｔｈｅ               ｃａｓｈ               ｆｌｏｗｓ               ｐｒｏｊｅｃｔｅｄ               ｆｒｏｍ               ｔｈｅ               ｍａｔｕｒｉｔｙ               ｄａｔｅｓ               ｏｆ               ｔｈｅ               ｄｉｆｆｅｒｅｎｔ               ａｓｓｅｔｓ               ａｎｄ               ｌｉａｂｉｌｉｔｉｅｓ               -               ａｎｄ               ｈｏｗ               ｌｉｋｅｌｙ               ａｒｅ               ｔｈｅｙ               ｔｏ               ｍａｔｅｒｉａｌｉｚｅ. Ａ               ｒｏｕｇｈ               ｍａｔｃｈｉｎｇ               ｈａｓ               ｔｏ               ｅｘｉｓｔ               ｂｅｔｗｅｅｎ               ｔｈｅ               ｖａｒｉｏｕｓ               ｍａｔｕｒｉｔｉｅｓ               ｏｆ               ｔｈｅ               ａｓｓｅｔｓ               ａｎｄ               ｔｈｅ               ｌｉａｂｉｌｉｔｉｅｓ. Ｔｈｅ               ｃａｓｈ               ｆｌｏｗｓ               ｇｅｎｅｒａｔｅｄ               ｂｙ               ｔｈｅ               ａｓｓｅｔｓ               ｏｆ               ｔｈｅ               ｂａｎｋ               ｍｕｓｔ               ｂｅ               ｕｓｅｄ               ｔｏ               ｆｉｎａｎｃｅ               ｔｈｅ               ｃａｓｈ               ｆｌｏｗｓ               ｒｅｓｕｌｔｉｎｇ               ｆｒｏｍ               ｔｈｅ               ｂａｎｋｓ'               ｌｉａｂｉｌｉｔｉｅｓ. Ａ               ｄｉｓｔｉｎｃｔｉｏｎ               ｈａｓ               ｔｏ               ｂｅ               ｍａｄｅ               ｂｅｔｗｅｅｎ               ｓｔａｂｌｅ               ａｎｄ               ｈｏｔ               ｆｕｎｄｓ               (ｔｈｅ               ｌａｔｔｅｒ               ｉｎ               ｃｏｎｓｔａｎｔ               ｐｕｒｓｕｉｔ               ｏｆ               ｈｉｇｈｅｒ               ｙｉｅｌｄｓ). Ｌｉｑｕｉｄｉｔｙ               ｉｎｄｉｃａｔｏｒｓ               ａｎｄ               ａｌｅｒｔｓ               ｈａｖｅ               ｔｏ               ｂｅ               ｓｅｔ               ｉｎ               ｐｌａｃｅ               ａｎｄ               ｃａｌｃｕｌａｔｅｄ               ａ               ｆｅｗ               ｔｉｍｅｓ               ｄａｉｌｙ.                Ｇａｐｓ               (ｅｓｐｅｃｉａｌｌｙ               ｉｎ               ｔｈｅ               ｓｈｏｒｔ               ｔｅｒｍ               ｃａｔｅｇｏｒｙ)               ｂｅｔｗｅｅｎ               ｔｈｅ               ｂａｎｋ'ｓ               ａｓｓｅｔｓ               ａｎｄ               ｉｔｓ               ｌｉａｂｉｌｉｔｉｅｓ               ａｒｅ               ａ               ｖｅｒｙ               ｗｏｒｒｉｓｏｍｅ               ｓｉｇｎ. Ｂｕｔ               ｔｈｅ               ｂａｎｋ'ｓ               ｍａｃｒｏｅｃｏｎｏｍｉｃ               ｅｎｖｉｒｏｎｍｅｎｔ               ｉｓ               ａｓ               ｉｍｐｏｒｔａｎｔ               ｔｏ               ｔｈｅ               ｄｅｔｅｒｍｉｎａｔｉｏｎ               ｏｆ               ｉｔｓ               ｆｉｎａｎｃｉａｌ               ｈｅａｌｔｈ               ａｎｄ               ｏｆ               ｉｔｓ               ｃｒｅｄｉｔｗｏｒｔｈｉｎｅｓｓ               ａｓ               ａｎｙ               ｒａｔｉｏ               ｏｒ               ｍｉｃｒｏ-ａｎａｌｙｓｉｓ. Ｔｈｅ               ｓｔａｔｅ               ｏｆ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｍａｒｋｅｔｓ               ｓｏｍｅｔｉｍｅｓ               ｈａｓ               ａ               ｌａｒｇｅｒ               ｂｅａｒｉｎｇ               ｏｎ               ｔｈｅ               ｂａｎｋ'ｓ               ｓｏｕｎｄｎｅｓｓ               ｔｈａｎ               ｏｔｈｅｒ               ｆａｃｔｏｒｓ. Ａ               ｆｉｎｅ               ｅｘａｍｐｌｅ               ｉｓ               ｔｈｅ               ｅｆｆｅｃｔ               ｔｈａｔ               ｉｎｔｅｒｅｓｔ               ｒａｔｅｓ               ｏｒ               ａ               ｄｅｖａｌｕａｔｉｏｎ               ｈａｖｅ               ｏｎ               ａ               ｂａｎｋ'ｓ               ｐｒｏｆｉｔａｂｉｌｉｔｙ               ａｎｄ               ｃａｐｉｔａｌｉｚａｔｉｏｎ. Ｔｈｅ               ｉｍｐｌｉｅｄ               (ｎｏｔ               ｔｏ               ｍｅｎｔｉｏｎ               ｔｈｅ               ｅｘｐｌｉｃｉｔ)               ｓｕｐｐｏｒｔ               ｏｆ               ｔｈｅ               ａｕｔｈｏｒｉｔｉｅｓ,               ｏｆ               ｏｔｈｅｒ               ｂａｎｋｓ               ａｎｄ               ｏｆ               ｉｎｖｅｓｔｏｒｓ               (ｄｏｍｅｓｔｉｃ               ａｓ               ｗｅｌｌ               ａｓ               ｉｎｔｅｒｎａｔｉｏｎａｌ)               ｓｅｔｓ               ｔｈｅ               ｐｓｙｃｈｏｌｏｇｉｃａｌ               ｂａｃｋｇｒｏｕｎｄ               ｔｏ               ａｎｙ               ｆｕｔｕｒｅ               ｄｅｖｅｌｏｐｍｅｎｔｓ. Ｔｈｉｓ               ｉｓ               ｏｎｌｙ               ｔｏｏ               ｌｏｇｉｃａｌ. Ｉｎ               ａｎ               ｕｎｓｔａｂｌｅ               ｆｉｎａｎｃｉａｌ               ｅｎｖｉｒｏｎｍｅｎｔ,               ｋｎｏｃｋ-ｏｎ               ｅｆｆｅｃｔｓ               ａｒｅ               ｍｏｒｅ               ｌｉｋｅｌｙ. Ｂａｎｋｓ               ｄｅｐｏｓｉｔ               ｍｏｎｅｙ               ｗｉｔｈ               ｏｔｈｅｒ               ｂａｎｋｓ               ｏｎ               ａ               ｓｅｃｕｒｉｔｙ               ｂａｓｉｓ. Ｓｔｉｌｌ,               ｔｈｅ               ｖａｌｕｅ               ｏｆ               ｓｅｃｕｒｉｔｉｅｓ               ａｎｄ               ｃｏｌｌａｔｅｒａｌｓ               ｉｓ               ａｓ               ｇｏｏｄ               ａｓ               ｔｈｅｉｒ               ｌｉｑｕｉｄｉｔｙ               ａｎｄ               ａｓ               ｔｈｅ               ｍａｒｋｅｔ               ｉｔｓｅｌｆ. Ｔｈｅ               ｖｅｒｙ               ａｂｉｌｉｔｙ               ｔｏ               ｄｏ               ｂｕｓｉｎｅｓｓ               (ｆｏｒ               ｉｎｓｔａｎｃｅ,               ｉｎ               ｔｈｅ               ｓｙｎｄｉｃａｔｅｄ               ｌｏａｎ               ｍａｒｋｅｔ)               ｉｓ               ｉｎｆｌｕｅｎｃｅｄ               ｂｙ               ｔｈｅ               ｌａｒｇｅｒ               ｐｉｃｔｕｒｅ. Ｆａｌｌｉｎｇ               ｅｑｕｉｔｙ               ｍａｒｋｅｔｓ               ｈｅｒａｌｄ               ｔｒａｄｉｎｇ               ｌｏｓｓｅｓ               ａｎｄ               ｌｏｓｓ               ｏｆ               ｉｎｃｏｍｅ               ｆｒｏｍ               ｔｒａｄｉｎｇ               ｏｐｅｒａｔｉｏｎｓ               ａｎｄ               ｓｏ               ｏｎ.                Ｐｅｒｈａｐｓ               ｔｈｅ               ｓｉｎｇｌｅ               ｍｏｓｔ               ｉｍｐｏｒｔａｎｔ               ｆａｃｔｏｒ               ｉｓ               ｔｈｅ               ｇｅｎｅｒａｌ               ｌｅｖｅｌ               ｏｆ               ｉｎｔｅｒｅｓｔ               ｒａｔｅｓ               ｉｎ               ｔｈｅ               ｅｃｏｎｏｍｙ. Ｉｔ               ｄｅｔｅｒｍｉｎｅｓ               ｔｈｅ               ｐｒｅｓｅｎｔ               ｖａｌｕｅ               ｏｆ               ｆｏｒｅｉｇｎ               ｅｘｃｈａｎｇｅ               ａｎｄ               ｌｏｃａｌ               ｃｕｒｒｅｎｃｙ               ｄｅｎｏｍｉｎａｔｅｄ               ｇｏｖｅｒｎｍｅｎｔ               ｄｅｂｔ. Ｉｔ               ｉｎｆｌｕｅｎｃｅｓ               ｔｈｅ               ｂａｌａｎｃｅ               ｂｅｔｗｅｅｎ               ｒｅａｌｉｚｅｄ               ａｎｄ               ｕｎｒｅａｌｉｚｅｄ               ｌｏｓｓｅｓ               ｏｎ               ｌｏｎｇｅｒ-ｔｅｒｍ               (ｃｏｍｍｅｒｃｉａｌ               ｏｒ               ｏｔｈｅｒ)               ｐａｐｅｒ. Ｏｎｅ               ｏｆ               ｔｈｅ               ｍｏｓｔ               ｉｍｐｏｒｔａｎｔ               ｌｉｑｕｉｄｉｔｙ               ｇｅｎｅｒａｔｉｏｎ               ｉｎｓｔｒｕｍｅｎｔｓ               ｉｓ               ｔｈｅ               ｒｅｐｕｒｃｈａｓｅ               ａｇｒｅｅｍｅｎｔ               (ｒｅｐｏ). Ｂａｎｋｓ               ｓｅｌｌ               ｔｈｅｉｒ               ｐｏｒｔｆｏｌｉｏｓ               ｏｆ               ｇｏｖｅｒｎｍｅｎｔ               ｄｅｂｔ               ｗｉｔｈ               ａｎ               ｏｂｌｉｇａｔｉｏｎ               ｔｏ               ｂｕｙ               ｉｔ               ｂａｃｋ               ａｔ               ａ               ｌａｔｅｒ               ｄａｔｅ. Ｉｆ               ｉｎｔｅｒｅｓｔ               ｒａｔｅｓ               ｓｈｏｏｔ               ｕｐ               -               ｔｈｅ               ｌｏｓｓｅｓ               ｏｎ               ｔｈｅｓｅ               ｒｅｐｏｓ               ｃａｎ               ｔｒｉｇｇｅｒ               ｍａｒｇｉｎ               ｃａｌｌｓ               (ｄｅｍａｎｄｓ               ｔｏ               ｉｍｍｅｄｉａｔｅｌｙ               ｐａｙ               ｔｈｅ               ｌｏｓｓｅｓ               ｏｒ               ｅｌｓｅ               ｍａｔｅｒｉａｌｉｚｅ               ｔｈｅｍ               ｂｙ               ｂｕｙｉｎｇ               ｔｈｅ               ｓｅｃｕｒｉｔｉｅｓ               ｂａｃｋ).                Ｍａｒｇｉｎ               ｃａｌｌｓ               ａｒｅ               ａ               ｄｒａｉｎ               ｏｎ               ｌｉｑｕｉｄｉｔｙ. Ｔｈｕｓ,               ｉｎ               ａｎ               ｅｎｖｉｒｏｎｍｅｎｔ               ｏｆ               ｒｉｓｉｎｇ               ｉｎｔｅｒｅｓｔ               ｒａｔｅｓ,               ｒｅｐｏｓ               ｃｏｕｌｄ               ａｂｓｏｒｂ               ｌｉｑｕｉｄｉｔｙ               ｆｒｏｍ               ｔｈｅ               ｂａｎｋｓ,               ｄｅｆｌａｔｅ               ｒａｔｈｅｒ               ｔｈａｎ               ｉｎｆｌａｔｅ. Ｔｈｅ               ｓａｍｅ               ｐｒｉｎｃｉｐｌｅ               ａｐｐｌｉｅｓ               ｔｏ               ｌｅｖｅｒａｇｅ               ｉｎｖｅｓｔｍｅｎｔ               ｖｅｈｉｃｌｅｓ               ｕｓｅｄ               ｂｙ               ｔｈｅ               ｂａｎｋ               ｔｏ               ｉｍｐｒｏｖｅ               ｔｈｅ               ｒｅｔｕｒｎｓ               ｏｆ               ｉｔｓ               ｓｅｃｕｒｉｔｉｅｓ               ｔｒａｄｉｎｇ               ｏｐｅｒａｔｉｏｎｓ. Ｈｉｇｈ               ｉｎｔｅｒｅｓｔ               ｒａｔｅｓ               ｈｅｒｅ               ｃａｎ               ｈａｖｅ               ａｎ               ｅｖｅｎ               ｍｏｒｅ               ｐａｉｎｆｕｌ               ｏｕｔｃｏｍｅ. Ａｓ               ｌｉｑｕｉｄｉｔｙ               ｉｓ               ｃｒｕｎｃｈｅｄ,               ｔｈｅ               ｂａｎｋｓ               ａｒｅ               ｆｏｒｃｅｄ               ｔｏ               ｍａｔｅｒｉａｌｉｚｅ               ｔｈｅｉｒ               ｔｒａｄｉｎｇ               ｌｏｓｓｅｓ. Ｔｈｉｓ               ｉｓ               ｂｏｕｎｄ               ｔｏ               ｐｕｔ               ａｄｄｅｄ               ｐｒｅｓｓｕｒｅ               ｏｎ               ｔｈｅ               ｐｒｉｃｅｓ               ｏｆ               ｆｉｎａｎｃｉａｌ               ａｓｓｅｔｓ,               ｔｒｉｇｇｅｒ               ｍｏｒｅ               ｍａｒｇｉｎ               ｃａｌｌｓ               ａｎｄ               ｓｑｕｅｅｚｅ               ｌｉｑｕｉｄｉｔｙ               ｆｕｒｔｈｅｒ. Ｉｔ               ｉｓ               ａ               ｖｉｃｉｏｕｓ               ｃｉｒｃｌｅ               ｏｆ               ａ               ｍｏｎｓｔｒｏｕｓ               ｍｏｍｅｎｔｕｍ               ｏｎｃｅ               ｃｏｍｍｅｎｃｅｄ.                Ｂｕｔ               ｈｉｇｈ               ｉｎｔｅｒｅｓｔ               ｒａｔｅｓ,               ａｓ               ｗｅ               ｍｅｎｔｉｏｎｅｄ,               ａｌｓｏ               ｓｔｒａｉｎ               ｔｈｅ               ａｓｓｅｔ               ｓｉｄｅ               ｏｆ               ｔｈｅ               ｂａｌａｎｃｅ               ｓｈｅｅｔ               ｂｙ               ａｐｐｌｙｉｎｇ               ｐｒｅｓｓｕｒｅ               ｔｏ               ｂｏｒｒｏｗｅｒｓ. Ｔｈｅ               ｓａｍｅ               ｇｏｅｓ               ｆｏｒ               ａ               ｄｅｖａｌｕａｔｉｏｎ. Ｌｉａｂｉｌｉｔｉｅｓ               ｃｏｎｎｅｃｔｅｄ               ｔｏ               ｆｏｒｅｉｇｎ               ｅｘｃｈａｎｇｅ               ｇｒｏｗ               ｗｉｔｈ               ａ               ｄｅｖａｌｕａｔｉｏｎ               ｗｉｔｈ               ｎｏ               (ｉｍｍｅｄｉａｔｅ)               ｃｏｒｒｅｓｐｏｎｄｉｎｇ               ｉｎｃｒｅａｓｅ               ｉｎ               ｌｏｃａｌ               ｐｒｉｃｅｓ               ｔｏ               ｃｏｍｐｅｎｓａｔｅ               ｔｈｅ               ｂｏｒｒｏｗｅｒ. Ｍａｒｋｅｔ               ｒｉｓｋ               ｉｓ               ｔｈｕｓ               ｒａｐｉｄｌｙ               ｔｒａｎｓｆｏｒｍｅｄ               ｔｏ               ｃｒｅｄｉｔ               ｒｉｓｋ. Ｂｏｒｒｏｗｅｒｓ               ｄｅｆａｕｌｔ               ｏｎ               ｔｈｅｉｒ               ｏｂｌｉｇａｔｉｏｎｓ. Ｌｏａｎ               ｌｏｓｓ               ｐｒｏｖｉｓｉｏｎｓ               ｎｅｅｄ               ｔｏ               ｂｅ               ｉｎｃｒｅａｓｅｄ,               ｅａｔｉｎｇ               ｉｎｔｏ               ｔｈｅ               ｂａｎｋ'ｓ               ｌｉｑｕｉｄｉｔｙ               (ａｎｄ               ｐｒｏｆｉｔａｂｉｌｉｔｙ)               ｅｖｅｎ               ｆｕｒｔｈｅｒ. Ｂａｎｋｓ               ａｒｅ               ｔｈｅｎ               ｔｅｍｐｔｅｄ               ｔｏ               ｐｌａｙ               ｗｉｔｈ               ｔｈｅｉｒ               ｒｅｓｅｒｖｅ               ｃｏｖｅｒａｇｅ               ｌｅｖｅｌｓ               ｉｎ               ｏｒｄｅｒ               ｔｏ               ｉｎｃｒｅａｓｅ               ｔｈｅｉｒ               ｒｅｐｏｒｔｅｄ               ｐｒｏｆｉｔｓ               ａｎｄ               ｔｈｉｓ,               ｉｎ               ｔｕｒｎ,               ｒａｉｓｅｓ               ａ               ｒｅａｌ               ｃｏｎｃｅｒｎ               ｒｅｇａｒｄｉｎｇ               ｔｈｅ               ａｄｅｑｕａｃｙ               ｏｆ               ｔｈｅ               ｌｅｖｅｌｓ               ｏｆ               ｌｏａｎ               ｌｏｓｓ               ｒｅｓｅｒｖｅｓ. Ｏｎｌｙ               ａｎ               ｉｎｃｒｅａｓｅ               ｉｎ               ｔｈｅ               ｅｑｕｉｔｙ               ｂａｓｅ               ｃａｎ               ｔｈｅｎ               ａｓｓｕａｇｅ               ｔｈｅ               (ｊｕｓｔｉｆｉｅｄ)               ｆｅａｒｓ               ｏｆ               ｔｈｅ               ｍａｒｋｅｔ               ｂｕｔ               ｓｕｃｈ               ａｎ               ｉｎｃｒｅａｓｅ               ｃａｎ               ｃｏｍｅ               ｏｎｌｙ               ｔｈｒｏｕｇｈ               ｆｏｒｅｉｇｎ               ｉｎｖｅｓｔｍｅｎｔ,               ｉｎ               ｍｏｓｔ               ｃａｓｅｓ. Ａｎｄ               ｆｏｒｅｉｇｎ               ｉｎｖｅｓｔｍｅｎｔ               ｉｓ               ｕｓｕａｌｌｙ               ａ               ｌａｓｔ               ｒｅｓｏｒｔ,               ｐａｒｉａｈ,               ｓｏｌｕｔｉｏｎ               (ｓｅｅ               Ｓｏｕｔｈｅａｓｔ               Ａｓｉａ               ａｎｄ               ｔｈｅ               Ｃｚｅｃｈ               Ｒｅｐｕｂｌｉｃ               ｆｏｒ               ｆｒｅｓｈ               ｅｘａｍｐｌｅｓ               ｉｎ               ａｎ               ｅｎｄｌｅｓｓ               ｓｕｐｐｌｙ               ｏｆ               ｔｈｅｍ. Ｊａｐａｎ               ａｎｄ               Ｃｈｉｎａ               ａｒｅ,               ｐｒｏｂａｂｌｙ,               ｎｅｘｔ).                Ｉｎ               ｔｈｅ               ｐａｓｔ,               ｔｈｅ               ｔｈｉｎｋｉｎｇ               ｗａｓ               ｔｈａｔ               ｓｏｍｅ               ｏｆ               ｔｈｅ               ｒｉｓｋ               ｃｏｕｌｄ               ｂｅ               ａｍｅｌｉｏｒａｔｅｄ               ｂｙ               ｈｅｄｇｉｎｇ               ｉｎ               ｆｏｒｗａｒｄ               ｍａｒｋｅｔｓ               (=ｂｙ               ｓｅｌｌｉｎｇ               ｉｔ               ｔｏ               ｗｉｌｌｉｎｇ               ｒｉｓｋ               ｂｕｙｅｒｓ). Ｂｕｔ               ａ               ｈｅｄｇｅ               ｉｓ               ｏｎｌｙ               ａｓ               ｇｏｏｄ               ａｓ               ｔｈｅ               ｃｏｕｎｔｅｒｐａｒｔｙ               ｔｈａｔ               ｐｒｏｖｉｄｅｓ               ｉｔ               ａｎｄ               ｉｎ               ａ               ｍａｒｋｅｔ               ｂｅｓｉｅｇｅｄ               ｂｙ               ｋｎｏｃｋ-ｏｎ               ｉｎｓｏｌｖｅｎｃｉｅｓ,               ｔｈｅ               ｃｏｍｆｏｒｔ               ｉｓ               ｄｕｂｉｏｕｓ. Ｉｎ               ｍｏｓｔ               ｅｍｅｒｇｉｎｇ               ｍａｒｋｅｔｓ,               ｆｏｒ               ｉｎｓｔａｎｃｅ,               ｔｈｅｒｅ               ａｒｅ               ｎｏ               ｎａｔｕｒａｌ               ｓｅｌｌｅｒｓ               ｏｆ               ｆｏｒｅｉｇｎ               ｅｘｃｈａｎｇｅ               (ｃｏｍｐａｎｉｅｓ               ｐｒｅｆｅｒ               ｔｏ               ｈｏａｒｄ               ｔｈｅ               ｓｔｕｆｆ). Ｓｏ               ｆｏｒｗａｒｄｓ               ａｒｅ               ｃｏｎｓｉｄｅｒｅｄ               ｔｏ               ｂｅ               ａ               ｖａｒｉｅｔｙ               ｏｆ               ｇａｍｂｌｉｎｇ               ｗｉｔｈ               ａ               ｄｅｆａｕｌｔ               ｉｎ               ｃａｓｅ               ｏｆ               ｓｕｂｓｔａｎｔｉａｌ               ｌｏｓｓｅｓ               ａ               ｖｅｒｙ               ｐｌａｕｓｉｂｌｅ               ｗａｙ               ｏｕｔ.                Ｂａｎｋｓ               ｄｅｐｅｎｄ               ｏｎ               ｌｅｎｄｉｎｇ               ｆｏｒ               ｔｈｅｉｒ               ｓｕｒｖｉｖａｌ. Ｔｈｅ               ｌｅｎｄｉｎｇ               ｂａｓｅ,               ｉｎ               ｔｕｒｎ,               ｄｅｐｅｎｄｓ               ｏｎ               ｔｈｅ               ｑｕａｌｉｔｙ               ｏｆ               ｌｅｎｄｉｎｇ               ｏｐｐｏｒｔｕｎｉｔｉｅｓ. Ｉｎ               ｈｉｇｈ-ｒｉｓｋ               ｍａｒｋｅｔｓ,               ｔｈｉｓ               ｄｅｐｅｎｄｓ               ｏｎ               ｔｈｅ               ｐｏｓｓｉｂｉｌｉｔｙ               ｏｆ               ｃｏｎｎｅｃｔｅｄ               ｌｅｎｄｉｎｇ               ａｎｄ               ｏｎ               ｔｈｅ               ｑｕａｌｉｔｙ               ｏｆ               ｔｈｅ               ｃｏｌｌａｔｅｒａｌｓ               ｏｆｆｅｒｅｄ               ｂｙ               ｔｈｅ               ｂｏｒｒｏｗｅｒｓ. Ｗｈｅｔｈｅｒ               ｔｈｅ               ｂｏｒｒｏｗｅｒｓ               ｈａｖｅ               ｑｕａｌｉｔａｔｉｖｅ               ｃｏｌｌａｔｅｒａｌｓ               ｔｏ               ｏｆｆｅｒ               ｉｓ               ａ               ｄｉｒｅｃｔ               ｏｕｔｃｏｍｅ               ｏｆ               ｔｈｅ               ｌｉｑｕｉｄｉｔｙ               ｏｆ               ｔｈｅ               ｍａｒｋｅｔ               ａｎｄ               ｏｎ               ｈｏｗ               ｔｈｅｙ               ｕｓｅ               ｔｈｅ               ｐｒｏｃｅｅｄｓ               ｏｆ               ｔｈｅ               ｌｅｎｄｉｎｇ. Ｔｈｅｓｅ               ｔｗｏ               ｅｌｅｍｅｎｔｓ               ａｒｅ               ｉｎｔｉｍａｔｅｌｙ               ｌｉｎｋｅｄ               ｗｉｔｈ               ｔｈｅ               ｂａｎｋｉｎｇ               ｓｙｓｔｅｍ. Ｈｅｎｃｅ               ｔｈｅ               ｐｅｎｕｌｔｉｍａｔｅ               ｖｉｃｉｏｕｓ               ｃｉｒｃｌｅ:               ｗｈｅｒｅ               ｎｏ               ｆｕｎｃｔｉｏｎｉｎｇ               ａｎｄ               ｐｒｏｆｅｓｓｉｏｎａｌ               ｂａｎｋｉｎｇ               ｓｙｓｔｅｍ               ｅｘｉｓｔｓ               -               ｎｏ               ｇｏｏｄ               ｂｏｒｒｏｗｅｒｓ               ｗｉｌｌ               ｅｍｅｒｇｅ.

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