Compare And Contrast Positive Accounting Theory - 1117 Words

What is accounting theory? A coherent interrelated goal and a basic principle of the system used as a class of explanations of the phenomena that are expected to lead to consistent standards. It includes positive and normative theories (Deegan Samkin, 2013, p. 76). Compare positive accounting theory (PAT) and Normative accounting theory. PAT is that because the company is fundamentally about a contract that determines its business, the core driver of the company s success is efficiency. So positive accounting theory attempts to understand and predict how the actual company handles the accounting treatment of these transactions. On the other hand, normative accounting theory takes a different approach. It is based on theoretical†¦show more content†¦78) The diagram also shows the owner invest capital to enterprises. Then the managers supply the financial information (statement) to owners. Then the about principal-agent relationships have two relationships. Those are shareholders and management shareholders and auditors: Shareholders and management: Shareholders demand information and managers supply information. Shareholders use information to make invest decision and make employees salary plan. Shareholders and auditors: This is different with first relationship. The audit is seen as a key component of corporate governance, providing an independent review of the financial position of the organization. The auditors must follow the rules of the audit risk committee. Owners hire agency need pay money. That is agency cost which is monitoring cost, bonding cost and residual cost. Monitoring cost includes audit fees that cost of monitoring behavior, such as by establishing management audit procedures and fees for meetings with financial analysts and principal shareholders, and Bonding cost include costs of preparing financial statement and management providing annual report data such as committee activity and risk management analysis, and cost of principal reviewing this data. Residual cost is that total cost minus monitoring cost minus bonding cost such as incentive schemes and remuneration packages for directors (Governance). Hypothesis: There are three hypothesizes in the positive theory which are basedShow MoreRelatedThe Impact Of Ifrs Adoption On Accounting Quality And Its Implication Essay1105 Words   |  5 PagesReporting Standard (IFRS), there has been a heated debate over the effect of IFRS adoption on accounting quality and its implication. 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Fundamentals of Research Methodology - 1135 Words

Fundamentals of Research Methodology Monique Vann PSYCH 540 March 24, 2013 Jeanne Henry, Ph.D. Fundamentals of Research Methodology This paper will explore the fundamentals of research methodology in the Psychology field and discuss the importance of psychology. The answers to these questions are the basis for the theories that led to research. Research is the groundwork performed by Psychologists in order to answer questions about behavior and the mind. The outcome of the research will offer a clear picture of why an individual act the way he or she does. In the Psychology field, data is gathered to conduct the research and produce an outcome. This is a time-consuming process but without it there would be many of unanswered†¦show more content†¦The Quantitative data collected can be used to graph or construct a table of the results. The Qualitative data is the more complicated of the two data’s because it is descriptive but both are equally important. Scientific Theory Construction and Testing Testing is conducted and hypothesis is formed in order to reach an outcome. Clearly to understand scientific theory, the word â€Å"has† to first be defined. Scientific theory is based on scientific observations are hypothesized and retested until it is proven to be valid, and there is not evidence to disprove it. The variables are taken into consideration when creating a theory. Intervening variables is important when developing theories because the ideas allow the researchers to explain the relationship between independent and dependent variables. If the test is inaccurate and the hypothesis proves to be false, the testing process will be repeated and once accurate a theory is formed. Research is a trial and error process. The Scientific Theory Construction and Testing is an important research process. The first step is to introduce the theory. The second step is to develop a hypothesis used to explain the theory. 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Serving Diverse Interests In Our Community -Myassignmenthelp.Com

Question: Discuss About The Serving Diverse Interests In Our Community? Answer: Introducation St Clair Recreation Precincthas established about half a century ago as an indoor sports and recreation center in Adelaide. It promotes indoor sports and is only one place containing four court stadiums in the city (Missingham 2017). It is the main community hub in the suburban area where a lot of people of diverse communities come for playing indoor games and for recreation. Australia is a country where sports is the most popular method of recreation and time-pass. People of different communities tend to play different sports with the help of which they get to know each other well and blend in to make the bonds between communities stronger (Missingham 2017). St Clair Recreation Precinct is a place which possesses almost all the qualities of a communityCentre.The facilities here at St Clair Recreation Precinctrange from health and fitness tools, kids entertainment, roller skating events, birthday parties, vacation care and various sports events are conducted. This community Centre has flexible membership options with no hard and fast rules for the convenience of its members. Young and old people both are seen to be actively visiting this place, but kids and young citizens of Adelaide are the major crowds. St Clair Recreation Precinct contains a huge stadium added with many small indoor stadiums which are up for hire at the time of big sports events. Cultural and sports events organized in the precinct are the main source of revenue apart from the membership. People of Adelaide who visit the precinct are mostly employed and work in the city and spend their leisure time at St Clairs playing sports which keeps them healthy and fit (Ife 2013). It is also a place to socialize as many of the married members of the precinct first met their spouses there only playing sports. Theoretical analysis of a Community The community is defined as a group of people living in the same place who are interrelated with each other due to one or more common aspects or practices. Here at St Clair Recreation Precinct, citizens of Adelaide who are young and are interested in playing sports for their refreshment form a community (Underwood 2017). They share the common interest in sports and have a knack to enjoy themselves in each others company. St Clair Recreation Precinct provides them a place where they can meet up and spend time with each other doing some healthy and positive things (Underwood 2017). With theactive participation of its members, St Clair Recreation Precinct has expanded its scope from being a sports community to a full-fledged social community.It extends its activities for kids, elder people and even for the education of a young generation (Munden-Dixon 2017). Looking after the needs of good health and employment of its members by providing them with gym facilities and library St Clair Re creation Precinct intends to make a difference in the overall growth. As any community would do for its members St Clair Recreation Precinct looks after the economic, social, cultural and environmental needs of its members (Munden-Dixon 2017). Description of Community Project With thepassage of time,St Clair Recreation Precinct needs to evolve to keep up with the changing pace of community needs of its members. An entire new project has been started by St Clair Recreation Precinct management to revitalize the place and make it modern equipped with all the latest amenities (Pioltine Anseloni 2017). As it was observed in June 2017 that contractors have started the construction work which will be completed until November 2017. This will include the construction of a new road which will be an intersection on Woodville Road and Glenys Nunn Drive (Ife 2013). This extension will provide a new space for recreation for the people of Woodsville and will have new visitors and members (PioltineAnseloni 2017). The facilities of theplayground will be world class and its size will be the largest in the city of Adelaide. New picnic facilities and barbeque spots will be made in addition to therenovation of other small playgrounds and indoor courts. St Clair Recreation Pre cinct intends to implement its plan in order to: Keep the local heritage of the facility intact. To keep in alignment the car parking and footpath to have better access to the fields. Construct a five court stadium to simultaneously conduct many sports event. To achieve all the goals, cost of the upgradation of theproject will be in millions. It is estimated that the entire cost will sum up to $25.77 million. There is an availability of $13 million and another $2.5 million will be secured by selling the Council assets which are not is use. There is an expected contribution of about $7.5 million by the State Government given through Department of Recreation and Sports (Fagan 2017). Being an expensive affair, this upgradation will make St Clair Recreation Precinct a state of the art facility which will attract more members from the mainland Adelaide city. The design input of the facility has been taken from the stakeholders who have been with St Claire for many years and have ample experience in the field of groups and communities (Wu 2017). The newly upgraded precinct will contain: Nature play and new play features in the stadiums. A state park. Passive picnic and recreational area. Enhanced area of sporting. New tennis courts including grass courts and clay courts. Smart car parking and pedestrian paths to provide connectivity to Woodville Road. Analysis of Community Development Process Community development is done through a process which has a structure. To develop a community, learning about the nature and type of community which is under consideration is required (Fagan 2017). St Clair Recreation Precinct being an old one has passed this phase at a very early stage. Secondly, taking inputs from the members of the community is required in order to know the necessities needed to be added for proper development of that community. Adding people of different culture and region is necessary to make a community (Farmer 2017). St Clair Recreation Precinct has done this using the medium of sports on a major front. Providing full access to the resources, assets, and equipment of the community makes its members comfortable and develops a sense of trust and belongingness. It also creates a concept of ashared vision among its members (Farmer 2017). St Clair Recreation Precinct has taken the initiative to help its members in extending the scope of community services by realiz ing the need in some concerned areas and articulating them on a priority basis. Upgradation of the precinct in such huge manner with a large budget and fast construction shows the interest of the St Clairs management in facilitating its members with the world-class amenities and resources (Roka 2017). There should always be a vehicle of change in the community which drives the sense of enhancement and development in a positive manner. St Clair Recreation Precinct is observed to be dynamic and understanding in thecontext of the needs of its members. Having a rich heritage, St Claire has constantly upgraded its standard with time to provide thebest sporting and other community facilities to its members (Roka 2017). A community only survives when it evolves constantly with time and adopt the changing scenario of the society. St Clair has done exactly the same as at first they were mainly concerned about the sporting events but in due course of time they extended up to health services, gym facilities, kids recreation activities and education services like a library for their members (Back 2017). It can be concluded that St Clair Recreation Precincthas done everything by the book for developing their community and have emerged as the biggest and most successful community in the Adelaide city. References Back, L. 2017. Class, Inequality and Community Development.Community Development Journal, pp.1-3. Casaleisure.com.au 2017.Home - Casa Leisure. [online] Casaleisure.com.au. Available at: https://www.casaleisure.com.au [Accessed 1 Oct. 2017]. Fagan, K. 2017. Understanding human behavior and the social environment.Community Development, 48(4), pp.601-602. Farmer, E. 2017. Advancing youth work: Current trends, critical questions.Community Development, 48(3), pp.455-456. Ife, J. 2013, Community development in an uncertain world: vision, analysis and practice, Cambridge University Press, UK Missingham, B. 2017. Asset-based learning and the pedagogy of community development.Community Development, 48(3), pp.339-350. Munden-Dixon, K. 2017. Growing livelihoods: Local food systems and community development.Community Development, pp.1-2. PioltineAnseloni, E. 2017. Community effects of leadership development education: Citizen empowerment for civic engagement.Community Development, 48(4), pp.603-605. Roka, K. 2017. Civic ecology: Adaptation and transformation from the ground up.Community Development, 48(3), pp.451-452. Underwood, T. 2017. Community: A contemporary analysis of policies, programs, and practices.Community Development, 48(3), pp.454-455. Wight, R. 2017. Community Development in Action: Putting Freire into Practice.Community Development Journal, 52(1), pp.217-219. Wu, M. 2017. Content Ecosystem: Serving Diverse Interests in Our Community [From the Editor].IEEE Signal Processing Magazine, 34(3), pp.3-13.

Introduction of Banking Sector free essay sample

The Indian economy is emerging as one of the strongest economy of the world with the GDP growth of more than 8% every year. This has given a great support for the development of banking industry in the country. Due to globalization, competition among the banks has drastically been increased. As India has a substantial upper and middle class income hence the banks have immense opportunities to increase their market shares. The consumer being on the receiving end is in the comfortable position but the banks trying to increase their market share have to continuously add alue for consumers in order to increase market share and sustain their growth. BANKING SECTOR The banking sector is the most dominant sector of the financial system in India. Significant progress has been made with respect to the banking sector in the post liberalization period. The financial health of the commercial banks has improved manifolds with respect to capital adequacy, profitability, and asset quality and risk management. We will write a custom essay sample on Introduction of Banking Sector or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Further, deregulation has opened new opportunities for banks to increase revenue by diversifying into investment banking, insurance, credit cards, epository services, mortgage, securitization, etc. Liberalization has created a more competitive environment in the banking sector. The origin of banking in India is traceable in ancient time through the modern banking hardly 200 years old. The main function of bank is to accept deposits and grant loans. There is evidence of these functions being performed by a section of the community in the Vedic periods. There are many references of debt in the Vedic literature. During the Ramayana and Mahabharata areas banking, which was a side usiness during the Vedic period, become a fulltime business activity for the people. During the smriti period, which followed the Vedic period and the Epic age, bankers performed the function of the modern banks. The members of the Vaish community carried on the banking business and Manu speaks of earning through interest as the business of Vaishays. He accepted deposits from the public, granted loans against pledges and personal security, granted simple open loans, acted as bailee for his customers, subscribed to public loans by granting loans to kings, acted as treasurer nd banker to the state and managed the currency of the country. Indigenous bankers used to maintain a regular system of accounts and borrowers used to sign the loan deeds. n existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After Indias independence in 1947, he Reserve Bank was nationalized and given b roader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980. Currently, India has 88 scheduled commercial banks (SCBs) 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector anks hold over 75 per cent of total assets of the banking industry, with the private and foreign banks holding 18. 2% and 6. 5% respectively. Early history Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and the Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, he other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1925 to form the Imperial Bank of India, which, upon Indias independence, became the State Bank of India. Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. It was not he first though. That honour belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Shimla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Comptoire dEscompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. [pic] The Bank of Bengal, which later became the State Bank of India. The first entirely Indian Joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian Joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian Joint stock banks were generally undercapitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments. The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadesh movement inspired local businessmen and political fgures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervour of Swadesh movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada istrict is known as Cradle of Indian Banking. From World War I to Independence World War (1939-1945), and two years thereafter until the independence of India were challenging for Indian banking. Nationalisation By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a large industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled Stray thoughts on Bank Nationalisation. The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a masterstroke of political sagacity. Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August, 1969. A second dose of nationalization of 6 more commercial banks followed in 1980. The tated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the GOI controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. The nationalised banks were credited by some, including Home minister P. Chidambaram, to have helped the Indian economy withstand the global financial cnsts of 2007-2009. Liberalisation In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%, at present it has gone up to 49% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not Just Currently, banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time- especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect MAs, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an nvestor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connection with housing, vehicle and personal loans. There are press reports that the banks loan recovery efforts have driven defaulting borrowers to suicide. BANKING SYSTEM The oxford dictionary defines the bank as an establishment for the custody of money, which it pays out, on a customers order. A banking company in India has been defined in the banking companies Act 1949, as one which transacts the business of banking which means the accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawals by cheque, draft, order or otherwise. The banking system in an integral sub-system of the financial system. It represents an important channel of collecting small savings from the households and lending it to the corporate sector. The Indian Banking system has the Reserve Bank of India (RBI) as the apex body for all matters relating to the banking system. It is the central bank of India. It is the banker to all other banks. 1. Non-scheduled Banks: These are banks, which are not included in the Second schedule of the Banking Regulation Act, 1965. It means they do not satisfy the conditions laid down by that schedule. They are further classified as follows: * Central Co-operative Banks and Primary Credit Societies. * Commercial Banks. 2. Scheduled Banks: Scheduled Banks are banks, which are included in the second schedule of the Banking Regulation Act, 1965. According to this schedule a scheduled bank: Must have paid-up capital and reserve of not less than Rs. Must also satisfy the RBI that its affairs are not conducted in a manner detrimental to the interests of its depositors. Scheduled banks are sub-divided as: * State cooperative banks. * Commercial banks. State cooperative banks: These are Co-operatives owned and managed by the state. Commercial banks: These are business entities whose main business is accepting deposits and extending loans. Their main objective is profit maximization and adding shareholder value. These are further sub-divided as: * Indian Banks: These banks are companies registered in India under the Companies Act. Their place of origin is in India. These are also sub-divided as: State Bank of India and its Subsidiaries: This group comprises of the State Bank of India (SBI) and its seven subsidiaries viz. State Bank of Patiala, State Bank of Hyderabad, State Bank of Travancore, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Saurastra, State Bank of Indore. This group consists of private sector banks that were nationalized. The Government of India Nationalized 14 private banks in 1969 and another 6 in the year 1980. Regional Rural Banks: These were established by the RBI in the year 1975 of Banking Commission. It was established to operate exclusively in rural areas to provide credit and other facilities. Old Private Sector Banks: This group consists of banks that were established by the privvy states, community organizations or by a group of professional for the cause of economic betterment in their area of operations. Initially their operations were concentrated in a few regional areas. New Private Sector Banks: These banks were started as profit oriented companies after the RBI opened the banking sector to the private sector. These banks are mostly technology driven and better managed than other banks. Foreign Banks: These are banks that were registered outside India and had originated in a foreign country. Retail Banking According to Investopedia. com, retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth. Types Of Retail Banks 1. Private bank Private Banks is a bank that is not incorporated. Either an individual or a general partner(s) with limited partner(s) owns a non-incorporated bank. In any such case, he creditors can look to both the entirety of [the banks] assets as well as the entirety of the sole- proprietors/general-partners assets. These banks have a long tradition in Switzerland, dating back to at least the revocation of the Edict of Nantes (1685). A commercial bank is a type of financial intermediary and a type of bank. Commercial bank has two possible meanings: Commercial bank is the term used for a normal bank to distinguish it from an investment bank. This is what people normally call a bank. The term commercial was used to distinguish it from an investment bank. Since the two types of banks no longer have to be separate companies, some have used the term commercial bank to refer to banks which focus mainly on companies. In some English-speaking countries outside North America, the term trading bank was and is used to denote a commercial bank. It raises funds by collecting deposits from businesses and consumers via checkable deposits, savings deposits, and time (or term) deposits. It makes loans to businesses and consumers. It also buys corporate bonds and government bonds. Its primary liabilities are deposits and primary assets are loans and bonds. Detailed information on banks sectoral exposure of credit reveals that over two-thirds of the credits flow has been on account of retail, housing and other priority sector loans. Banks credit flow exposure to large Enterprises continues to remain buoyant with recent indications that credit to agriculture and Micro credit has also picked up. The Investment Banking and Markets division brings together the advisory and financing, equity securities, asset management, treasury and capital markets, and private equity activities of the Group to complete the CIBM structure and provide a complete range of financial products to ur clients. Increasingly, ECA financing is being considered by customers and we work closely with our project export finance teams, both onshore and offshore, to provide structured solutions. Growth And Present Status Of The Industry Commercial banking can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking). as in the Indian banking.. The most prominent on our minds in the context of banking these days, perhaps, are the mplications arising out of the Basel II accord. Banks, as we all know, are subjected to more intense regulation as compared to the non-financial firms. This is probably because the banks possess certain special characteristics: Banks are much more leveraged than the other firms due to their capacity to garner public deposits. The asset liability structure of the banks is also different from not only the non-financial firms but also the financial firms. To illustrate, the risk in an insurance company arises mainly from the liability side of the balance sheet in the form of insurance laims whereas for the bank the risk mainly comes from the diminution of asset values (for example, illiquid loans that are not fully recoverable). The deposits which constitute a major part of the liability of banks are repayable on demand, unsecured and their principal amount does not change in value whereas the loans of a bank are illiquid and there can be erosion in the value of loans or of other assets. The liquidity transformation by an insurance company is in the reverse direction as compared to a bank.