Financial Markets Questions. Business & Marketing Essay

Discussion Problems
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Question1
Effects technology on banks’ traditional lending activities and their decline on balance-sheet importance
Technology has been the blueprint in transforming banking activities that they can now transact with clients from overseas efficiently, timely, and at a lower cost. Banks are leading in the financial sector in replacing their traditional systems with the new technology.
Banks loans are one of the four significant principal earning assets apart from mortgages and securities. They play an essential part in a bank's statement of financial position, and thus the management should always pay attention to any opportunity in the market to improve lending (Mocetti, Pagnini & Sette, 2017).
Traditional lending activities involve rigid regulations like lots of paperwork, substantial operating, and transaction costs. The increase in competition due to new technology has made banks incorporate it into their lending business. Bank Lending apps have been developed that can be easily accessed anytime on mobile phones. It has enabled banks to increase their portfolio as well as increased revenue streams from lending and fees from money market mediations thus are more improved balance-sheet. Technology has indeed been a game-changer in lending activities as it has made transactions efficient and fewer costs as well as reduced time. However, it has its fair share of challenges, like assessing the creditworthiness of their clients.
Question 2
This is a system set by many countries around the world to protect depositors in the event the financial institution is unable to pay their debts because of insolvency.
Potential problems that deposit insurance creates or makes worse.
* Moral Hazard.
Moral hazard is when the insured clients take little or no concern about how their bank management is engaging in risky lending. Absence of scrutiny by the depositors gives the administration a leeway to indulge in high-risk credit, which lowers their capital ratio (Hogan & Johnson, 2016).
* Encourages Risky Lending.
Deposit insurance program gives a false sense of security to the bank management that they can indulge in risk lending because they are covered and can be bailed out.
* Too big to fail notion.
This scheme is used by governments to favor larger banks compared to the small banks if they need a bailout. Governments use this program to provide a large cover for the larger banks more as they are perceived to be the ones holding the economy, while the small banks are less covered. This scheme ensures financial stability in an economy and also supports its growth through lending (loans) with less concern on loss.
Question 3
A no-load mutual fund is a type of mutual fund whereby there are no sale charges/load fees charg...