1.Traditional banking business has declined in both size and profitability. Four major financial innovations take the blame. What are they? Explain why banks lose cost and income advantages from these innovations.
2. What is the asymmetric information problem? How does it contribute to our understanding of the structure of bank regulation in Canada and other countries?
3. Liquidity management can be practiced on either side of the balance sheet. How are asset and liability management similar and how do they differ? Describe the trade-off faced by banks in liquidity management.