Bank的Investment Objectives

问题如下：

Pure Case Scenario

Lorelei Chan is a relationship manager at Northcross and Co., a firm offering outsourced chief investment officer (CIO) services to small and mid-sized institutions, including banks, insurance companies, and retirement plans. She is meeting with Anabelle Li, a new risk officer at Pure Mobilebank. Pure, a Northcross client and startup firm, offers community banking services exclusively in a mobile and online format, forgoing physical bank branches. Li has asked to meet with Chan in order to review the bank’s investment policy statement.

Chan begins, “We can start with a review of how the investment objectives, risk tolerance, and constraints have been formulated.”

Li states, “Pure Mobilebank takes deposits and invests in a portfolio composed of consumer loans, high-quality debt securities, and cash. I have listed the elements of the investment objective and our approach to risk tolerance in Exhibit 1.”

Exhibit 1

Investment Objective

To manage both assets and liabilities by investing in high-quality debt securities with a longer-term orientation.

Risk Tolerance

Risk tolerance is formulated in terms of the definition and management of risk limits, within which assets and liabilities are managed and monitored on an ongoing basis to ensure that risk positions are within the specified risk tolerances. The investment team monitors portfolio characteristics, such as duration, convexity, and other measures, relative to a benchmark for each asset class. Probabilistic methods are used to account for the timing of liabilities, which are not known with certainty but are measurable at any point in time. The underlying investment strategy is liability-driven investment.

Chan asks, “Can you describe to me some of the external constraints Pure faces?”

Li answers, “Similar to an insurance company, Pure has diverse external constraints to consider. We focus on the following three:

• Constraint I. Reporting and transparency requirements

• Constraint II. Investing in higher-quality, liquid securities in order to meet net stable funding ratios

• Constraint III. The need for balance sheet comprehensive income accounts mandated by statutory accounting rules”

Li continues, “Pure makes little use of wholesale funding and does not use derivatives or off-balance-sheet assets. We make variable-rate loans to individuals and small businesses funded primarily by deposits. Our mobile banking app allows non-interest-bearing checking account clients to initiate payments and apply for loans, as well as to receive complimentary financial planning services. We have determined that these services cause them to be insensitive to interest rate changes and incentivizes them to keep their checking accounts at Pure Mobilebank.”

Chan says, “Pure Mobilebank is dependent on its technical employees. How are you addressing the employee retention risk for such a large portion of your workforce in an industry where average employee tenure is less than three years?”

Li answers, “We realize the importance of incentives for employees to remain at our bank for at least four or five years. In addition to a defined contribution plan offered to all employees, Pure offers an additional deferred compensation plan to our technical employees, which is designed to mimic a defined benefit plan. It is a so-called non-qualified retirement plan, not eligible for favorable tax treatment but also not subject to the typical pension regulatory requirements.”

Li continues, “The plan’s benefit is defined as a percentage of each year’s compensation subject to a fixed 4% annual interest rate credit accumulating each year to a total lump sum. Pure, which has sufficient cash flow, has a policy of contributing an amount sufficient to cover accumulated vested plan benefits annually into a corporate trust. The plan’s trust portfolio is entirely composed of fixed-income securities. The employee gradually accrues rights to the full amount of the benefit from the beginning of Employment Years 3 through 6. Upon separation from employment, the employee may receive distribution of the entire vested benefit or leave it in the plan to accumulate further. Those who do not remain employed long enough to become fully vested forfeit some or all of the benefit. Pure uses these forfeited funds to reduce its future contributions to the plan’s trust. A majority of the participating technical employees remain at least five years, and we lose only about 20% of our staff within the first four years. The average tenure of our technical staff is 5.5 years. Exhibit 2 shows some of the characteristics of the portfolio backing the benefit.”

Exhibit 2

Portfolio Characteristics

Question

Which of the following investment objectives would Chan most likely recommend adding to Exhibit 1?

选项：

A.Generate a positive real rate of return above a threshold. B.Manage liquidity and risk relative to the non-security assets. C.

Outperform a long-term policy benchmark with a specific tracking error budget.

解释：

B is correct. Li has described a common investment objective for only a portion of the bank’s portfolio. The largest component of bank assets is loans, or the non-security assets. Managing liquidity and risk relative to non-security assets is a central investment objective for a bank.

A is incorrect, because it would be an investment objective for an endowment or foundation.

C is incorrect, because outperforming a long-term policy benchmark with a tracking budget would be an investment objective of a private foundation.