This session connected the two main pillars of the course:
The “official” layer — regulation, supervision, and the formal structure of the financial system.
The “real” layer — what truly drives markets, trust, power, and global dynamics beneath the surface.
The class blended both: understanding how banking works (licensing, products, risks, and Basel regulation) while also reflecting on information, habits, and decision-making in a world changing at high speed — from AI and China to trust and media bias.
The official side: everything regulated, supervised, and examinable — like central banks, regulation, Basel, QE, and interest rates.
The real side: the “elephants in the room” — politics, technology, and narratives that shape the world beyond official data.
→ Example: China’s growing power in AI and electric vehicles, Trump–Xi meeting, and the shift of global influence.
Finance, like coffee with a friend, is an excuse to understand what’s really going on underneath.
If you don’t know a word → Google it immediately.
If you don’t understand a concept → wait until the key idea appears, then write it down.
When I say:
“Today we’ll talk about banking” → write Banking.
“Supervisors” → write Supervisors.
“Financial system divisions” → write Markets, Banks, Insurance.
→ These are exactly the type of questions that appear on exams.
A bank is not defined by lending money — everyone can lend money (even Amazon or Google).
What makes a bank unique is the ability to take deposits from the public under a public license.
→ Analogy: A taxi needs a public license to operate a private service.
Banks are private institutions providing a public service.
| Product | Function | Key Idea |
|---|---|---|
| Loan | Fixed amount given upfront | You must repay it over time |
| Line of Credit | Access to money when needed | Pay only for what you use |
| Mortgage | Loan with collateral (usually real estate) | Reduces risk for the bank |
| Bank Guarantee | Bank promises to pay on your behalf if you default | Like insurance — creates trust |
| Letter of Credit | Guarantees payment in international trade | Used to build trust between strangers |
| Payments | Transfers, cards, apps (e.g., Bizum in Spain) | Banks manage the flow of money |
Money = Trust.
It’s nothing by itself, but it can move everything.
You can’t eat money, but you can buy food with it.
You can’t buy friendship, but money shapes trust and power.
Banks exist to manage trust and risk — and they are paid for it.
Their real business is risk management, not “making money.”
To understand letters of credit, the class explored Incoterms (FOB, EXW, DDP):
Define who bears the risk and when ownership transfers in trade.
Example: FOB Singapore → risk passes when goods are loaded on the ship.
If cargo is lost after shipment, the buyer already owns it.
Letter of Credit flow:
Buyer and seller agree on the deal.
Buyer’s bank sends a Letter of Credit to seller’s bank.
Seller ships goods → presents documents → gets paid by his own bank.
Banks settle between themselves.
→ Banks are the “bridge of trust” in global commerce.
| Basel Accord | Year | Focus | Trigger Event | Key Risks Covered |
|---|---|---|---|---|
| Basel I | 1988 | Credit risk | Globalization of banking | 8% minimum capital ratio (weighted by risk) |
| Basel II | 2004 | Credit + Market + Operational risk | 9/11 and data centralization | Three “pillars” approach |
| Basel III | 2012 | Liquidity + Systemic risk | 2008 financial crisis | Focus on stability and trust |
Key concept (Basel I example):
Minimum capital = 8% × Risk-Weighted Assets (RWA)
Cash → 0% risk weight
Mortgages → 50%
Loans → 100%
→ Example: if total RWA = 200 → capital ≥ 16.
Basel II — “Three Pillars”
Pillar 1: Minimum capital (8%)
Pillar 2: Supervisory review — banks explain their own risk methods.
Pillar 3: Market discipline — transparency.
Basel III — Lessons from Crisis
Liquidity and trust became central.
If customers lose trust → bank run (e.g., Silicon Valley Bank).
Systemic risk = when one bank’s failure threatens the whole system.
| Risk | Definition | Example |
|---|---|---|
| Credit risk | Borrower fails to repay | Defaulted loan |
| Liquidity risk | Bank runs out of cash | “ATM out of service” panic |
| Market risk | Asset value drops due to rates or FX | Rising interest rates cut bond prices |
| Operational risk | Failures in systems or people | 9/11 destroyed bank data centers |
| Systemic risk | Collapse spreads through system | Lehman Brothers (2008) |
Banks prefer stability over profit → they value peace, predictability, and reputation.
Finance = managing uncertainty.
Banking = managing risks arising from trust and information.
Central Banks supervise stability and transmit monetary policy through the banking system.
Everything connects: money supply, interest rates, QE/QT, and financial markets depend on how banks manage risk.
Understand what makes a bank unique (deposits + license).
Review Basel I–III: dates, key risks, context.
Know the three main banking risks and examples of each.
Revisit trust instruments: letters of credit, guarantees.
Practice Incoterms (FOB, EXW, DDP): meaning and risk transfer.
Remember: Money = trust, and risk = uncertainty.
Next classes will move from banks → markets:
Equity & fixed income markets
Private equity
Corporate finance and valuation
These topics will connect back to interest rates, duration, and monetary policy transmission through the banking system.
“You can’t predict the future — but you can prepare for it.”
Finance, like life, is about preparation, awareness, and purpose.
Know where you want to go, gather the right information, and use tools like GPT and NotebookLM wisely — to think, not to replace thinking.
5 de noviembre de 2025, 9:32a.m.
1 h 26 min 5 s
Amor.
¿Alguien?
Did you did you do that? I don’t know if there were the contract inside the there was great, great in this course.
In this course we have seen two things at the same time. One thing is official, all official things, regulated supervisor things, yes, official things.
Cool.
Are being asked and then we’ll be asking the China. Yes, I’m not going to ask something regarding that GBV China.
Yes, because it’s official. Yes, Powell is like the boat. The course has two parts. One, it’s official that personally, how do you say? I don’t mean in Norway. I say it in Norway, Norway.
Nobody will understand it, but both.
Me neither. I know that is Spanish, but in Spanish. What I mean is there is one part official regarding this official part.
Personally.
It’s like having the driving license. It’s like getting money at the end of the month. It’s like being healthy. It’s something I don’t care too much about because I don’t really care.
We take breakfast with people, with friends. We take a coffee. Oh, Victor, do you want to take a coffee with me? Not because we love coffee. It’s just because we want to talk one each other at the end. Drinking coffee is just an excuse, yes. So we have seen an official part and the official part is that.
The tip of the iceberg. Yeah. What is under the water? Nothing. There is nothing under the water. I have just talked about official things. I have just talked about tip of icebergs, yes.
And also at the same time, I say more than 10 times this class, probably I’m interested, but I have to say I’ve talked a lot of times that there are elephants in the hood. There are several elephants, yes.
And in China, that China has better a I models than US ones. Did anyone so did anyone see Trump and see last week?
What she? All of you know who is she? Who is she?
You don’t know. Yeah, but no, you don’t know which it.
No, no, you don’t need to know. I mean, for me, it’s better because my life won’t be easy. Once the tsunami arrives, you will die. It’s a joke. It’s a joke. But who is she? She’s China president.
You know who is Kardashian?
In Kardashian, I know you, I know you know, I know, you know, saying in same sentence Kardashian and she put some where, where that you know what I’m talking about.
Knowing who it’s here and what had happened last week, what he fell from?
We are the same. We are peers. She told Trump, not Trump told C.
And what Trump said? I don’t know. I just know what she said 10 years ago.
Someone could think about China and you know what I’m talking about. What I’m talking about is that China ruled the war. China has better cars, better electrical cars. China has very best AI models.
Probably regarding macro chips.
Who cares about Taiwan? A lot of people cares about Taiwan, but after that meeting 2000.
What I mean is that the world is changed at an incredible high speed.
I am telling you to know all things regarding change.
No, no, because all things, but we have an incredible power tool in order to know what what is going on. Yes, I don’t want to register. I mean I have registered into this computer in order to.
Open my WhatsApp. Yes, I’ve registered in order to open the WhatsApp. Sorry, I thought he was not. I know that you are. I know who you are.
I know who you are. No, I know who you are. I was going to tell you to close the door once you have were closed, but the door is already closed. I know that you have get a good grade and I just want to punish you.
Because just kidding, but not too much. What I’m saying the class has two parts, one official that is important and is the one that is going to be asked and another part that.
I don’t care if you know who it see or not. Why? Why? Because I cannot pay you. I can’t take you. God, you should know.
But at the end we are a lot of people. Not everyone can knows and regarding know whatever. I don’t want to register in this computer, but I do it always with WhatsApp. Always when I register myself, I come into the.
Hey.
I came into the, I came into the silent mode. I don’t know how to call it. I don’t know why you men, you use this silent mode. I don’t want to know it, but I think this is international. Sorry for this.
Here I have I I have I have never tried. I mean I have just googled chatbot chat app yes and I’m going to say it without knowing what I’m saying. So please don’t open this till.
Don’t open this deal.
Don’t open this till I tried. Yes, probably. I mean probably you can find here malware from Israel, China or whatever.
We haven’t talked about Israel in the last 234 weeks.
It’s like Ukraine.
It’s important to know what are we talking about, but it’s much more important to know what probably we should be talking about, but we are not talking.
From media, they manipulate us.
Habits. Habits. It’s something you should if you don’t know a name. If you are in a class and you don’t know a name or a word, what you should do it. Write the word and Google it and try to understand it. If you don’t know a word, you should Google it.
This is an habit. Also, if you are in a class, what you should do if I am talking, you don’t know yet what I’m talking about, so you should not write anything yet. But once I start saying today I’m going to talk about banking, what you should write.
Thank you. And if I talk about supervisors, what you should write supervisors. And if I talk, don’t write this because I have to say that financial system is divided into three parts, financial markets, markets.
Banking and insurance. Who supervise its part? SCC. If you are American supervise markets, a Fed supervise, then what can you be? What can you find in the final or in the midterm? This question what can you find in the test?
These questions. But now I’m not talking about this. Now I’m talking about that I have download this. I don’t know yet. What is this? Anyone my?
You know what is this?
Perfect. Nothing is lost.
This is a bot without I have not registered. I have shared with you. I have shared with you last class transcript, last class transcript. I don’t have any problem in sending you. I have all. I think I have already sent all transcripts.
With you but this is last class and why I have not last sorry the class before last one. Last class I talk about Google notebook LM and my head explode on last class but now I have to recover my head and today I’m going to talk about banking.
And I don’t want to lose important part of the iceberg that is OTC, that is over the counter that.
That means nothing.
Have you heard teachers saying don’t use?
Yeah.
Have you heard it? Have you heard a teacher or a professor saying don’t use ChatDPT or ChatDPT should be banned? I have heard it. Whatever I don’t. Yeah, five attacks. What I’m going to do, I’m going to.
Import in this file there is the transcription. In this file there is the transcription of last class, not of last, sorry of the class before last class. The class has two parts, one part that was dedicated to review the midterm.
Yes, I’m gonna start with this one. Tell me regarding.
The midterm.
Most important ideas I have never tried. I have never tried this AI.
I have never tried this AI. Let me see and.
Yeah, OK, let me forget about this chat EPT.
OK.
OK, forget about.
You cannot whatever.
Don’t open this.
OK.
Yep.
OK, that DPT.
My friend.
OK, I’m going to, I’m going to open this one. But I’m opening this one. I have never tried. I never used this one, but I’m trying. I don’t know what I’m trying. I’m trying just to open as if I were you. I don’t want that EPT.
Tell me important things regarding the midterm and the attacks.
Yes, yes.
But it’s the first thing he’s saying. The same thing that I have already told you. The same thing that if you have came to classes, you should see Gato. Gato.
You have asked me, oh, are we going to review? Should we do it before, after? The more times, the more times, the more push-ups you do, the better.
It’s not a point of before the exam, just start doing push-ups. You wake up, you do push-ups. After lunch you do push-ups. Before night you do push-ups. The more push-ups you do, the better. If you open this before and you try to see it by yourself.
Perfect. If you do it after, better, yes. What are we going to do in class? We are going to review, but personally I would like you to do this by yourself also. I’m going to talk about a lot of things regarding this banks, insurance.
All the financial monetary aggregates, QEQTFX, repo market. You don’t need heavily detect, just function. I talk about repo. I I don’t remember why I talk about repo, but repo was important. Probably it’s because of Fed.
And because the market was liquid, but you can ask more detail regarding Repo. What is Repo? How does this work? But today is not the day for talk about Repo. Yep, banks, what makes the oh and this part, this part regarding banks.
This has to do with the duration and Silicon Valley midterm concepts trigger what to study first.
What me? Want me to create a one perfect? No, I I want to.
No, all things I need to.
No regarding.
Thank you what I’m asking.
Review the part of the class we have already seen regarding banking. Yes. What is the prompt that I am using? The prompt that I have told you to do? Yes, perfect. I will give you exactly what you need to know about banking for your course and meter.
Now forget about the meter.
Forget about the meter.
I want to continue working for the future.
Um.
OK.
I’m trying to answer your question. What I’m going to do today?
I have already talked about last class. I was one. I was last class, last before last class. I talked about banking. I told you all things that we were going to talk about last class. Last class we talked about notebook element, yes.
Today we are going to go deeper in all things that I have already told you, but personally I look what is here.
I look what is here.
And what is there is much better for you to study than my slides. My slides I have all the information, but this is much better.
Personally, I’m feeling like the world has already changed.
I’m not talking just for my class. I’m talking for all classes.
I’m looking for all, not for all classes. I’m looking for your professional life.
You, yes.
Write the work, few words. You take the conversation, you add strategic what you should do. The world is absolutely yours.
And I guess CEOs are not aware of all business. They could say that something is happening. They could say that AI is important and I’m just showing you the deep of the ice there.
That is inside the water. Because I’m not talking about Agentix. I’m not talking about Agentix. Have you tried Agentix? I’ve tried weekend Agentix, but I don’t want to talk about. I don’t want to go deeper.
You don’t know the basic things. Absolutely important, please. Most important thing is data. Sorry, before data, before data, please, I need all of your attention.
Most important thing is knowing where to go.
Knowing where to go. I’m talking about business and also I’m talking about you in the state. Also I’m talking about my life. Most important thing is knowing where to go.
Where do I want to go today? Thank you.
Thank you. Personally, I would like you to come with me. But if you don’t really care, I don’t care because you can live without understanding banking. But today the place is banking, but I don’t care about banking as much as I care about.
This time we are together and you do think about where do you want to go.
Because I’m sorry, if you know who is Kim Kardashian and you don’t know who is he?
Probably media, media is taking you to the place they want you to be and you don’t know exactly where you are going. I’m not telling you not to know who is Kim Kardashian.
I’m not telling you not to know who is Kim Kardashian. I am telling you that probably what is going on in China is important.
It’s important.
There is something happening in China and fully understanding this is something that should make you think about where you should be.
And I’m going into your life. I’m sorry for that because it’s life is absolutely personal. So first idea is where do you want to go once you know where you want to go to go.
Second thing.
This.
I’m sorry, I am. I absolutely love your your needs the best.
Oh, if there is any majority under here, please. Sorry for that. I mean, I love animals.
Sorry for this increase. I have seen this and we are in Spain. Sorry also for this. I love animals. I don’t like bull fightings, but but there is a spectac and.
I know that this is a multicultural class. I respect everyone. I’m sorry for being in love once I have seen the spectator, but he put it there just in order to now talking serious.
Knowing where to go, then once you know where to go.
Once you know where to go, you can ask Sajiv. You can ask Sajiv. But second important thing is that for information once you know where to go, what I have sent you.
At the beginning of the of this course, I told you I’m going to record all classes. I don’t know why, but I what I was doing taking data, data, data. What do I have now? All the words that I have told you.
I have all the words that I have told you. And what can I do with all these words? Play. I am playing. I’m telling you I have.
Me term exam was similar in conception or in mediasa last year, but the power of hope and teaching is much, much powerful and I don’t care to give up. Last year I was thinking if everyone knows this, this, this and this.
I will be, I will be fine. This year for me is much much easier to do same thing. I am finding same not not same normal curve. The curve is to the is has moved to the right but I but the curve has failed.
Thanks. But I don’t care about statistics. I don’t care about the statistics. I care about power. I care about you to have. You have the power. I care about you to use this power to work the place you want to go. I want you to be happy in the future.
Because if you are happy, your parents will be happy, your kids will be happy, U.S. citizens will be happy, America will be happy. I care about that. So if you know where to go, then as a GPTR needs absolute information to have proper information.
I have been teaching in this way, this term in all classes I have and I have people 18 years old that came and told me, oh Luis, this is not the correct answer because I have looked in the Internet and in the Internet say they say they are 18 years old.
In the Internet. I go into the Internet and I find something different. I say I find something different in the Internet.
I find something different in the Internet, OK?
Oh, and if you are talking about money and you look in the Internet, what are you gonna find? Busy.
I don’t know if **** is correct in this context or not, but you are going to find trust. Why? Because people are not going to show you how to be rich because be rich. I can, I can.
OK, can you pay me the future?
But can you manage? Can you imagine what is going to happen now? Yes, you can manage.
What? What can happen now?
You cannot demand it, but I have more information. Everything is about information.
Can you predict the future? Can you be prepared for an unexpected future? Yeah. Can you be prepared? Sure. I think that attacking. You know what he’s attacking.
Turkey. Turkey. Is Turkey. Thanksgiving. Thanksgiving is close. Thanksgiving is close. Turkey makes. Are you asking?
I’m going to do that. I’m hearing. I’m hearing that again.
123 OK, OK, OK, give him up.
Did you say this? You didn’t expect it, but were you prepared? Is it the first time you have made push ups?
That is the first time you make pusas.
You just one day you did 100 or you do each day. A little. Each day you were. I mean, he cannot predict, but he was prepared. You understand what I mean? And once one important thing.
Once you were there being in this with me, once you were there, did you enjoy it?
At the end, I mean.
Do you understand what I’m trying to explain? I absolutely enjoy what I do. You cannot expect where you’re going to go, but if you do a little, a little, first thing, you should know where to go, where you want to go and probably being healthy.
Hey.
without
No one has recorded. OK, you’re welcome. You can now we want to go being healthy. So it’s a way we should take.
Being healthy. Personally, if I were you, I would treat with my body. I mean food and doing exercise, regular exercise and this is part of this so.
I have the slides. I have already gone through the slides. I’m going to go. This is a summary of all things that we have seen. What are we going to talk about today? What is a bank instruments that are being given by banks, instruments that bank use and banking regulation, regulation and.
Regarding banking regulation.
What I’m gonna talk about, I’m gonna talk about.
I’m going to talk about risks. What is finance about?
What is finance about?
Noah. Absolutely. Absolutely. You have done three steps in one. First step is, second is, second step is.
Try manage an uncertain future. What we will call uncertainty risk. So at the end you can just say managing risk. Finance has to do with managing risk. What is banking business about?
What is banking business about?
What is banking business about? Anyone banking business about?
Lending money. Lending money. Perfect. Great. Because this is the perfect and incorrect question. They’re always there. So thanks. I will take this into account. No, no, no, because.
I would allow. I mean, what is banking business about?
This is not the correct way, the correct answer. Money. You can say money.
Then you are saying lending money. You say lending money. Everyone can lend money without any problem. I can lend money. Amazon can lend money. Google can lend money. Everyone can lend money. Yes, without any problem getting a banking license.
Allows you getting a banking license. Getting a banking license allows you to take.
Deposits. Deposits. Why do you know this? Don’t know because I have already say last class because if you ask this to ChatGPT with this insight with what I have showed you, it will say that.
A license banking licence allows you to take deposits. What is a deposit? Money given to someone that goes in the street. It’s a service. It’s a public service given by an own by a private company.
A private company receiving deposits. I use the example of a taxi.
I use the example of a tax bank. Banks are private, private, yes, and.
The service is public, and in order to be a public service in a private way, you need a license. Once you have money, once you take deposits, what can you do with this money? Any loans? Any loans?
But I mean, money comes, money goes. But where is money? We have to talk about what is money. Yes. Can you eat money? No. Can you borrow money? Yes. But but it would be it’s better to buy.
Oil barn? Yes. Or to buy good and barn? Yes. What I mean is money is nothing.
Money is nothing, and at the same time, money is everything. Sorry for for talking in business. Money. Money is nothing. Money is everything. You know what I’m saying? Yes, money means nothing. At the same time for money there are.
The people that will kill.
And not this, and it’s not too expensive in terms of how much a human life.
Work, work. You know what I’m saying. What is money? Something important for our society. And at the same time, if you really think about it, it’s just nothing. You can do nothing with money and you can do everything with money.
And.
You cannot buy. You cannot buy frenzy. You cannot buy. You know what I’m looking at. Yes, you cannot buy a lot, but you can buy things. You cannot buy frenzy, but if you have money, you will have a lot of friends.
And I’m so you have money.
What?
OK. Banking business, banking business, banking business has to do with and also it has to do with trust.
Yes, to go to the bank.
And you you can ask for money, you can ask for a mortgage, you can ask for a loan, yes, mortgage loans, but also you can ask for a bank guarantee. Have you ever have a bank?
Randy.
I got it. Let me explain it. I know we need to.
I don’t have bank guarantees here. I mean, I don’t have bank guarantees here. I will not ask in the exam about bank guarantees.
Loans, other banking, line of credit, letter of credit. I have letter of credit, but I don’t have banking guarantees, banking guarantees, but I want to explain.
You can go to the bank and ask for money, yes, but also you can ask the bank for trust, yes.
And this matrix you can ask for money.
In a fixed way, yes. And you can ask for a certain amount of money, then you will. You will ask for a loan, yes.
But you you also can ask for money in an uncertain way. I don’t know how much money I will need. I don’t know how much money I will need, but I know that I will need money and depending on uncertainty, I will need more or less. Yes, then you can ask for a.
Line of credit. What is a line of credit? You have your credit there and you can take money when you want. Yes, and you will be charged for having the money waiting for you, but also you will have another charge.
Will be like a normal loan once you take the money. Make sense once you take credit.
This is, this is what Saul has answered me back when I was talking about banking business. Also it will be out of the also banks being of payment. You have credit cards, you can make transfers, you can make.
In Spain you can make bithum. Yes. Do you know what is bithum?
In Spain, Bithoom is 1 app that allows you to make payments between a mobile and another mobile. And Bithoom has been developed by banks, by Spanish banks, yes.
This has to do with money. You give banks deposits and with these deposits, banks give credit or banks give loans. Got it.
Hey, also, you are the federal government.
What do I have to talk about?
And in our government, what you should be thinking about now?
I see. Can you know what?
No. Who knows? Federal government. Mr. Balsi. Yes. Nowadays. It’s up here.
Hello.
Yeah.
Yeah, really.
I mean, federal government sat down. Mind that we were in year 1961 and talk about US president or year 1962, once Kennedy has been shot.
You see that can be murder. What’s important there?
Now we have the federal shutdown. That is something you should know. It has to do with my class somehow. I will be asked this in the final. No, but you should know that now the Federal Reserve Government, the US Federal Reserve Government is shut down.
Yes.
Sorry for this parentheses, but you are the federal government. I have win a project and you are going to pay me money in advance. Federal government is going to pay me money in advance in order to the the White House to make the dancing.
Sorry for the joke, but in order to make a public work, yes, you have contract and you are going to give me my money in advance. You will give me $1 million. Are you going to give me this money without asking me back or something? You can tell me.
Which I will give you the money. Why don’t you give me a bank guarantee? What is a bank guarantee? Banking.
Banking guarantee is like an insurance contract, but it’s not an insurance contract. It’s been issued by banks. It’s a paper what is written.
This is you to the federal government. I am the one that take it for my gun, yes, and the federal government has a gun, a gun.
If you want, you can go to the bank and ask for 1,000,000. If you do this, a lot of lawyers will start will start working. Normally gangs are there in order not to be used. You give me 1,000,000, I do the work, you give me back the bank guarantee, I give it back to the bank and the bank.
Receive 1 between 0.5% and 1% of the operation.
And nobody will execute never banking guarantees. Make sense. So bank guarantees like an insurance given by banks. Yes, then next step, next step.
Letter. Letter of grade. What is a letter of grade? Do you have a letter? Anyone has heard about letter of grade? Letter of grade? Anyone have heard about ecoteles?
Incontence. They all have a computer in front of you. So happy. Look what is that? Look what I want you to tell me.
You go there.
OK.
Sorry for disturbing you.
Anyone knows what he’s going to go there? The set of international commercial terms that defines.
Absolutely. If I say FOV, we are working and you see in a contract FOV. What does this mean? FOV. Yeah, what does this mean?
And.
You see FOB, it should be something. OK, it should be determined. It’s FOB is one in the term, but I want you to tell me what does FOB mean in terms of.
Risks, risks that are transferred. If I would have a computer in front of me, I would continue Uber for information. It tells I mean in the counter of when the actual ownership of the product being shipped is transferred, so that can.
The FOB shipping point where the transfer of the asset is on. OK, let me ask you a more complicated question. Rapo something FOB Singapore.
And.
The grill that is taking merchandise, the container, the grill is broken and the merchandise is broken. Who sees this merchandise? Who sees this problem?
If I hear or listen, why?
Hello.
It was on the board. It was on the board. It was on the.
I want, I want Google. We’ll continue Google. You have.
Google is the one that should answer these questions, not me. I know the answer, but I want you to work a little.
This.
Yeah.
Why I ask this question? Because it’s not a true or bad or false. It depends on something.
You know you.
I’m not going to do push up with you. The answer is not the center of the bank. The answer has to do it once.
That’s in place. Where does it run? The game has been broken.
Value. This is the sip. This is the port. Yes. Oh, sorry, better. This is the sip. This is the port. I take the container. I’m not going to throw it.
But imagine that it fell. It fell. If it fell.
Over the sea, the transmission has already been complete. Do you understand what I’m saying? I’m careful because it fails with the sea and on the other side the transmission has already been complete.
And that’s all I want to say.
I’m the one that is saying this because I have just created. No, because in con terms, commodities trading, commodity trading, con terms are used more than.
I don’t know the statistics, but if I say that more than 10,000 transactions are made, you say I will be far for the from the number, but there are.
100,000 transactions that are being made with Incoterms. Yes, why is only the most common Incoterm?
Because normally, if you are Chinese and I am American, yes, who knows about taking goods out of China, building things in Chinese, running Chinese railroads.
You know about China, who knows about international cargo city? Or at least both of us know. Or at least once you put merchant sites in the sea, I can do with them. I don’t know who to put things in Chinese.
But one once the thing is in the in the in the in the cargo seat, in the cargo seat, everything is done. You understand what I mean regarding eco terms.
Ecoterm has to do with banking. No, ecoterm has not to do with banking. Why I’m talking about ecoterms? Because I am talking about trading. I am talking about international trading. I am talking about commodities and I’m going to talk about better of grade.
And what is letter of credit? Do you trust someone you don’t know?
Someone that doesn’t know you will trust you. And how can you create trust in international trade with, for example, you are American with a Chinese?
You talk. You take the phone. You just close a deal. You’re closing a deal with someone you don’t know. You’re right.
Ready.
Nobody cares about the grape. You give me the money and if you don’t give me the money, I will not trust you. Give me the money and then I will work. I want to see the money in my account. Writing means nothing in international business.
Writing means nothing. Oh, you have to look for a Chinese lawyer in China against the government.
Or would you create a cross? Or would you create a cross?
Let it or create. Let me show you how this works and then let me explain how this works. First, how does this work? Again, John, you are still Chinese. Yes, we close audio. I am buying containers at one price.
Once we close the deal, I told you I will send you. I am the buyer. I will send you the letter of credit and once he received the letter of credit.
He will know that the agreement is closed and he will trust, not in me, in his Chinese bank.
And I know that I will not pay the money until I will receive the books and I will not pay, nor the Chinese, nor the Chinese. I will pay my own back. How do I send him?
The letter of credit through my American bank. I will call my bank. I will give his banking details and I will tell my bank send to this guy through his Chinese bank the letter of credit.
Once you receive the letter of trade, you know that once you see the cargo, once you see the goods, you will take documentation. You will show these documents to your bank, and once you show these documents to your bank, you will be paid.
What is the cost of the little upgrade? A 3% more or less of the operation. And what do you get by paying a 3%? Trust. And how do you do this in an absolutely fast and automatic way?
And John, what did you get by using letter of credits?
And this is absolutely standardized. Victor already knows what do you get? Hope international commodities are being great in a really.
John, not really liquid weight. Not really liquid weight. You just take a call. You just say the price. You just say the price. You just say I will send you the letter of grade. Give me the details.
And the and the deal is closed less than one. You have everything automatized and you have closed a deal with I mean million lot of containers, many containers, 20 containers.
In an absolutely secure way. This is liquidity because this is highly standardized tons of letter of credits are being closed. It’s a letter of credit.
What is banking business about? Not just lending money. It has to do also with risk management, with creating trust and what do they receive in order? They receive money, they are being paid in order to create trust.
Yes. Do you trust in someone you don’t know? Absolutely no. But do you trust in your bank? There is no way you should. I I I hate banks.
But you trust us. You know that I hate. No, I don’t hate anyone, but you know what I’m talking about. Your own bank is there.
He’s there.
You trust the government. You should trust the government.
You trust authorities?
Please.
By definition.
OK, understood.
This has to do with products, with banking products and let me move.
I don’t remember. I don’t remember where. Oh, these are in good terms. Why did you say FOB or why did you say S work?
What did you say? Oh, sorry, I’m going too fast. I’m going too fast. Yes, let me explain this scheme. I’m absolutely on fire and because of that, I’m going too fast. Let me explain this scheme.
I am the buyer. You need to sell it. Yes, one, we close the deal.
First, we have closed the deal. Once we close the deal, what I’m what I’m doing look 234. I am sending a letter of credit through my bank.
Who he’s back makes sense.
First we close the contract 234 once John has delivered the goods, once John delivered the goods, John present documents.
To whom to his bank and he received money, then his bank sent.
Documents to this one and this will pay this bank. Make sense.
In later of grade, one thing that is absolutely unreal important are documents, documents that you present in order to.
That’s the confirmation from his bank. I mean, you don’t receive. You don’t trust this seller, for example. You’re the buyer, so paper tells you that they will pay you.
You’re trusting your Chinese bank. They they don’t pay you. The problem is not yours. Your bank will pay you. The bank will pay you. Yes, the one that will pay you is your bank.
Once the letter of credit is been said, you will receive the money not from this guy. You will receive the money from your bank. Even if this guy doesn’t pay, my bank still will pay, yes, but this bank normally.
Not normally. This bank will always pay this bank. In case this bank will not pay, it’s a problem regarding the the Spanish bank and myself in case I am the buyer and I don’t want to have problems with banks.
Because they have the power. And if they give me credit, it’s because they know me. And it’s because, I mean, I don’t trust this guy because I don’t know. But regarding the two parts, there is trust. Regarding the two parts, there is trust.
And here they are banks working well with each other and their businesses create distrust.
Yep. Money and trust. At the end, money and trust is the same. Yeah, so close. So, so quick. I mean, he concerns.
We got terms.
Has not to do with banking, has not to do even with finance that are absolutely highly standardized. If I say standardized is standardization, if I say standardization.
And and trading, commodity trading is a really liquid market. You can buy commodities, you can buy petrol, you can buy gasoline, you can buy it.
These are so.
If you buy something in Amazon, you don’t know, but you are buying things. DDP. What is DDP? You need delivery pay. You receive the things on your house. If you go to the factory and you buy the things in the factory.
All transport cost, risk, insurance going out of the tools or documentation goes on your part. If you buy things on the factory, you are buying things as ex work. Ex work there are.
Less than 20 in good terms. I don’t know. There used to be 30. I don’t know how much incoterms there are now. It has appear 2-3 more incoterms and at the end you should know what are incoterms because it’s something that is normally.
Been used.
And OK, weather.
Weather here. Yes, this is the slide I was looking for.
Risks and banking.
Risk and banking. John, you can go back. Basel one, basel one, basel two and basel three credit increase.
Then liquidity. I’m sorry, I forgot about liquidities. Basel 3. Great risk then operational risk, a market risk. Market risk has to do with money, has to do with interest rate risk and then it goes with Basel 3 systematically risk can systematically.
I said one has to do with globalization. Basser 2 has to do with the 11th of September attack, operational risk and Basser 3 has to do with the number of crisis. Yes, you can go.
Welcome. What are the risk banks have to manage? No finance has to do with managing risk. Banking business has to do with.
Yeah.
After this class, we are going to start working with markets. We will talk about equity market or fixed income markets. Yes, we will talk a little about private equity. Also we will talk a little about corporate finance.
But if I say banks and finance, everyone should think about stability, about peace.
Banks. Banks don’t like surprises. Once you are rich, you don’t care about getting more money or you care about getting more money. You will not. You will never stop trying to look for money. But once you are rich, you will care about.
I’m paying, yes. Central banks care about inflation, care about price stability. They don’t care about making money. They don’t care about speculating. They care about peace, yes.
Risk management is absolutely important in general, but what does a normal person look look for?
Making money. Normal person. Personally, I know that if I want to make money, I should assume risk. The more risk, the more money. When talking about banks, they want no risk. They know that if you want return, you should assume risk.
And because of that, public debt is being created.
Alibet is risk free.
And it will give you 2 percent, 3% return. What is the inflation objective? 2%? What is now inflation? 3%? You see what I mean?
I mean that base 3 percent, 2%. Banking assumes 2 percent, 2 percent, 3%. What is inflation normally 2% or what is inflation? What inflation should be 2%? So what everyone is looking for is stability.
There is return increase, but in terms of risk free, the rate should be 2% that will match with inflation. Make sense.
Once say this, what are the risk banks have to manage? Let me summarize this is like what are the risk banks have to manage?
Open.
Yeah, you have here before you have here before the the side that I have asked you. What did I told you?
Credit. The first one I told was great and you were thinking about so you were worried because you were not going to be paid. What is this credit please?
Thanks. The money and what they care about don’t receiving back the money they have given. You asked me for a letter of you give me you give me a letter of pay that you care about.
My credit because of that you know me, you have all the information for me and you can as if you were and insurance company you can calculate what are the probabilities for me to pay.
And regarding all these probabilities, this is part of your business. If you were an insurance company, yes, so the most important, not the most.
What is the problem if I say the most?
That you will die because of another one that is not the most. The one that counts your death is the most important. There is no one that is more important. All are important and managing risk is being handled.
And not knowing that there is no one that is the most that you will never stop learning, that you can always fail, that you can. Do you understand what I’m saying? Yes, but vessel one starts started vessel one.
I said one started in the 80s. Yes, hope the war was in the 80s. A brand new war. There were a I in the 80s. Now there was Internet.
Internet, No. Internet, no. But communications, yes, there were computers, but there was not Internet. As we know, there was something like globalization and banking business was not worried regarding Internet because Internet didn’t exist. They were worried just about.
In their business and in order to avoid it, you know what is that thing? That thing. Look for Olivia. You are Tolia. Tolia. Look for that thing.
Dumping. Dumping. We need doom thing. Tell me what that what does something mean?
No, you are Olivia. You are. I want to talk. We sell a product in a warm market at a lower price. And why will you do this?
Service applied imports and exports and.
Good. Um.
So when you want like a, yeah, work in for the market.
Thank you guys in your committed and exports. Why someone will do this? Because they’re greedy and they want a lot of GD.
OK, you are. Why? Why someone will do this? Because you want to be your competence. What is this? This is losing money. Losing money because if you sell losing money, a lot of people will buy you.
What you will do? Take in your pocket and shop of the market. This is killing your pockets.
And once you bought the market, because you have to your competence, once you want to prices, you will increase it, yes.
And this kind of practice can be done. You have already said and this is perfect can be done because.
You are a country, you want to have power and you will help your exports in order to get markets from outside. China has been doing this for years. Nothing.
I don’t want to see a nuclear weapon.
My house is not. You know what I’m talking about, no. In order to avoid dumping banking business, we should take.
Equity, equity higher than 8% of my assets weighted weighted asset risk.
I take my assets and I calculate the weights regarding the risk of these assets. Let me show you one quick example.
Person one tell you your equity should be higher than 8% of your risk weighted assets. Yes, risk weighted.
Yes, for example, a simple bank. I have mortgages.
Of 100, yes, commercial loans, normal loans of 100. Let me put this 200 and I have cash of 500500 cash.
I am a manager and I have what are my cobal assets? 200, one hundred, 500, eight hundred? No.
800 How much equity should I have? It depends. Mortgages worth and I’m not the one that says this. It’s not the one, the one that says this mortgage mortgage worth 50% in terms of risk, 50% loans.
100% and if you have cash, you don’t need to worry regarding great risk because you have cash. So this is 0%. Yes, you calculate this and this is 100. This is 100, so these are 200.
How much equity you should have? Your equity should be bigger than equity should be bigger than 8% of 200. Equity should be bigger than 60, yes, your liabilities.
You take 800, you take out 60 percent 60. So this will be 700 eighty-four 784 make sense.
What about some one girls? Yes, your equity should be. I’m talking about credit risk and I’m talking about credit risk in a really simple way. You have a mortgage, 50%, you have loans, 100%.
And then you have gas. I don’t care about gas and English because you have your own money. Yes, make sense.
OK. OK. Risk passer one, yes, let me move here.
Let me move here.
Central banks.
What is a?
No.
Have you heard about the Bank for International Settlements, the BIS?
Anyone knows what I am? Why I’m asking Noah?
Noah, you know why I’m asking you? Yes, because he’s Swiss. And in which city is the is Basel? What is the BIS? The Bank for International Settlements? What is the BIS?
What is a beast?
That’s it is with Swiss.
That’s it. Yes. What is that is?
Is is like an inter a central bank of central banks. Each central bank is independent. It’s independent by central banks. Central bankers on one hand, they need each other. That’s our home.
The summer they meet each other, central bankers in the state. You know, Paul was there to say things, but they meet each other in the official way.
And what do they these people say?
Rules to banks all over the world. All central banks have same each each central bank has the particular rules in order to supervise, but you know the rules have been saved by.
Plus my niece, yes.
And here is the bank for international settlements. Yep.
As L Juan published in 1988 as L Juan talks about.
Credit risk. This is what I have just told you. Basel 2. It comes after the 11 of September attack. It came in 2004 and Basel 2 cares about not just credit risk but also.
Operational risk, operational risk, market risk and we went through this last class. I have told you 2 minutes ago, 3 minutes ago if I say market risk.
Margaret Breeze. Why is Margaret Breeze for a bag?
Money. And if I say money, what you should think about interest rates, interest rate risk and not just interest rate risk because if you have dollars, you also should be worried about euro dollar relations.
Not yes, but also points.
Yeah.
Basel 2 includes what I’m saying and then comes Basel 3 after Lehman’s class that also considers systematic, liquidity, risk and systematic risk, liquidity and systematic risk.
Basel 3, whatever. 1988 Why Basel one was needed. I have already told you and this is what I have told you. Cash 0% mortgages, mortgages 50%.
And loans, normal loans 100%, yes, what Basel one tells you that what Basel one tells you here is capital was set at 8% and was adjust by a loans great risk weight.
Make sense?
Basel one problems with Basel one. The approach is setting risk weights is too simplistic and it ignore other types of risk, yes.
The 11th of September attack. What did it mean? A lot of people dead.
The terror war started. Afghanistan was. I don’t know if he made it is the correct war, but the Afghanistan war start. But regarding finance, the attack happened in the World Trade Center, the buildings.
With all their data disappear. A lot of banks all over the world has their main center, has their data there or clients from these banks or people, traders from these banks were there in the World Trade Center. This was operational risk.
And the whole world realized that you cannot put all eggs in the same basket in technological terms.
And after these, that’s a true habit.
Passer 2 has to do with three pilots. Passer 2 is still too simplistic. You can read it in two minutes. You take passer 2, you Google passer 2, it’s a PDF 20 pages and you can go through this so quick.
Don’t we? And what does it shooters? You see pylar. How do you say pylar in English? Pylar. Pylar. Same time in Spanish. Pylar. All you see happen the same all.
I use the same as pillar one. Pillar one is the same as this. It’s not it’s 8%, it’s still an 8%, but instead of just talking about credit risk, they also consider market risk and operational risk.
Yes.
And how this this I want your attention for one second. How this whole credit, sorry, whole market risk, open national risk and credit risk should be measured.
It’s bank or itself. It’s bank will measure as the way they want.
This man will miss her and will say how you are, for example, I am a man.
I know how I’m going to measure and I sell to the central bank who I’m going to perform my work. I sell in the central bank who I’m going to perform my my work. Make sense.
And then pill up 3.
I can BCP.
All of you are gonna be good boys.
Right there, good boy to make it. He will get angry. Good boy, good boy. We have the same mistakes. I’ll give me
So don’t give him the call because I don’t understand what I’m saying.
First, first, each one for itself, Mr. Turner. Then you tell me how you are going to and the central bank. You tell me how you are going to do the things and you are going to be a good boy, yes.
And finally, the system lowered. Why? Not because of 2008, the system lowered because of the Internet, because of the paste, because we have talked. We have already talked about what happened in 2008 crisis, yes, and after 2008 crisis.
Basel 3 appear and as Basel 2 is short and can be read so quick Basel 3 never never end. Have you read one incredible book that is the never ending story?
Basel 3 is longer. Basel 3 is longer. Basel 3. This is a metaphor in order just to tell you that there is a lot of things being said, but regarding Basel 3, there are two important ideas.
First area is liquidity. Liquidity start, start mattering. Liquidity, liquidity. If I say liquidity, you should think about panic, panic, people taking their deposits and running. You should think also about Silicon Valley Bank. You should think about whole banks.
Die.
At the end, it’s a matter of trust. If the trust get broken, what people will start doing? A bank run, running, taking their money and running and run. Make sense?
Hey, OK.
With this, I have finished talking about banks.
10 minutes left what I’m going to do.
In these 10 minutes.
I’m going to. Sorry. I mean, I don’t want. I want people to write things. So I’m going to give you extra. Send me a WhatsApp and tell me that you have extra grade because of this. I don’t know. I don’t remember what was your grade in the.
Midterm, but you are going to get. I mean, if you were, if you have a nine or an 8, yeah, if you have an 8, you will get extra grade if you have a 9.
So then this is you are. You will get a 7 or an 81 extra point because no, I’m not going to ask anything. You have done your duty that was sent a message in the WASA group. Yes, I want students.
I want people to be alive.
And and incentives, incentives. There are expectations, then there are incentives and I want to incentivize people that is alive.
OK, that’s all what I’m gonna do. I’m gonna read what WhatsApp or sorry, WhatsApp DPT has told me.
The thing that I have sent you at the beginning of this class and the thing that I have told you to review before this class, I’m going to say I’m going to read the summary of last class transcription, not last the class before last class, yes.