Banking in Nouvelle Alexandrie

Banking in Nouvelle Alexandrie is dominated by six major banks: Banque Nationale de Nouvelle Alexandrie (BNNA), Quipu Bank, Caja de Ahorros de Santander (CAS), Crédit Aldurienne de Nouvelle Alexandrie (CANA), Banque Populaire Wechua (BPW), and Euran Savings Bank (ESB Bank). There are several smaller banks with branches across the country, along with other financial institutions such as credit unions, building societies and mutual banks, and other institutions that provide limited banking-type services and are described as authorised deposit-taking institutions (ADIs). Many large foreign banks also have a presence in Nouvelle Alexandrie, but not many of them have a meaningful retail banking presence. The central bank is the Federal Bank of Nouvelle Alexandrie (FBNA). The government of Nouvelle Alexandrie guarantees deposits up to NAX€300,000 per account-holder per ADI in the event of an ADI failing.

For banks to operate in Nouvelle Alexandrie, they require a bank licence. Foreign banks require a licence to operate through a branch in Nouvelle Alexandrie, as do foreign bank subsidiaries incorporated in Nouvelle Alexandrie. Complying charitable development funds (RCDFs) are exempt from the banking licence requirement.

Nouvelle Alexandrie maintains a sophisticated, competitive, and profitable financial sector and a strong regulatory system. All of Nouvelle Alexandrie's major banks are some of Micras' largest banks by market capitalization and all consistently rank as among some of the safest banks worldwide. The financial sector of Nouvelle Alexandrie is one of the largest contributors to the national economy and a major driver of economic growth, employing over 1 million people.

Interbank lending market

Throughout each day, banks in Nouvelle Alexandrie carry out numerous transactions, such as payroll, retail and business purchases, and credit card payments. Some transactions result in cash (or its equivalent) flowing into the bank, while others involve cash outflows. Banks cannot accurately predict the nature or volume of these transactions. By the end of each day, banks must reconcile their positions. A bank with excess cash would miss out on earning interest, even if only for one night. Conversely, some banks may have more cash going out than coming in, requiring them to borrow funds to cover the shortfall. In this case, the bank with the shortfall borrows from a bank with a surplus in the interbank lending market. Depending on the bank's evaluation of the shortfall and associated costs, it may opt for an overnight loan, the interest rate of which is based on the cash rate set by the Federal Bank of Nouvelle Alexandrie each month, or a short-duration loan, known as "prime bank paper," with a term of between one and six months and an interest rate called the "bank bill swap rate" (BBSW), set by commercial banks.

A body named the Nouvelle Alexandrie Financial Markets Association (NAFMA) determines the BBSW rate. Prior to 2013, NAFMA would ask each of the 'prime banks' at 10 am daily about the interest rates they would offer or request that day. NAFMA would then compute the BBSW rate as the average of those quotes. Typically, longer terms yield higher offered rates. The system needed a degree of subjective judgment by banks, as they wouldn't know their end-of-day position at that time. Moreover, the system was vulnerable to abuse if banks provided false information to NAFMA, which could lead to BBSW rate manipulation to benefit certain banks. To prevent potential manipulations, NAFMA altered the BBSW rate calculation method to rely on actual market transactions, although the possibility of manipulation still exists. The BBSW rate influences many other financial rates. The Federal Securities & Investments Commission (FSIC) oversees the BBSW system and prosecutes those found manipulating the system.

Occasionally, a situation arises when the interbank lending market lacks sufficient funds for banks to balance their books. Some banks may experience a bank run or withhold funds from the market in anticipation of increased demand in the near future. The Federal Bank of Nouvelle Alexandrie plays a vital role in ensuring liquidity in the banking system, including acting as a lender of last resort during liquidity crises.

See also

• Economy of Nouvelle Alexandrie