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    BANK3011 Week 13 Tutorial Questions

    Uploaded by

    Jamie Chan
    This document provides tutorial questions for week 12 material on bank financial management. It includes questions about how deposit institutions can offset liquidity effects from deposit drains, measures of liquidity risk, calculating a bank's financing gap and requirement, how liquidity and interest rate risk management can conflict, the relationship between funding costs and risks, and definitions of the Liquidity Coverage Ratio and Net Stable Funding Ratio introduced in Basel III. It also provides a sample bank balance sheet and asks questions about adjusting its liquidity cash flow ladder based on additional information and assessing its liquidity position over 12 months.

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    BANK3011 Week 13 Tutorial Questions

    Uploaded by

    Jamie Chan
    10 views2 pages
    This document provides tutorial questions for week 12 material on bank financial management. It includes questions about how deposit institutions can offset liquidity effects from deposit drains, measures of liquidity risk, calculating a bank's financing gap and requirement, how liquidity and interest rate risk management can conflict, the relationship between funding costs and risks, and definitions of the Liquidity Coverage Ratio and Net Stable Funding Ratio introduced in Basel III. It also provides a sample bank balance sheet and asks questions about adjusting its liquidity cash flow ladder based on additional information and assessing its liquidity position over 12 months.

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    This document provides tutorial questions for week 12 material on bank financial management. It includes questions about how deposit institutions can offset liquidity effects from deposit drains, measures of liquidity risk, calculating a bank's financing gap and requirement, how liquidity and interest rate risk management can conflict, the relationship between funding costs and risks, and definitions of the Liquidity Coverage Ratio and Net Stable Funding Ratio introduced in Basel III. It also provides a sample bank balance sheet and asks questions about adjusting its liquidity cash flow ladder based on additional information and assessing its liquidity position over 12 months.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    10 views2 pages

    BANK3011 Week 13 Tutorial Questions

    Uploaded by

    Jamie Chan
    This document provides tutorial questions for week 12 material on bank financial management. It includes questions about how deposit institutions can offset liquidity effects from deposit drains, measures of liquidity risk, calculating a bank's financing gap and requirement, how liquidity and interest rate risk management can conflict, the relationship between funding costs and risks, and definitions of the Liquidity Coverage Ratio and Net Stable Funding Ratio introduced in Basel III. It also provides a sample bank balance sheet and asks questions about adjusting its liquidity cash flow ladder based on additional information and assessing its liquidity position over 12 months.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    BANK3011

    BANK FINANCIAL MANAGEMENT


    WEEK 13 TUTORIAL QUESTIONS FOR WEEK 12
    MATERIAL
    1. What are the two ways in which a DI can offset the liquidity effects of a net deposit
    drain of funds? How do the two methods differ? What are the operational benefits
    and costs of each method? Lange Chapter 14, Q6.

    2. Define each of the following four measures of liquidity risk. Explain how each
    measure would be implemented and utilised by an FI. Lange Chapter 14 Q11

    a. Sources and uses of liquidity.


    b. Peer group ratio comparisons
    c. Liquidity index.
    d. Financing gap and financing requirement

    3. Plainbank has $10 million in cash and equivalents, $30 million in loans, and $15 in
    core deposits. Lange Chapter 14 Q15

    a. Calculate the financing gap.


    b. What is the financing requirement?
    c. How can the financing gap be used in the day-to-day liquidity management
    of the bank?

    4. How can liquidity and interest risk management objectives conflict in a bank? Where
    possible, provide examples. Are these conflicts resolvable? Explain. Lange Chapter
    15 Q9

    5. What is the relationship between funding cost and funding or withdrawal risk? Lange
    Chapter 15 Q12

    6. Define and explain the operation of the Liquidity Coverage Ratio (LCR) and the Net
    Stable Funding Ratio (NSFR) that were introduced in Basel III.

    7. Not from the Text.

    The table below represents the balance sheet for Australian Bank. The following
    additional information is also relevant:
    i. Of the 6-month deposits $15mill is sourced from professional investors. The
    FSA requirements for stress testing sets out that 90% of these deposits may
    be withdrawn in a liquidity crisis.
    ii. Call deposits and the remainder of 6-month deposits are all retail based. The
    FSA requirements for stress testing sets out that 8% of these deposits may
    be withdrawn in a liquidity crisis.
    iii. Liquid Government Securities can be generally sold on the basis of obtaining
    funds next day and are treated as such for liquidity assessment. They are
    recorded at market value but the FSA requirements for a stress testing sets
    out they may not expected to realise more than 95% of their value in a fire
    sale.
    iv. The FSA requirements for stress testing sets out that only 4% of overdrafts
    are likely to be received in a liquidity crisis.
    v. For the purposes of assessing liquidity, it is not considered possible to
    demand the repayment of other business loans before their due date.
    Based on the balance sheet and the additional information, you are required to:
    (a) Draw up the liquidity cashflow ladder using the information before any
    allowance for behavioural factors.
    (b) Adjust the liquidity cashflow ladder the effect of the additional information
    above.
    (c) What is the liquidity position over the coming 12 months assuming that the
    structure of the balance sheet does not change over that period?
    (d) What assumptions are critical to your assessment of liquidity?

    Australian Bank Limited


    Balance Sheet as at 30 June
    $ $

    Shareholders Funds Liquid Assets


    Capital 18,778,000 5 year Government Securities 14,156,000
    (semi-annual)
    Liabilities Business Loans
    - Call Deposits 41,234,000 Business Loans
    - 6 months (180 days) 23,137,000 - Overdrafts 7,533,000
    - 1 year 10,000,000 - 6 months (180 days) 11,089,000
    - 3 years (semi-annual) 12,671,000 - 1 year 11,000,000
    - 5 years (semi-annual) 3,875,000 - 3 years (semi-annual) 36,375,000
    90,917,000 - 5 years (semi-annual) 40,542,000

    109,695,000 109,695,000

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