Risk Management project, Risk Management

Assignment Help:
Imagine you are the Chief Risk Officer of a newly-formed bank, with a focus on corporate lending in Slovakia. The bank is largely funded by local deposits. The CEO (and so does the regulator) wants to know if sufficient capital has been allocated against assets, and what provisioning policy should be. He would also like your views on pricing of loans and deposits, so that the bank can make a decent profit while making competitive headway without excessive risk. The bank takes small positions in trading local government bonds. The CEO would also like you to assess the bank’s VAR, as well as liquidity, to be sure no undue risks are being taken.

Following is the financial position of the bank after the first year of operations:

Assets (Euro millions)

Cash 194
Due from banks 86
Securities 1200
Gross loans 2700
Loan loss reserves (LLRs) -150
Fixed assets 75
Other assets 175
Total assets 4280

Liabilities & Equity

Deposits 2573
Due to banks 782
Market funds 200
Other liabs 196
Equity 529
Tot liabs & equity 4280

Income Statement

Int inc 300
Int exp -170
=Net int inc 130
Trading inc 20
Net fee & comm. Inc 30
=Optg inc 180
Personnel exp -55
Other optg exp -70
D&A -13
=Pre-prov inc (PPI) 42
Loan loss provisions (LLPs) -29
=P-t inc 13
Tax -3
=Net inc 10
In addition to the above requests from the CEO, he would also like your input on measures to reduce operational risk, and what dividend policy should be.

The bank’s €2.7 billion gross loan book is rated as follows:
€1 billion of BBB rated loans,
€1 billion of BB rated loans
€500 million of B rated loans
€200 million of CCC rated loans. There are no collateralized loans or off-b/s items.

Securities of €1.2 billion are all invested in A rated government bonds.

VAR = 553 mm

Loans are evenly divided between 1, 2 and 3 years’ maturity.

Deposits are 50% demand (due at any time), 25% in 9 months, and 25% over 1 year.

Market debt is of 2 years’ maturity.

Please formulate your recommendations to the CEO (me). Thank you

Related Discussions:- Risk Management project

Discretionary access control and mandatory access control, Question: (a...

Question: (a) (i) Explain what is meant by Discretionary Access Control and Mandatory Access Control. (ii) What is the difference between the two types of access contro

Historical simulation approach, How can I calculate 10-day 99% VaR for port...

How can I calculate 10-day 99% VaR for portfolio comprising two banks by using the Historical Simulation Approach ?

binomial option pricing model , Question 1 Zero coupon yields (all yie...

Question 1 Zero coupon yields (all yields are continuously compounded) are 3.00% for three months, 3.50% for six months, 3.60% for nine months and 3.80% for twelve months. Nort

describe a risk-free strategy and delta-hedging position, Explain how you ...

Explain how you would hedge a short position in a European (plain vanilla) call with six  weeks to maturity if the spot price is 60, the strike is 65 and σ = 0.3, r=0.1. You rehedg

Four critical components of risk-management integrity, The purpose of this ...

The purpose of this memorandum is to outline in sufficient detail the terms of the audit engagement. In planning the audit engagement for Toy Local Corporation for the year ended O

Explain basic organisational structures, Question : (a) Every company h...

Question : (a) Every company has its own idea about how to organise itself and its work. Different companies doing the same work may have different organisation structures and

New student, what are the risk in management when you don''t have a fix pla...

what are the risk in management when you don''t have a fix plan of what you want o accomplish?

Budget and value report, A strategy value assessment, based on calculating ...

A strategy value assessment, based on calculating the budget of the project. Discussion should not restrict itself to construction cost control but should consider the life cycle a

Trade Finance and Risk, The risks in the transaction seem to be very broad ...

The risks in the transaction seem to be very broad and encompassing. Can Engineering Tech effectively protect its interests and assure payment?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd